Are the REIQ a bit optimistic

The Consumer Price Index (CPI) rose 0.6 per cent in the December quarter 2017. Certainly no early RBA hike here! was Shane Oliver's immediate tweet.

The CPI rose 1.9 per cent through the year to December quarter 2017 having increased 1.8 per cent through the year to September quarter 2017. Still beow the RBA's target band.

According to MacQuarie Bank it is now looking very likely that housing prices at the national level are again rising modestly.

After seasonal adjustment, monthly growth in APM's measure of capital city dwelling prices has picked up modestly in recent months. And CoreLogic's data to mid-January shows a clear improvement in seasonally adjusted dwelling price growth, with the caveat that sales volumes in January are very low.

There are some life stage considerations involved in answering this question specifically. But for the sake of this discussion...

The short answer is YES. It is possible to have a negatively geared property that completely pays for itself.

Do you know where your financial future is heading? Do you know if you will be able to maintain your current lifestyle when you stop full time work?

Units are often a popular choice for first time investors as they are at a lower price point than houses for the same location and on the surface, can appear to offer better returns.

This is why you need to relook at your investment loans.
 

• Increased interest rates for investment and interest only lending
• Increased equity or deposit requirements for investment lending
• Tighter conditions on loan servicing
• A closer examination of living expenses
• Withdrawal or substantial restrictions on overseas buyers including ex-pats
• Restrictions on property types and properties in certain postcodes
• In some cases, stopping investment lending altogether

The net result of these changes has seen many investors stuck on higher interest rates with their current lender with no room for negotiation. In many cases on rates well above 5%.

But you can take a number of steps to improve your situation.

There are still competitive investment rates available
The changes have affected different lenders differently. At the time of writing there were still investment rates starting from 3.74%.

An investor with $750,000 in lending on a 5% interest rate could save approx. $9,450 per annum in interest.

Look at principle and interest (P&I) repayments
Better pricing is now skewed towards reducing loans rather than interest only. Restructuring some of your investment lending onto P&I may now make more sense. I have had a number of clients where we have reviewed their situation and for no increase in repayments they can put some of their investment lending into reduction which will increase their equity in their property and reduce their long term borrowing costs.

Fixing may also be an option
There are some better rates in investment space for fixed rate lending at present. With rates at historical lows it could be worth locking in some or all of your investment lending.

Don’t limit your thinking to investment lending
There are also savings to be had on the home loan front with some very low rates available. Refinancing your home loan and also looking at debt consolidation are further steps that could reduce repayments and free up cashflow.

Don’t forget the fees
Many loans particularly loan packages have ongoing fees of up to $400 per annum. Getting a lower rate plus getting onto a new loan with no fees could end up saving you a couple of thousand dollars a year.

Have your switching costs covered
Some lenders will offer cash bonuses for bringing your lending to them. In many cases this bonus will offset the cost of switching meaning you can get onto a lower rate at no cost.

Cash positive property
If you have a cashflow shortfall in your current investment mix then adding a cash positive property to your portfolio might be a sensible move. The surplus cashflow can either offset existing holding costs or be channelled into other debt reduction. A recent option for a client is generating over $6,000 a year positive cashflow after all costs.

Have your situation reviewed
In many cases we have identified savings of $3,000 a year or more for clients. In some cases, we have even identified savings of more than $10,000 a year.

To have your situation reviewed is easy. Just click on the button below to arrange an initial telephone appointment with me and let's start saving you some money.

Schedule Appointment

Greg Carroll MORE THAN ACCOUNTANTS Now followed by over 11,600 subscribers

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