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CLIPS, Nothing wrong with what you did, it worked well thats all that matters. Interest only against paying the pricipal only means you move on to your next buy quicker. If you want to slow the process down or stop with what you have then what you did is best. If you want the benefit of the largest property gain with the least money involved then you are wrong. After your first buy without adding your own personal money towards it with the final goal being that this is your money that will keep you in luxury in your old age then i am right. The profit is in capital gain, the more capital gain you take on board the better. The faster you get the second property with peter paying paul the better, paying principal over the top slows you right down. macdunk
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MacDunk lets take danchops example above $309000.00 rents for $325.00 per week. $309000.00 at 7.5% 2year fixed mortgage interest= $23175.00 divided by 52=$445.67 per week. Add body corporate, rates, insurance,management fees And a small allowance for vacancies & maintenance. and you are about $10,000.00 in the hole plus loss of interest or dividends & capital gain from investing in market. definately you may be able to claim a Tax refund but if you are on a working holiday overseas this may not be possible. Unless there is a guarantee of substantial capital gain in Two years in my opinion this would be an investment for a half blind idiot.
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Enigma, Why not take a real example the one i bought and sold to my daghter and friend. We can all find examples they put a small deposit down and it self funded. Then made a nice capital gain. Some people on the share market buy a dog other people make a lot of money. macdunk
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Duncan and a lot of people do the same with houses. Most are dogs.
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"The faster you get the second property with peter paying paul the better, paying principal over the top slows you right down. macdunk"
This was the key meaning for interest only buying.
It took me 25 adult years to buy a house. I built it myself. Now 6 years on I have a mortgage on 5. With rent rises, each pays for itself. and each has doubled in value with the boom. And with interest only (except for my permanent home) the extra money I can put in the stock market or buy another house.[8D]
But had I started what Macdunk has shown at a young age, I would be amazingly rich.[8D]
As a boy, I listened to my father (who is NOT rich) It was always, don't get credit. Pay everything in cash. What a shame! He admits his error now. :(
Mercury
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Oh I should point out that the houses I have are all cheapos or Icould not have afforded them. Having built the first myself saved me a lot ( but I learned a lot too) (kept the wife active mixing cement....and now keep her washing dishes (just joking about the dishes))
But by interest only housing deals, the extra money can buy another. Putting it against a principal and interest loan lowers the amount owed by very little. And with inflation, it doesn't help to get your next house if the money is tied up in equity.
Sure the equity helps buy a house, but only with a bigger mortgage than you would have had you saved the extra interest and used it as a downpayment.
Good luck to you all....and Amanda...you can do good with the cheapos if they are paying for themselves.
Provided they are not in an area that goes downhill.
I know a woman and man who lived in Rockhampton for awhile. They bought a cheapo rental property and Rocky didn't do good for many years. They couldn't resell the house for what they paid for it. However, the boom will finally have changed that. They may not want to sell anymore.
Hey Macduck...you seem to be knowledgeable.
Two of my properties are in the Bundaberg are (QUEENSLAND) WHICH is a transforming area. Used to be sugan but changing to mixed veges and fruit.
My house is at the bottom of the market. pays for itself, but only a modest $1000 a year profit after expenses. major repairs would lessen that quickly.
The other is just out of town, on a 5 acre piece that floods when the rains come. About 2 inches under the house. Highset.
but Bundy was one of those stagnating towns. Prices actually went down after an earlier boom. do you think I should hold on rather than sell and buy a house by the sea?
I am 55 now....have about $200,000 in the bank....no super (30,000) and no permanent job. My back gave out after years of construction work. For the last year I have just been trading.
I like your words. Your ideas would be worthy of my attention.
Mercury
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MERCURY, If you have a self funding property with an expectation of a decent capital gain with no expected large expences looming, why sell if you dont require the money. It is like everything else, sit down and write out the expected price today if you sold, and what you would buy to replace it as an investment, then what position is best for you. If you did sell out you are in the position to build a block of units, you living in one renting the others. Being in the building game means you know what goes on, even although your back is buggered. The world is your oyster, sit down and get it all written on paper then sit back and think it out. best of luck macdunk
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Thanks for your reply Duncan. I wish i were as wise as you suggest....as a former tiler, i can't say I understand the building finance game as well as i would wish.
However, my wife and i would like to live within walking distance of the sea.
So if I sold one house investment I would gain $70,000 plus 100,000 by selling the house I live in.,,, giving 170000. Then Ithought I'd kickin another 130,000 and get the cheapest house by the sea, in a reasonably popular area.
For $300,000 I could get a 2 maybe 3 bdrm fibro up to weatherboard by the sea. Land values in the area I am looking at are about $240,000, but there isn't any land for sale.
What do you think of that scenario?
Not wishing to take up too much of your time.
Mercury
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Mercury, Nobody can give advice in a situation you describe. It seems you are to young to wallow it out on the beach, it would get pretty boring. How about a business of some kind, motel or something that you can with your wife run in semi retirement.
You really need to sit down and nut it out, with your wife first. To buy a house with most of your capital and watch the savings diminish is not a good option at your age. macdunk