Category Archives: Money Matters

Stop! Don’t Go Changing Jobs Right Now…

Stop! Don't Go Changing Jobs Right Now.... Getting approved for finance is tough enough without putting major hurdles in front of your application unnecessarily by changing jobs.

If any circumstances change between the date you first submit your finance application and the date of settlement of your loan, then the bank may not look kindly on your application, and in fact in most instances, will decline your application completely.

Trouble is – most people are not aware of this!

CASE STUDY:  CHANGING JOBS AT THE WRONG TIME

Recently I saw a familiar case where an investor had selected a great little investment property and placed his application for the loan. Being disgruntled with his job he decided to quit and take a holiday. He planned to get a new job when he got back home, which he did. When he returned home his loan application process continued and he had to provide documents to the bank to support his income. The bank saw that he had a change in job and promptly declined his application!

If he had only just stayed in his job for a few more weeks until the loan application was finalised, he would now be the sitting happily on his first investment property.

I see this same scenario happen over and over and I want you to avoid the same thing happening to you!

(Even real estate agents will tell you not to change jobs when you are in the process of buying property.)

TIMES HAVE CHANGED

In days gone by, investors didn’t have to think about this so much because it was common that the career you went into as a 16 year old was the same career you had when you were making all of your loan applications as an adult.

Today the world is a different place. People are less likely to remain in situations that make them unhappy, especially jobs. Many employers demand more of employees, longer working hours and less gratitude for work done. It’s not uncommon for employees to change jobs multiple times in their working career.

Of course, the long term purpose of helping you to build wealth through property is to no longer have to rely on an employee status for income. But, in the meantime, initially you need your job to support the serviceability of your loans.

ARE YOU A RISK TO THE LENDERS?

Lenders look more favourably on borrowers who have a reasonably stable recent employment record. They prefer you to have had at least six to twelve months or more in your job, receiving regular income.

Lenders like to be reasonably sure the borrower has a reliable future income based on their current income. If they see a borrower has been changing jobs over a short period of time, there is just not sufficient evidence to back up their financial stability.

Equally high risks to lenders are borrowers who have gaps or breaks in their work history or have had a change in pay structure. For example, if you move from a salary to a position that is commission based, you will be tagged as a higher risk. This will occur even if your new employment conditions provide you with a higher income.

Moving to a commission based employment arrangement will be considered along the same lines as someone who is self employed. That means, you would have to prove a two year history of your new income levels before that additional income can be included in a loan application at all.

WHAT TO DO IF YOU HAVE CHANGED JOBS

If you have had a job change, no matter what, a lender is going to need the following things from you — and your employer — in order to approve a loan application: an offer letter for the property purchase, a role change letter if you have a title change and commensurate compensation package change, and the most recent pay stub and verification of employment.

It’s not all doom and gloom…..

If you have just changed jobs – don’t be tempted to do nothing expecting that you’ll have to wait for time to pass. Every lender views all circumstances differently. A good broker will be able to match you up with a bank that will look most favourably on your conditions.

Other circumstances that can also affect the loan approval process for you are:

  1. Not being honest about your financial position
  2. Not including all your expenses
  3. Get the paperwork details right first time
  4. Understanding your borrowing capacity before you place a formal approval
  5. Shop around to get matched with the best lender for your circumstances
  6. Be prepared for additional loan costs

A FINAL ROUNDUP

If you are looking to be changing jobs around the same time you are looking to buy a property, seriously consider doing just one or the other. Stay in the same employment at least until you have the mortgage.

If you already have a mortgage commitment and are determined you’ll be changing jobs, ensure you have enough money saved to cover mortgage repayments and lifestyle costs for a few months or even more, in case things don’t work out.

I hope these tips help you be more prepared when you are ready to apply for mortgage funds.

Thoughts, questions? Leave a comment & let’s talk…

Here’s to your success!

Fay McLean Property Investing Support

 

p.s. At the very least, consider getting yourself a complimentary Financial Health Check just by contacting me here. It’s a great way to see how much you can borrow in your current circumstances.

My March 2015 Monthly Review

My March 2015 Monthly Review

I have decided that at the end of each month I will write a detailed monthly report about my property portfolio and investor lifestyle. There is a lot more to owning a property portfolio than just simply signing a contract, sticking a tenant in your property and forgetting about things.
I hope by sharing my Monthly Review it will be helpful for you to read about the good, the bad and the ugly when it comes to creating and managing a property portfolio and investor lifestyle. This is going to be the real life stuff involved with property investing. Most of flashy sales teams trying to sell you properties will never tell you about these behind the scenes things.
I will share as I review any challenges I faced. What I can learn from these experiences? What good can come from it? By finding the positive and the lessons learned, those challenges then become your asset. This will ensure you don’t make the same mistakes or experience the same challenges/failures for your upcoming investing journey.

Interest Rate Reduction

For the third time in less than twelve months, this month Murray called the banks we have loans with and requested they review and reduce our interest rates. I have to make it clear, that this request is in addition to the drop in interest rates the banks have given as a result of the RBA reducing rates this past year. It really does pay to continually check in with your bank and keep them honest. This is extra money in our bank for just 10 minutes effort.

South Hedland Deal

This is a deal we are doing with a Joint Venture partner. You can read about the deal in more detail here where it all started.

Joint Venture Agreement in South HedlandThe property that is currently on the land has come up for lease renewal and the agents are recommending a drop in rent which is not unexpected given the current conditions in the mining arena.

The initial plan was to have already started to build the first of the new houses (4 x 2) by now on the rear of the block. To date this hasn’t happened for a couple of reasons. The main one is that we are investigating the opportunity to use pre-constructed buildings in a slightly different configuration from our original plan.

Some good research has been done by our partner on the option to have some smaller modular style accommodation built in China and shipped to WA for installation and final fittings. It would be very much along the same lines as what a builder in Perth has recently done recently that you can read about in this article.

 

Original plans: Two 4 x 2 houses plus one 2 x 1 granny flat giving us three rentable properties.
Currently being considered:
Two 4 x 2 modular multi-key units. Each of these modular units would have dual occupancy (multi—key) which means each 4 x 2 can be rented out as two 2 x 1’s. In addition, we can also fit two 2 x 2 modular multi-key units. Each of these modular units would have dual occupancy (multi-key) which means each 2 x 2 can be rented our as two 1 x 1’s.
In total, this option would provide us with a total of eight rentable units.

As with the homes Mr Forster has erected, the houses would be Cyclone-D rated and designed to meet the needs of the demographic current looking for accommodation in South Hedland and Pilbara region.

So, our joint venture partner is continuing to research the costing, viability and rental demand for this type of property. As you can see, the modular units would provide us with a much larger rental base and spread our risk should any of the units not be tenanted for a period of time.

If we decide to go ahead with the change of direction in what is built on this property, the current DA approval in place from Council would need to be re-submitted for some changes although we can’t foresee any difficulties in getting these amendments approved.

We were fortunate to buy into the Pilbara region at a time when the prices had already dropped considerably, and now it’s a matter of working out how we will maximize returns on our investment so that we can ride through the current conditions and still be players in the field when the next lift starts to occur – and I believe it will.

One thing we are realizing very quickly is that in the world of property development, the words 12 months really means 18 months icon_smile

Balmoral Joint Venture

This deal is a sub-division on a block of land in the inner suburbs of Brisbane. The sub-division is now completed and we have engaged a marketing company to promote the blocks of land to builders with mock plans of the type of house that could be built on these properties that would still provide a builder with a good profit margin himself, and see us receiving our expected asking price for the two blocks.
Hopefully next review we might have had some nibbles on these blocks icon_smile

Melbourne Sub-Division

This project is a larger 80 lot sub-division that is being done in two Stages. Large machinery is starting to come in to do earthworks, drainage etc and I’ll post some pics as soon as I have some.  Many of the Stage 1 blocks have already been sold.

We will be due to receive one chunk payment of some of our capital back that we invested into this project so the Line of Credit will enjoy having another $50,000 in it. This payment schedule was all agreed upon and set out in legally drawn up Loan Agreements between ourselves and our JV partner.

Gamble Green

We’ve recently replaced the oven in this property, and the tenant is now complaining to our Property Manager that it is not working properly and is inefficient.
We have also just ordered for a security screen to be fitted to the front door. This will assist in airflow in the warmer months, but more importantly, will also address the needs to meet with safety standards now imposed on rental properties.

Flynn Street, Churchlands

The new tenant that moved into this property in January has been no trouble and the increased rent we are receiving is very welcome. There will be a rental inspection on this property mid April. We have decided to attend this inspection personally so we can see first hand how the property is being kept.

Daly Street

A tradesman has been contacted to go and quote on some repairs to the patio at this property.
We are still waiting on a report on exactly what needs doing and the cost.

PPR

Principal Place of ResidenceWe have flagged 2015 as a year to do quite a few maintenance jobs on our principal place of residence. The most urgent was to replace the front doors which were very weather damaged and not a good look as the entry point to our home. The new doors look fantastic and still need a final coat of paint to finish them off which we’ll do after Easter.

Reviewing Our Own Portfolio

We had a good review of our current property portfolio during the last few weeks and can see that our focus still needs to be on increasing our borrowing capacity/income further to be able to add still another property or two into our portfolio. The sooner we can add these properties, the longer we have it to take advantage of another full property cycle.

Books I’m Reading

MONEY Master the Game: 7 Simple Steps to Financial Freedom

I was unsure about spending the time to read this book as I knew it had a very large focus on shares and mutual funds. But I figured if it was written by Tony Robbins, there would have to be something I could learn from it. And I was right! I’m only part way in, but this is a book that I would love to make as essential reading for all teenagers or young adults. The first few chapters lay the foundations for understanding the importance of saving, investing and having your money work hard for you. Even as a seasoned saver and investor, these are good reminders for me too. I’m looking forward to finishing the rest of the book. (I should get some good reading in over the Easter break!).

Property Investing Support Blog

Although this blog is reflective of the personal journey both Murray and I have taken to build a multi-million dollar property portfolio, it is important to me that visitors also see it as being a professional and high quality hub for information. It is for this reason that I have spent much of the past month working with designers to re-design this site. I am planning on being able to release the new version to the public by the end of next month, so watch this space….

Lifestyle & Personal Development

Events

I’m excited to have locked in my ticket to the annual ProBlogger event. It’s an event for lots of other bloggers and online entrepreneurs to get together and improve their presence and make new connections. It will be good to visit the Gold Coast and get lots of new ideas on how I can deliver great content to you on this blog. icon_smileicon_smile

Meditation and Journaling

At the end of 2014 I decided it was important for me reduce the high expectations I was setting on what I could achieve with my time. To learn to say ‘no’ sometimes and be sure to spend the majority of my time on things that were going to move me closer to both my professional and personal goals.IMG_1575

I am now regularly including meditation into my week and enjoying the process. It’s a new skill and one that I have wanted to introduce for a long time. I am also journaling every day giving gratitude and setting intentions for what I want my new day to be like. My journaling and meditation have both been helpful introductions to my daily routine to me start my days in a more peaceful way.

Goals Review

The end of March also saw the end of the first quarter of the year. It was time for me to review my quarterly goals. To see which ones got hit, and which ones fell short. It’s the first time ever I’ve been really committed to setting my long term goals and consistently reviewing my progress.  I break the long term goals down into quarterly, monthly, weekly and daily goals. I have to say I love it and have got so much more accomplished this way. I can still make even more improvements for sure, but I’m happy with the results so far.

I enjoyed putting this Monthly Review together and I look forward to doing one again for April. It’s great to share what’s working and what’s not and to give you an insiders view to property investing and wealth creation. Thanks for reading!

Please leave a comment below or let me know any questions you have.  I’d love to hear what you think!

Here’s to your success! icon_smile

Signature_Fay

 

 

 

P.S.   If you want to find out how you can start building a property portfolio that will fund a life you love… then the next step is to reach out by submitting a message by clicking HERE and I’ll look forward to seeing if I can help!

11 Tips For New Investors Nervous About Buying A Rental House

nervous buying rental propertyAs a new property investor, these are some of the ideas that have helped me and others get going when we have been nervous about buying a rental house.

1. Turn your analysis paralysis into a need-to-do list.

Breaking the whole investing process down in steps or a timeline will make it easier for you to take the emotion out of the process and just focus on what you need to do next to reach the goal you desire. It adds to confusion and nervousness if you try to remember everything in your head. Get it out on paper and worth through what needs to be done systematically.

2. Don’t get bogged down in media headlines.

The only way news channels and newspapers keep themselves in business is by selling. The bad stories make a great headline. That is why you see and hear so many. These horror stories and stories about the market dropping out of property is what feed the newsroom.

3. You are buying a rental property not a home to live in.

The property you buy will be a home to someone else, but it will not be your home.  Make your decisions from the point of a landlord and not a home owner. Many tenants will not have the luxury of being picky about things such as whether or not the bathroom is at the beginning or end of the corridor. Buy a property in a good location at a good price that will have tenant demand. That’s it!

4. Determine what spending limit you are comfortable with or require and stick to it.

You might be able to afford to buy an investment property worth several hundreds of thousands of dollars more than you are comfortable with. Be sure you’re buying a rental house that matches your comfort zone then, pull that trigger!

5. The key isn’t doing a home run the first time you buy a rental property.

But instead, to get started and not lose money! You will always be learning and changing your decision making processes, but until you take action and buy that first one, there will be nothing to improve upon.

6. Find and maintain a balance of doing due diligence and not over thinking.

When you are first buying a rental house and you start of look at all the numbers and official documents involved, it’s easy to get stage fright. Of course, check things over carefully, but there will reach a point where you must stop over-thinking or it will drive you crazy and you will end up doing nothing! If the numbers stack up – go for it!

7. Consider the 3 important elements.

Regardless of how many concerns you have or how nervous you are about buying your first rental house, it all comes down to 3 things when looking at a property:

  • Numbers: Do the numbers make sense?
  • House: Is the house in the condition you think it is and is it the type of property that will rent well?
  • Purpose: Is there something else you want to be doing in life? I’m guessing there is.

If these 3 things match up, you should probably overcome your nervous edge and get on with it!

8. Remember you’re not alone.

Everyone’s nervous about anything that will involve stepping outside of the comfort zone. Take some time, check your numbers. Gather a reliable support team (not a sales team!) around you and ask lots of questions.

9. Don’t listen to your brother, uncle, Mum or next door neighbour.

That is of course, unless they have already built a multi-million dollar property portfolio. You think you’re nervous. And yet you’ve still reached the point where you are seriously considering buying a rental house. Let me tell you – your brother, uncle, Mum or next door neighbour is even more nervous than you are – because they probably have never even reached the point you are at because they are so scared. These type of ‘helpful’ advisors can undermine your desire to build wealth and live a life you love quicker than you can say Jack Robinson.

10. Forget ‘la-la’ land.

Sitting on your coach thinking of how great it would be ‘if’ will get you nowhere. Wishing, dreaming, hoping is all great (and fun). But they won’t get you the results you’re after. They say knowledge is power. In fact it is not. Action is power.

11. Let the past be the past.

You might have had times where you have made decisions to invest your money before and perhaps it hasn’t worked out so well for you. Let bygone’s be bygone’s. Just because one thing didn’t work out well in the past, or someone else had a bad experience does not mean you will too.

[box type=”note” style=”rounded” border=”full”]Think of the reasons WHY you wanted to invest in the first place.[/box]

Remind yourself of the adventures you’ll enjoy, the time you can spend with family, telling your boss you quit.  Constantly remember the real reason you want to create wealth through property. Things won’t change from your current reality if you don’t take action.

If you don’t start now, you never will. You may feel nervous buying a rental house but there is no one else to wait for. It’s all you – and your future is waiting for you. After all…

A year from now you will wish you had started today. 

Now get out there and buy a house!

Thoughts? Leave me your comments below, and click the little share buttons below to share this post on your favorite social media channel!


 

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10 Sure Fire Ways to Increase Your Serviceability

“How can I increase my serviceability?”

…..is a question I get asked all the time.

Once you understand the power of property as a vehicle to creating long term wealth you will want to buy one investment property, then buy another and then another. It can literally become quite addictive

Trouble is, while holding properties long term will create wealth from capital growth, having cash flow to support your portfolio is like needing to have a pulse to keep your body alive.

After you’ve bought your first or second property, you can often get stuck because your serviceability won’t let you buy more properties.

If you want to improve your cash flow, look carefully through the following strategies. Growing your portfolio further may be possible by applying one or more of these ideas.

1. Reduce your credit card

creditcardOne of the first and easiest ways to increase your serviceability is to reduce your credit card and other credit.

Your existing credit limits have a large bearing on your ability to service new loans. Having a high credit card limit can dramatically reduce your serviceability.

Many borrowers get easily confused about how a lender will treat their credit card debt (or lack of it). Most people believe it’s your credit card balance that counts but that is not the case.

Lenders will take the limit on the card as a possible debt level regardless of whether or not you pay your credit card off on a monthly basis. So even if you have a zero balance on your $10,000 limit credit card most banks will count that $10,000 as a liability.

Lenders will also assume you have a monthly debt repayment of 2%-3% of your total limit.

To give an example, if your credit card limit is say $10,000, most lenders will assume your minimum monthly debt repayment to be $200-$300. This calculation stays the same from the lenders point of view, regardless of how much you have outstanding on your credit card at the time of your loan application.

At the time of making a new loan application or accessing your serviceability, you should try to keep your credit card limit as low as possible. The key things to consider when taking out a new loan is to keep your credit card limits as low as possible.

Even inactive or unused credit cards are considered in the same way as the example above. If you own multiple credit cards do your best to cut up or cancel as many of them as you can. This will be advantageous even if it is for the short period of time that your loan application is being submitted for approval. If you have to keep one card available during the loan application period, at least request that the credit limit be reduced to as low as you can manage for that period of time.

Don’t apply for any further credit facilities such as credit cards, car loans or personal loans while you are having an increase to your serviceability accessed. All of these limits will reduce your ability to borrow.

2. Consolidate Your Debts

consolidateConsider combining any unsecured debts such as other personal loans you may have into your existing mortgage repayments. If each of these unsecured debts are listed individually you will see a high monthly total that needs to be paid out in order to reduce these short term debts.

A lender will look at these high monthly repayments and calculate this against your serviceability. They will consider each of these repayments to be less money you have available to meet a new mortgage repayment.

By rolling the debts into your existing mortgage, the repayment will be seen as one lump sum and this will immediately work in your favour to help increase your serviceability.

3. Know Your Numbers And Keep Them Up To Date

Almost every week I spend around one hour keeping my book keeping up to date using Quicken. quicken

I know how much I spend on every thing that goes on in my life (including how much all my coffees cost me!). While this may been an overkill to some – I believe it gives me massive power.

I can see areas that I can cut back on if necessary. I can notice if a change if unusual charges occur in relation to personal or property invoices. And I believe in focussing on abundance.

You might not have the same reasons as me to know your numbers but when it comes time to increase your serviceability you will be able to:
•    Provide the most up to date information possible on your income levels to your lender.

•    Complete your tax returns on time (money back in your bank account quicker).

•    Provide information on your entire income. If you are working for wages your last two payslips may not accurately reflect your annual income. And if you are self employed or relying on income from your property portfolio like me, you will need to be able to see your annual income.

4. Join With Your Partner

If you have previously loaned money in just your name you can increase your serviceability by joining with your partner this time around. Including your partners income in the loan application will boost your serviceability. Understand of course that your partner will also then also become responsible for the debt if a new loan is approved.

5. Split Liabilities With Your Partner

In the exact opposite to the above strategy – you can split the liabilities for some of your expenses with your partner. You will need to be buying a property only in your name for this to work.

Provide proof in your application that your partner is responsible for certain obligations and you may be able to increase your serviceability.

For example, you could show that your partner supports – and will continue to support – your dependent children and the lender may disregard any financial costs associated with their care.

6. Get The Right Product For You

There are so many loans on the market now it’s like a smorgasbord. And each new product comes with its very own features. Every lender has their own criteria and guidelines when it comes to approving loan applications. This is where a broker can be of such a help to you. They know and understand each of the lenders requirements and can match you more easily with a lender whose guidelines you meet.

Many features of products that can mean you either are or are not able to service a loan include:

Not every bank will access your income in the same way. Some lenders will require you to have been employed in the same job for a longer period of time than another lender. Some lenders include certain types of income such as government benefits whereas other lenders may exclude them.

If you want to seek every possible opportunity to increase your serviceability, work with a reputable broker who can really shop around to find the right product for you.

7. Keep On Top Of Your Existing Interest Rates

If you can get a lower interest rate for any existing loans this is going to mean lower repayments. Lower repayments will help increase your serviceability!

While the RBA interest rate has remained steady for a long time now, we have personally telephoned our bank three times in the last twelve months to request a reduction in our loan interest rate. Every time it has been granted! You must stay active in pursuing every avenue open to you to maximize your profits from your property portfolio. Keeping on top of your existing interest rates is a way to easily keep more cash in your bank account.

8. Pay Interest Only

Not everyone is aware that lenders will nearly always allow you to make interest only repayments on your loans. The first loan many people have is for their principal place of residence (PPR).

While you can pay principal and interest to help reduce the overall debt, it is also common to request your mortgage repayments be interest only; even if it is your PPR.  This will mean your monthly repayments are considerably lower than if you were paying principal and interest.  Lower repayments equals great serviceability next time round.

9. Stretch Your Loan Term Out

Stretch your existing loan to increase your serviceabilityMost mortgages have a loan term of 25-30 years. Some lenders will agree to letting you extend this out to 40 years. This 10 year difference can make your repayments hundreds of dollars less each month. If you need to increase your serviceability you might want to have a serious conversation with your existing lender about this option.

Extending a loan like this will mean your overall interest paid is more but it could be well worth it if it means you’ve been able to access additional funds to propel you further into the property market.

Being able to secure and hold an additional property that has good capital growth potential might far outweigh the additional interest you pay on the extended loan.

10. Save…And Then Save Some More!!!!

If you’ve set a goal for what you want to achieve, it will be easy to be determined with this strategy. It is also easy to implement and requires the very least effort of all.dollararmy

Establish a budget and keep track of your spending. Allocate a certain amount of your income regularly to a savings account.

Aim to save 10-25% of your deposit. The amount you will need will vary depending on which product your mortgage broker considers best for you. If you’re using equity from an existing property, it’s still a good idea to save up a nice stack of cash before applying for your loan.

Careful planning, debt reduction and consultation with your broker and key factors to increase your serviceability without having to make dramatic changes to your existing lifestyle.

Start working on these strategies today and speak to a reputable broker  to help you calculate how much you can borrow for your next property

 

 

Cheers, and I hope you enjoyed this post! Let me know, and please share if you’d like! icon_smile

 

Line of Credit: Important Tips for Managing Your Line of Credit

Important tips for managing your Line of Credit

Line of Credit for Property InvestingManaging the cash flow and allocating appropriate spending in your Line of Credit (LOC) loan is very important, whether it’s for personal or investment purposes.

I would always highly recommend that if you have a Line of Credit set up, that you use it solely for the purpose for which it was originally established. This could be either for personal purposes or for investment purposes.

By correctly establishing the separate loan types into what is personal and investment right from the start, you’ll be able to easily identify which interest expenses are tax deductible.

As soon as you start to pull money in and out of an investment Line of Credit for personal expenses and then repay personal money back in, you start to get into all sorts of mess. And this mess ends up having to be sorted out by your accountant so he is claiming the correct amount against your investment. His extra time and effort will hit your hip pocket in the form of higher fees. So do yourself a favour and stick to the rules on this one!

Line of Credit for Investment Purposes

An investment Line of Credit should be used to invest in assets that appreciate in value. Any properties you buy are a typical example.

You can use your Line of Credit to help meet some of the costs associated with your investments. This will reduce the amount of cash you need to use from your personal savings or regular income.

During any twelve month period there can be large expenses associated with holding your properties such as rates and taxes or an unexpected maintenance issue. Even the lack of a tenant can put stress on your regular income. These are times when it can be useful to have a Line of Credit set up that you can dip into to meet these costs.

Your Line of Credit would also be the account where you deposit your rental income as well as place any tax refund you might get as a result of holding an investment property. Your Line of Credit can also be ‘topped’ up by transferring a set amount of your regular weekly income over to help with the running costs of holding your investment property.

Line of Credit for Personal Purposes

Typically, you would deposit your wages and investment property tax savings into your personal LOC.

However, these investment property tax savings may need to be transferred over to your investment LOC from time to time, to ensure the longevity of your investment LOC.

If you have an LOC set up for personal use, then any interest charged by the banks on this account will not be tax deductible* and will be just like having a credit card bill.

Important things you should know about Line of Credit Loans

Interest will accrue on your LOC and one thing that most borrowers rarely realise is that when interest rates rise and the interest continues to accrue, there will start to be a draining effect on your LOC. If you are not aware of this or you don’t manage it carefully, this situation can quickly bring you to your LOC limit.

You have extra take home pay because of your investment properties. This should not be spent and should be invested back into your line of credit or better still to reduce your bad debt – your home loan.

A Line of Credit requires Discipline!

These types of loans require financial discipline and good budgeting skills to stay within your financial limits. They are a little bit like having access to a credit card with a huge limit.

If you have a LOC set up to help manage your property investments, its rule number one that you must NOT dip into this account for personal spending.

A big mistake many investors make is they see a nice tidy sum of money sitting in a LOC readily accessible and then decide they need a holiday or they want to buy some new expensive ‘toy’. Next minute – boom! The line of credit balance drops and before long they can find themselves having difficulty with the holding costs of their properties and now have no surplus finds to assist.

When a LOC is set up to assist with your property investments it must only be used for that purpose.

Be sure to keep in regular contact with your bank to ensure you are receiving the best interest rate possible. Just this week, for the second week in a row, we have been given a reduction in the interest rate we are paying on some of our loans. I wrote all about it here last week.   I’ve just updated the post to include our most recent reduction.

Line of Credit interest rates

On that note, I’d like to remind you to constantly review your finance structure to be sure it is as optimized for your investing. You can always have a free, no obligation review with the team at eChoice.

*The information in this article is not meant to replace professional advice.

Here’s to your success!

Fay McLean

 

 

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How You Can Reduce Your Interest Rate – Today!

reduce your interest rates downReduce Your Interest Rate Down

One of the main purposes of this website is to help you maximize the profits you make from your property investing. And that means sharing with you the things you need to keep a close eye on as they relate to your properties. Things like – how you can reduce your interest rate today!

If you’ve been reading my blog for any length of time, you will know I’m always talking about how important it is to know your numbers. Knowing and understanding where you can continually extract more income from your portfolio is part of your learning journey.

Some people have the attitude that saving or earning an extra $10 or $20 dollars here or there is not important but I’m sure you’ve heard the saying before [quote]“If you take care of the cents, the dollars will take care of themselves.”[/quote]

Let me ask you a question…. If you found a $50 note lying on the pavement without an owner and picked it up – would you think it was your lucky day?

lotto winLoads of people spend a fortune week after week buying lotto tickets just waiting for a win. Imagine if you had a ticket and when you got it checked to see if you had won anything you heard the bells sounding off like they do when there is a winning ticket. The cashier tells you that you’ve just won $600!!! Wow – how cool would that be??

Well, you can get yourself a ‘lucky day’ feeling easier than you think….. all you have to do is make a phone call to your bank. Here’s why…

As savvy investors, we are constantly keeping a check on how to reduce the interest rates for our property loans and requesting they be reviewed.

And so the other week DH (Dear Husband) made a phone call to one of the banks we have a substantial loan with and simply requested a review of our interest rate. And he got jackpoticon_smile

A reduction in our variable rate from 4.95% to 4.85%.

For the level of loans we have with this bank, this equates to a saving for us of $600 per annum.reduce your interest rate

The reduction in the interest rate may not seem like a big thing but if the $600 was a lotto win I doubt there would be anyone that would snub their nose at being excited over that.

The ability to negotiate your interest rates and have them reviewed is a win for you as a savvy investor. It’s an example of how you must constantly ‘work’ your portfolio to gain maximum returns.

Having a portfolio of ‘buy and hold’ type properties doesn’t mean you can forget all about them once you’ve gone past settlement. Investing in real estate is a business all of its own and even if you work at another job, you must make time for your portfolio if you want to maximize your profits.

Three main areas that need regular attention are:

  • Interest rates
  • Maintenance
  • Rent review

In regards to your interest rates, if you have your loans at a variable rate then make a note in your diary to call each bank you have loans with and ask them to reduce your interest rate. Do this at least every twelve months, if not more often.

We make a call like this to our banks regularly. Every time, we get rewarded with a small interest rate drop regardless of where the market rate is.

Unfortunately you don’t have this luxury if you have decided to lock your interest rates into a fixed rate. If you need to check on whether you want to stay at variable rates or lock into fixed rates, it’s a good idea to chat this over with a reliable broker.

Why Is It Important To Reduce Your Interest Rate?

The interest you pay on your property loans is one of the biggest expenses you will incur as a property investor. So it stands to reason that whenever you can get a reduction in what you are paying, you are saving money.

Even if the amount you save is small or if you already have enough to pay for your properties, saving money is important.

Here’s a few reasons why:

1.  Save for an Emergency Cushion

It’s always comforting to have an emergency fund set aside that will cover unexpected expenses for your property portfolio. This could be any number of things; a new oven, replacing or installing air-conditioning, an extended period of time without a tenant or even loss of your job.

2.  Another Deposit for Your Next Property

Every bit of money you can put aside or save will get you to your next deposit even quicker. The quicker you can get into the property market again, the sooner your financial wealth can start to increase, the sooner you’ll be able to live a freedom lifestyle.

3.  You Can Only Spend Your Money Once

Once it’s gone – it’s gone! I believe in abundance and know that money can be made over and over. But it’s a whole lot easier not to spend it unnecessarily in the first place. Regardless of whether funds for your properties are coming from the bank, a joint venture partner or your own funds, everything that is spent on your properties is less you have to spend on something else you would love to be doing. Spend wisely and save madly.

People who regularly save and invest are the ones who end up being wealthy.

Hopefully if you are reading this blog, you are someone who falls into both of those categories. If so, congratulations!! You are on the right track  icon_smile

It is important that you trim your spending and save where you can so that you can really begin moving forward and acquiring wealth.

Today’s action step: Make time in your diary to go and call your bank to request a review to reduce your interest rates.

UPDATE TWO WEEKS LATER:

We did it again!! Another $678 in our pockets.

Have you ever been into a store to buy something and asked the retailer if they could match the price you were quoted for an item you saw down the street? I bet you have. But have you ever thought of doing the same thing with your bank?

Last time I posted telling you how Murray and just negotiated a reduction in the interest rate we are paying on our loans with one bank. Then this week, he went to another bank we also have loans with and told them we had just got a reduction on interest to 4.85% with another bank, and he would like to request they matched it.

To tell you the truth, we really didn’t expect a positive response because our broker had already negotiated a reduction on rates with this same bank only three months ago. But it’s always worth a try.

Well, how pleased were we, when after a day or so thinking about it, the bank came back and said YES!!

Score!! – That means over the past two weeks, we have negotiated a saving of over $1200 per annum in interest payments. That’s money we get to keep in our pockets rather than the banks getting it.

Imagine what it would mean to you if you could save $1200 each year by doing so little. That’s extra money you could put towards further investments, paying school fees or taking a family holiday. Either way – it certainly goes a long way to helping you enjoy a better lifestyle and have more freedom of choice.

Now if you didn’t take action last time – and you don’t take action this time – then perhaps you’ve got more money than sense. Or, you’re not really serious about maximizing your property investments. Seriously – today or tomorrow you’ve got to make the time to put a call into your bank to request your reduction in interest rates.

 

 

P.S. Be sure to check back here and comment to let me know what the results you get.

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Tax Time!! What Do I Need To Take To My Accountant?

tax timeTax Time!!

If you are on top of your game you’ll already be asking yourself what do I need to take to my accountant to maximize tax deductions for rental properties. If you’re part of the majority – you’ll be quaking in your boots at the thought that it’s tax time once again!

end of financial year salesI spent last weekend swooning around the city shops spending up big in the end of financial year sales. This weekend was struck with reality and the need to finalize my own book keeping before it’s time to visit my accountant.

My dear old father in law never used anything except the good old ‘spike’ to keep his receipts on – bless him. I prefer something I little more comprehensive  icon_smile

This financial year we had 10 properties in our portfolio. Whether you’ve got one, ten or more investment properties, you’ve got to have an organized way to keep track of all your paperwork and finances.

I’ve developed rock solid systems for our investments and business and I have the tools and reports I need to keep track of them.

For years now I’ve used Quicken to keep all our financial records. I love this system. It’s a simple and user friendly way to keep track of income and expenses so you stay on top of your book keeping for tax time. The system also allows for plenty of reporting and budgeting if you want those sort of features too, but I like to keep things as simple as possible.

Getting your tax done by a professional accountant who is familiar with property investing will maximize tax deductions for rental properties and help give you a stress free experience.

There are some fundamental documents and pieces of information you can make sure you have before you visit the accountant. Being prepared will help to keep the cost of your visit down as most accountants will charge you by every minute they spend working on your tax.

Here’s a list to help you get organized and gather the things you need.

Figures and Documents Your Accountant Needs

Asset Register

If you don’t have one of these already, I suggest you make a fresh start on one of these for the new financial year. It’s a register that lists ALL of your assets, including your properties.

In this register you will list the name of every asset you buy, the date of purchase and cost.

You can claim depreciation on your investment properties (and perhaps some of your other assets). Having a register will give you a handy reference for your accountant, and whenever you are required to list your assets, such as on loan applications. Having this register was a blessing when I had a recent telephone call with a broker who wanted all our assets and liabilities.

An asset register is not an essential item for your accountant, but believe me when I say it will make your life a lot easier.

Do the work once and use it over and over again.

Settlement Statements

If you have sold any of your investment properties during the last financial year you will need to take along your Settlement Statement. This will have been sent to you by your solicitor or conveyancer who acted on your behalf at settlement. It will list all the amounts of sale, stamp duty, charges and other important information your accountant will need.

Loan Interest

You’ll want to list all the interest payments you have made on any of your investment property loans.

If you are in the unfortunate position of having some of your properties cross-collateralized, then be sure to divide up the interest payments and allocate the right proportion to each individual property.

Accuracy here helps you determine the true yield or return on investment of each individual property.

Expenses: Travel, Maintenance, Repairs

Some minor expenses for your investment properties may have been paid by your property manager directly. In this case, they will show up on the Property Management Report. You may also have some invoices and receipts for expenses you have paid directly. List these expenses against the correct property.

If you have travelled to see your property at any time (after settlement) it’s likely that you can make a claim against your out of pocket expenses for the trip. Keep and document all fuel, accommodation, meal and other incidental dockets in relation to the trip. Your accountant will determine which of these costs can be claimed.

With properties in our portfolio all across Australia, we can offset some of the expenses on most of our travel against one or another of our properties. Have a good discussion with your accountant on this matter so you know in advance what is claimable and what is not. Often you need to know before you travel so you can be sure you have the correct records to verify your claims, like emails to managing agents or tenants to arrange the visit etc.

Property Management Statements

Most real estate companies are fairly prompt with sending through the end of year Property Managing Statement. This will list all the rent received, any expenses they have paid on your behalf. It will also list their managing fees. Your accountant will need all these figures to complete your taxation return.

Depreciation Report

After you settle on a property, you should order a Quantity Surveyor to complete a depreciation report. The report takes into consideration two main elements:

  • Capital works allowance; and
  • Plant and equipment.

From this report, your accountant can make a calculation for an ongoing tax deduction year after year for a limited time.

The first time you include a newly acquired investment property in your taxation claims, your accountant will need the Depreciation Report to refer to. From that point onwards, calculations can generally be made based on the previous years taxation records.

I love to maximize tax deductions for rental property. Our property portfolio has helped us legally reduce our tax by thousands of dollars over the years. This is a good checklist I use every year as I gather what I need to take to my accountant at tax time. I hope you find it useful too icon_smile

I’m happy to pay tax, but see no point in tipping the tax man! What about you?

Leave a comment below, and feel free to share this information with others who may find it useful.

Here’s to your success!

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Money Doesn’t Show Any Discrimination

Money does not show any discrimination, it does not grow on trees, but it is made to flow freely around the world.

We actually all have the same opportunities in life.  It really bugs me when people remark, “Gee how come you can go on a holiday?”, or “gee how can you have an investment property?”
You might have had similar things said to you.

Don’t worry about what you did yesterday.  Today is a brand new day and as I said we all have the same rights and opportunities as everyone else to become wealthy. However, the vast majority, of people will never achieve freedom financially.

Take a long hard look at yourself and ask the question, “Where do I want to be financially, and when do I want to get there?”  If you are one of the majority that think other people are lucky, then stop. Take a deep breath and know that you can have the same kind of ‘luck’ too.

There is a small group of property investors in Australia that are becoming wealthy, and I am one of them.  I can help you to go down the same path as me…

I want to share with you a comment that is said often to me about property investing.  This one, I hear all the time…

YOU HAVE TO BE SMART TO INVEST

Stop now and don’t put yourself down any longer. Anyone can invest in property, and yes it can be challenging. It is not rocket science, and my best advice to you would be finding yourself a mentor, or someone that actually invests in property.

Many people have great ideas and think they know all about investing but when it comes to the nitty gritty they really are all huff and puff. When you are looking around for that person to help you, please make sure you ask the question “Have you invested in property and are you wealthy or at least on the track to financial freedom?”

Really the truth is you can do anything you want to do. Saying that you’re dumb or not smart enough is just an excuse.

If you know nothing about investing, be determined to learn all you can about property investing so that you can set yourself on the path to financial freedom.

Find someone that has done what you want to do, and is where you want to be. Use their knowledge to fast track your own success by avoiding the major mistakes most people make. The world is at your feet!

When people then say to you “Gee you are so lucky”, be humble and let them know we all have the same opportunities.  Grab yours, run with them and before you know it, you will be where you want to be!

WHAT ARE YOUR GOALS IN RELATION TO PROPERTY INVESTING? LEAVE ME YOUR COMMENTS BELOW. 

Take A Long Look At Where You Are At In Life…

bigproblem

I urge you all to take a long hard look at where you are in life.

You can have control of where you want to be in the future, nothing is going to be easy;  however, the concept of creating a passive income stream is something to think seriously about.

I will tell you how I did it….

I bought investment properties – a total of bought 10 properties over a period of  8 years.  I used the bank, the tenant  and the tax man;  other peoples’ money, to help me build my property portfolio. After about 4 to 6 years most of these properties became cash flow neutral.

Property investing is a long term prospect.  It does take time and patience to reach your goal. One investment property is better than none, and with the right education you too could be well on your way to building a property portfolio.

If you want to make quick money and have more risk, head off to the casino.

I have been through the hard knocks in life, and once found that a simple person in life could have such control of their future. I’m not on easy street yet.  I am a few years away from where I want to be, but boy am I looking forward to continuing to be able to live the lifestyle I want into the years to come.

It wasn’t easy, but it was simple.

I grabbed some opportunism and ran with it. In just a few short years I will be living completely off the passive income we have created from our property investing and the passive income it provides.

I can show and help you how to do it as well, how exciting would that be?

p.s. If you have questions about how to start your own investment journey, or maximize your current portfolio, leave a comment below. I’ll be happy to answer your questions, or direct you to a resource or free tutorial here on Property Investing Support to help you through the step you’re on. So ask away!

WHAT IS IT THAT YOU NEED TO KNOW MOST?  LEAVE ME YOUR COMMENTS BELOW.