Although the RBA cash rate remains on-hold at 1.5%, lenders are still increasing their investor loan rates out-of-cycle. I believe there is merit now to seriously consider fixing your investment lending for the next 2-3 years. This will shield against further out-of-cycle rate rises brought on by APRA and the federal government’s new bank levy.
Because we’re expecting a mid-cycle slowdown between 2019 and 2020, this should time well as interest rates tend to come down during financial slowdowns, and this can be taken advantage of when your current rates expire.
As a guide, your fixed interest-only (IO) rates should be <4.79% and fixed principal & interest (P&I) rates should be <4.00%. Whilst interest-only is my preferred finance option, it may be worthwhile switching to P&I now as the interest rate differential can almost equal a loan’s principal repayment component. Please get in touch if you’d like us to review your current lending in light of your future goals.
Don’t forget we can also assist with DHOAS loans through Australian Military Bank!
Congratulations to our clients that have recently built in the Ipswich growth corridor. The $1.5billion Ripley town centre has begun construction and land prices are now in a solid growth phase. As this corridor begins to mature, other areas we’re tuned to is Redcliffe Peninsula, Moreton Bay, Sunshine Coast and Logan.
If you’ve ever been considering Perth, Adelaide or Darwin, now is the time to begin looking. Perth and Darwin’s growth will be tied to increasing commodity prices and defence spending, whilst Adelaide will take the lion’s share of defence spending. The major markets of Sydney, Melbourne and Newcastle are now approaching a cycle-peak where potential for future upside is now reducing.
I can’t emphasise enough the importance of sticking to a strategy and appreciating fundamentals. It’s been reported that some of our SAS folk have been left stuck with ‘underwater’ properties (where property value is less than loan outstanding) in Darwin that were purchased through a former Navy diver.
We at Defencewealth will never recommend a property that we ourselves wouldn’t personally invest in. I consider it a massive breach of trust and integrity that some members were sold apartments (minimal land content) under the NRAS scheme in a market that was clearly reaching peak-cycle. Whilst you are ultimately responsible for your own investment decisions, when seeking guidance and advice from others, make sure they have achieved what you’re aspiring to achieve and are also appropriately licenced and qualified. Whilst investment risk can never be eliminated, it can certainly be reduced through proper education and understanding.
The Defencewealth strategy of TWO-50-TEN™ is based on acquiring a $2 million portfolio at 80-90% LVR over a 6-8 year timeframe. Once acquired we work to reduce the LVR to 50% over the next 4-7 years using a combination of capital growth, offset accounts and principal repayments. Once at 50% LVR, you will have some serious financial options but it will take time (10-15 years) to achieve. The new property packages we recommend are considered investment-grade based on experience and results and are selected for their balance in anticipated cash flow, capital growth and risk.
It is in your moments of decision that your destiny is shaped — Tony Robbins