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  1. #31

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    Hi Raddies,

    Shouldn't quit your job before your properties can generate more income than your current job. Living on your wife's medium income would be tough. I suggest doing the properties part time on weekends

  2. #32
    Join Date
    Dec 2011
    Posts
    795

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    Quote Originally Posted by ScottSI View Post
    Book value increases after renovation - So much more to it sorry but here are a few tips.

    Regards

    Scott
    Hi Scott

    I have found your posts really helpful and have added at least one thing from this thread that I will act on (ie huge value as I have already been investing for a while).
    I am in Wellington but went to school in Hawkes Bay and sometimes visit, I would love to catch up for a coffee attend one of Orion's seminars - I have read the book he put out some years ago. Do you have any dates?

    Regards
    Eugene

  3. #33
    Join Date
    Nov 2011
    Location
    Riwaka
    Posts
    406

    Default

    Hi Eugene

    He has one this Thursday evening and advanced seminar on 8/10. Well worth the drive and free. I am off overseas so will miss them unfortunately as always good to keep up with continuing education.

    You could PM him from here (orion) or if you are on Facebook look up him up - send him a message re attending.

    There an FB investors group page where we all post what we have bought & numbers that might be of interest also.
    Plan and invest wisely - You only get one life so make the most of it!

  4. #34

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    Regarding "never refinance" - what exactly does that mean? Is "deposit recycling" ok in that regard? Essentially I refinance (top up) only to get deposit for the next property. If that is forbidden in your rules too where do you get deposits for buying more?

  5. #35
    Join Date
    Nov 2011
    Location
    Riwaka
    Posts
    406

    Default

    Never refinance refers to pulling cash out to pay for lifestyle etc and this has caused a few investors to go under, Michael Yardley pushes this in his articles.

    If you are dealing with one bank when the revaluation comes in your net equity worth goes up. Serviceability stays the same. The bank then extends a new loan as the debt / equity ratio is still below your banks LVR levels to buy the next house. Net equity doesn't change as position neutral. When the new property is revalued your net equity goes up so you can buy again.

    Serviceability only changes with each property but then each property brings in rent but if generally below 13% gross return on mortgage you will be topping serviceability from your income or some other source for the bank to loan again.

    Banks will start to question your stability if you miss a mortgage payment. Equity moves up and down but never, never, never miss your mortgage repayments (we struggled to put food on the table some weeks covering non paying tenants in the early days - always at Christmas time). They will start to look at your risk position with a fine tooth comb and could start recalling loans.

    The intial deposit that was put in property 1 as a shareholder loan (if company) can be drawn out then you are using 100% bank money. Ideally you are paying principal so net equity always increasing and as mortage decreases your servicability goes up.

    When interest rates go up your serviceability goes down of course and you may become equity rich but cashflow poor as an investor.

    Hope that helps
    Last edited by ScottSI; 23-09-2014 at 08:37 AM.
    Plan and invest wisely - You only get one life so make the most of it!

  6. #36

    Default

    Hi Eugene

    He has one this Thursday evening and advanced seminar on 8/10. Well worth the drive and free. I am off overseas so will miss them unfortunately as always good to keep up with continuing education.

    You could PM him from here (orion) or if you are on Facebook look up him up - send him a message re attending.

    There an FB investors group page where we all post what we have bought & numbers that might be of interest also.
    Can someone please give me the FB investors page that is mentioned above?

    Cheers!

  7. #37

    Default

    Thanks ScottSI, very helpful!

    How do you actually calculate the gross return? Related to the purchase price? Or or PP + upfront renovations?

    Also some people say they owe this much on one property and that much on another - I can't really work that out as the bank takes the portfolio as a whole...?

  8. #38
    Join Date
    Nov 2011
    Location
    Riwaka
    Posts
    406

    Default

    Quote Originally Posted by Auckland Newby View Post
    Can someone please give me the FB investors page that is mentioned above?

    Cheers!
    Need to message Orion about it or track him down on FB.
    Plan and invest wisely - You only get one life so make the most of it!

  9. #39
    Join Date
    Nov 2011
    Location
    Riwaka
    Posts
    406

    Default

    Quote Originally Posted by Curious View Post
    Thanks ScottSI, very helpful!

    How do you actually calculate the gross return? Related to the purchase price? Or or PP + upfront renovations?

    Also some people say they owe this much on one property and that much on another - I can't really work that out as the bank takes the portfolio as a whole...?
    I have a spread sheet where each property loan/ rent/costs etc are listed and shows operating costs / income earned. I update this every Saturday morning but the bank only looks at book value less debt = equity for the whole that is listed under their security and 75% of total rent roll.

    What you owe on each property is irrelevant it is value less debt and that is all that matters and what the bank looks at. I have some paid off places, some 1/2 paid off, some with a $ 200 paid off, who cares.

    Everyone has an opinion of calculating return but this is what I do:

    rent x 52 / price (or debt borrowed) x 100 = gross return

    For bank numbers: Last purchase

    If company pays for renovations:

    $ 260 x 52 / $ 81,200 x 100 = 16.65%

    If borrowing for renovations as well (cost $ 8320) - This is also the return after renovation no matter who paid

    $ 260 x 52 / $ 89520 x 100 = 15.10%

    There is a whole lot of other calculations also about net returns, internal rates of return etc but there is plenty of information on the net about those.
    Plan and invest wisely - You only get one life so make the most of it!


 

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