Would you consider my position risky?

[TMNT]

Was wondering if fellow SSers would find my position risky, and some comments on how to go from this point

I work part time, prorata $38k so about $25kpa
have my kids about half the time, pay no child support

have 10+ ips, all at 75% LVR based on purchase price
average purchase price, $170k, net yields approx 8.5%
take out expenses, might be $5-10k per year positive

am considering stop buying this year, and renovate a few of them

 

[Aaron_C]

It is risky if you do not have much cash right now as a good buffer.

 

[Angel]

Is your situation risky in that the Mrs might take a sudden liking to your IPS when their values increase more?

 

[DaveM]

I guess lenders exposure of 1.3+ million on servicing income of $25k pa makes me wonder how you got the loans and the 220k in deposits and stamps together?

Not a criticism by any means... I am genuinely interested in your back story, was income in the past higher or did you have a way of overcoming income limits?

 

[TMNT]

Is your situation risky in that the Mrs might take a sudden liking to your IPS when their values increase more?

ahh no, that certainly wont be happening, she's already claimed and taken the 70% of IP1, IP1 onwards has been purchased after we well split up, plus they are in my brothers name

I guess lenders exposure of 1.3+ million on servicing income of $25k pa makes me wonder how you got the loans and the 220k in deposits and stamps together?

Not a criticism by any means... I am genuinely interested in your back story, was income in the past higher or did you have a way of overcoming income limits?

I dont blame you, id be asking the same questions if I heard it too, basically sold a business and had proceeds from that for deposits, plus income was about $60k during the busines, at these incomes and lvrs, financing wasnt really an issue

 

[china]

Was wondering if fellow SSers would find my position risky, and some comments on how to go from this point

I work part time, prorata $38k so about $25kpa
have my kids about half the time, pay no child support

have 10+ ips, all at 75% LVR based on purchase price
average purchase price, $170k, net yields approx 8.5%
take out expenses, might be $5-10k per year positive

am considering stop buying this year, and renovate a few of them

So 10+ IPs at 10k per year positive means 100k passive income per year? Thats an excellent position to be in. You should be set for life.

 

[DaveM]

So 10+ IPs at 10k per year positive means 100k passive income per year? Thats an excellent position to be in. You should be set for life.

I think he means 5-10k positive across the whole lot not individually.

 

[china]

I think he means 5-10k positive across the whole lot not individually.

Then thats a lot of work (sourcing/managing 10+ IPs) for little return.

 

[Mr. Fabulous]

It is risky if you do not have much cash right now as a good buffer.

I second this. You also might want to keep future interest rate increases in mind. When we will see those increases is anyone's guess, but you can be sure they are coming at some point.

 

[Corey Batt]

Then thats a lot of work (sourcing/managing 10+ IPs) for little return.

Not if he halts any further purchases and sits on them, reducing debt/increases rents for five odd years.

Keeping a portfolio neutral to slightly geared/cashflow pos means you're effectively pushing the boundaries as opposed to building up pent up demand during the accumulation phase. It is best not to judge the Work In Progress as the end product, until it is such.

 

[TMNT]

Then thats a lot of work (sourcing/managing 10+ IPs) for little return.

yes agree, ive read a few of your posts and it seems like you are looking for a immediate return on your $, unfortuantely, im not in that position,

I doubt there are many properties that are $200 per week cashflow positive after ALL expenses for standard resi unless you start doing furnished/student accom/short stay accom

Am intending to keep a bit of a buffer at the moment, however, im also very tempted to keep on buying whilst I have a buffer, ie accumulation phase, and do some renos along the way, I feel that if I sacrifice more now, the benefits will come later magnified, like the guy who gave up beer to pay for his deposit/expenses on ip#3

personally, I dont know if I will go through a "pay down debt" phase for at least another 10 years and probably at this stage aim to accumulate until I can no more!

 

[coastal]

Hi

How long did it take to accumulate your portfolio and are your properties regional or city?

Over time you will be in a good position..just keep raising rents and in 10 years just of these 10 props you will have a passive income of $50 - 100 k. Just $10 per prop per year is $5000 in you back pocket..

 

[Gremlin]

plus they are in my brothers name

This = risky.

 

[TMNT]

sorry for bringing up my old post

how did you guys determine when your accumulation phase was to end?

I know everyones strategy is different, but I seem to want to keep on going,

buy run down properties, cheap, fix them up, refinance, pretty much pull all the deposit back out, and sometimes more

its working for me at present, and any CG+rental gains over a 10 year period is cream on top, so why should I stop going?

yes I could try and pay my portfolio down however, my income isnt big enough to make a decent dint, plus any CG will decrease my LVR which sits at about 80-85% over the years anyway

 

[geoffw]

I guess accumulation finishes either when time or money runs out.

At the point you want to step back, you may stop accumulating.

Or at the point when the bank determines that they can't lend you any more- and from what you've said earlier in the thread, I'd be surprised if they were lending.

 

[D.T.]

What happens if you and your brother have an argument and he sells the properties for himself?

 

[Terry_w]

Depends on what sort of risk you are talking about. I would say extremely risky in some aspects.

Types of risk, some are:
- Fire etc = insurance will hopefully be adequate and cover this.
- Risk of rate rises and not being able to cover the repayments
- Risk of fall in values ? not much you can do about this now, but could be minimised in future by buying in different areas/different types of property, diversifying etc
- Contractual disputes resulting in litigation. E.g. who would you contract with ? insurers, agents, tenants, tradesmen etc
- Bankruptcy ? yourself and/or your brother
- Family law disputes ? yourself and/or your brother
- Attorney risk ? eg you appoint an attorney and lose capacity. Attorney sells your properties and gambles your cash
- Risk in death ? challenges to your estate, your will, intestacy rules if no will. Watch out for family provision and notional estate orders in NSW.
- What happens if your brother dies? Does he have a will? Will you inherit your own properties and will this result in your asset protection plan being blown out of the water?

It seems to me by having someone else own your property you basically are doubling your risk. Even gay people have spouses

 

[TMNT]

Sorry I seem to have confused people, my setup with my brother eg is not what I was getting at

It was more on whether I should keep on buying as my serviceability hasn't hit a wall, since basically all or the Ips are neutral to positive so as long as I keep my buffer why should I stop.?

However I do feel for diversification reasons maybe I should do something slightly different such as commercial or subdivisions or builds etc,

That was more I was getting at, more a request for feedback on strategy

Hopefully I make more sense now

 

[geoffw]

I suspect your servicibility, or your borrowability, will be hitting a wall at some stage. Banks may only take 80% of your rents into account; you may be too "rent reliant", they will get uncomfortable lending above a certain amount.

It's worth while, if you haven't done so already, to be talking with a mortgage broker who's up with investment properties to structure things sooner rather than later.

 

[TMNT]

I suspect your servicibility, or your borrowability, will be hitting a wall at some stage. Banks may only take 80% of your rents into account; you may be too "rent reliant", they will get uncomfortable lending above a certain amount.

It's worth while, if you haven't done so already, to be talking with a mortgage broker who's up with investment properties to structure things sooner rather than later.

Thanks Geoff I will chat with my broker, when you refer to structure, what do you mean by it? What can my broker do?