First thing’s first, Happy New Year everyone! And what an exciting new year we have for you all here on The Property Couch. We’ll let Bryce and Ben fill you in on what’s to come, but for now we thought we’d kick the new year off with a fresh Q&A session. In today’s episode, Bryce and Ben answer the following 7 questions which are:

• Volks on Mechanics of Lenders Mortgage Insurance (LMI): I have a quick question, how would you tackle this situation. I’m 33 yo and married with 2 young kids with plans for #3 in the future. I’m currently rent vesting (I have subsidised housing thanks to my career) with one investment property in Warner north of Brisbane. (I bought this before I started to listed to your podcast) I have bought off the plan and in hindsight now, armed with the information provided by your podcast and other books on investment property, I would have steered away from that investment and bought based on location. Hopefully this property will do some heavy lifting in the future.

My question is in reference to LMI and loan to value ratio (LVR). Is the LMI attached to a loan dissipate over time as our LVR approaches the 80% sweet spot or does it remain until the whole loan is paid off? And, given I’ve saved up a good cash reserve, would it make sense to pay just enough to make my LVR 80%?

• Jamie on Purchasing foreclosed property direct from banks: Hi Guys, I’m a long time listener of the podcast and have currently just completed your book. I have a question regarding whether you have previously ever purchased foreclosed property direct from the banks. I have located numerous websites regarding this with some requesting membership’s fees to access the information. Are there ways to retrieve this information yourself and can you expect to purchase this property for under market value and if so how much can this process differ from a typical purchase.

• Bohdi on whether to buy comfortably within budget or stretching to the end of your limit: Hey Guys, Came across the podcast a few weeks ago and have binged a year and a half worth of episodes in 3 weeks. Addictive stuff! My now wife and I recently got married and are now looking to get ourselves into property.

We live in Manly in Sydney, have a good double income and a considerable deposit saved and are now trying to decide the best property approach for us. The maternity leave at my wife’s work is fantastic so we are not expecting any dip in salary income as begin to have children. In the long term our goal is to have a few investment properties wherever it makes sense to buy in Australia and then a PPOR in or around Manly.

My question to you: With our income we could probably get a loan of up to $1.5M and still be able to comfortably live. But in your experience, should we start by purchasing an investment property that’s well within our means – e.g. something for around the $700,000 – $900,000 mark and continue to rent in Manly OR should we try to stretch ourselves and buy a property at out upper limit that we live in for now and then think about additional investment properties later on? If we were to buy something a bit cheaper in an area that made sense, I’d imagine we’d be able to continue renting and then buy a second more affordable investment property as equity grows in the property and we continue to save. In other words, are we better to aim for a number of cheaper properties that we gain a small amount of capital growth or one more expensive property that might achieve large capital growth as it’s off a larger base?

Any thoughts/words of advice would be much appreciated as we’re undecided what to do next?

• Mike on offset accounts: Love the podcast! Got on board at Episode 69, been back to the start and nearly caught up again. I get excited about driving anywhere now because of your podcast. My question is: do you attach an offset account to each loan, or can you have one offset account attached to multiple investment loans? What makes more sense?

• Tim on what to ask a Property Advisor: Apologies if you’ve already covered these and I haven’t got to it yet but I’d love to hear more about the following:
  • If looking at a suburb/property that’s historically gone up 10% per annum vs a suburb that’s gone up 7% per annum, you could either conclude that the first is a better performing suburb and assume it will continue to be, or that the second is good value and has room for capital growth. I would love to get your thoughts on how to think about these two very different conclusions that you could draw from the same data. I’ve heard you mention the term regression analysis before and am curious if you’ve done any research into this.
  • It’s common to see managed bond/stock funds apply their strategy to historic data to demonstrate what it would have done had you invested 3 years ago, do you guys or other property advisors do the same thing with the principles that you apply and what kind of questions should people be asking their property advisor to validate that their approach is likely to be a successful one?

• Mitch on Strategy and Building out a Portfolio: I am currently in the early stages of talking to your mortgage brokers and buyers agent team about my next investment property early next year. My question to you revolves around strategy and building out a portfolio. I am 25 and bought my first investment property with little/no knowledge just over 2 years ago. Luckily I bought a 2 bedroom 1970’s unit (1 of 12) in Hove, Adelaide and so far it has done really well. Historically its capital growth has been 8.5% and yield 5.4%. I understand that this probably won’t continue into the future but feel we did well.

When designing plans and giving the buyers agent team a clear brief my partner and I are beginning to assess whether we chase capital gains property, a cash cow or a mix. Currently our cash flow is strong (minimum 2k surplus per month) but this could deteriorate slightly as circumstances change. I’m curious to know again the rough numbers you guys work off when considering these options ie. What capital gains % do you chase and what yield % do you chase for both types of property.

We are leaning towards a more capital gains focused property as with age on our side rental yields can catch up later, but we want to make sure we can easily manage the repayments so we don’t want to get stuck not being able to live life.

• Amber on realistic estimates of holding costs for Investment Properties: I wonder whether holding costs for an investment property after tax of 2% of purchase price is still realistic estimate in the current market? I read your article which was written in 2014 on how to invest without affecting family budget where you used this value.

If you like this Q&A episode (Mechanics of LMI, Purchasing Foreclosed Property, Stretching Your Investing Budget and more), don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/