Refinance, new super annuation and update on my investments in Japan

Hi everyone,

What a busy April already! A rather long article since I haven’t written for a while. But I have good excuses! I have refinanced both my PPOR and IP, changed my super (and my wife’s) and almost bought my first IP in Japan, not to mention adding more shares through Interactive Brokers and, for the first time, CMC market. Why so much as the same time? And how? And what? Let’s find out.

1/ Refinancing with Loan.com.au

I’m a strong believer that we should review our finances regularly. I never renew my insurance automatically as an example. As for our loans, I have put a reminder every 6 months to check what’s out there, which has never pleased my mortgage broker.
I have refinanced already once since the purchase of our PPOR. We were with Citibank (way too inflexible banking!) and then CBA (more flexible, more expensive, the easy solution if you need a packaged bank IMO), and I was on the market for the following: 100% offset for both properties, non cross-lateral of properties, interest only, split loan capabilities. Loans.com were the only one to tick all the boxes (UBank was close, but could not offer 100% offset – just redraw).
The only draw point for loans.com is that they’re not protected by the government (more details here). I’m always a bit of a skeptic when it comes to government “protecting” your assets. Why not spread your risk and invest defensively, way more effective instead of relying on others to protect you.

My rates (before the recent increase) with CBA were 4.07% for the PPOR and 4.47% for the IP. Loans.com provides a package which gives the same rate for both at 3.87%!
Including exit fees and refinancing cost, I will break even in 9 months.
Funnily enough, both Loan.com and CBA have increased their rates now…

I have been discussing with my broker who has been pointing out all the negatives of an internet banker… Still, after my own research, I was able to check that some of his arguments were wrong. The only reason I stayed so long with CBA is the fact that the banker was a mate who was helping me a lot and was proactive. He was made redundant so I had no reasons to stay..
Mortgage brokers are sneaky and I still haven’t found one who is REALLY playing for your best interest. Their trail commissions is what is driving them. Unless you find one who has fixed fee, I keep to be reluctant to play their game.
And online is always cheaper!

2/ Changing superannuation

I recently bought an excellent book from the Barefoot where Scott Pape points out an easy way to check your fees.
I was with AMP through my employer and could never find out exactly the fees they charges us (my wife and I) until I started researching… OMG! What a surprise when I discovered they were taking 1.4% ANNUALLY (!) to “manage” our investments!!
I also liked AMP because my employer paid for my good cover of insurances. What do I mean by good cover?
My mortgages would be entirely reimbursed if I was to disappear and be permanently disabled and a VERY comfortable salary continuance package.
A quick calculation confirmed that I should rather pay for these insurances with a new and cheaper super fund.

So I did my research and have switched to Hostplus, 100% indexed balances option.

I also would like to mention that we do salary sacrifice. To me, the one and only best tax heaven in Australia. Currently to $30k per financial annum (and $25k from next financial year).

I know some take an accountant to help them do their calculations for salary sacrifice arrangements. My salary changes every month due to the commissions I receive from work, and I still manage to cap at the maximum. So save yourself a couple of hundred bucks and DIY!

Lastly, and I know it has been a debate in Australia, yes, I’m chasing financial independence, an early one, and yes, I’m taking into account my super. Some will argue that you can’t get a penny be until you reach 60 and get your super. I take in my calculations into account that my Super will start paying money at age 70… An entire post to follow on my calculations later in the year.

3/ Investing in Japan:

I hear every day from my broker and bank (before I refinanced) that I have a huge equity in both PPOR and IP, and that I should use it buy more property. Australia, and not only IMO, is a very risky place to invest in real estate.
I would add that even if I have taken my precautions with building every month a nice safe in the offset accounts, a large portion of my wealth is in here, in property too.

As discussed many times, the two only ways to save yourself from catastrophe is to invest defensively and diversify (assets, and geography).
I explained here why I have chosen to invest in Japan.
I’m not a speculator so I have preferred harden yields against potential capital growth and I’m about to sign for my first purchase in Japan. In the city center of Fukuoka, for around $37k AUD all costs considered, returning pre-tax more than 8% yields! Not bad!

Before jumping on this unit, I have said “no” to many – I receive new units fitting my criteria every week- , put my own calculators to double check and this has given me:
– An idea of where to buy with Fukuoka (what Japanese like is very different to what Aussie do)
– The size of the units
– Potential issues (tenants, earthquake construction measures, …)

For the particular one that I have signed for, the vendor accepted to reduce the price due to some reparations which are going to affect the yields potentially – So win win.

So far so good even if I consider it a very risky investment too, as there is virtually no control on your asset (you’re far away, cannot open a bank account locally and have to put all your trust with a local agent speaking your language). I would recommend only a small portion of your portfolio. Saying this, the Japanese culture is a trustworthy one which balances with what I have just written.

4/ Investing in shares:

6 months ago, I knew nothing about shares, even worse, how to trade them. Today, I have a sizable portion of my assets invested in them, using Interactive Brokers for the US shares I buy (again, diversification…), cheapest broker around and where I can buy direct shares.
As I learn along, I realized I couldn’t sign for Dividend Reinvestment Plans for my Aussie shares so I signed up for CMC market and bough some shares in my home land. This is also a great idea to diversify with your brokers too if one goes bankrupt.
In Australia, I’m buying only AFI and ARG as they are based on value, great with distribution and offer distribution reinvestment plans.

5/ FIRE calculator and where am I going with all this:

I have set up my own retirement calculator because I’m not 100% sure I will be in Australia in a 4 years’ time. I could not find a calculator that would take me through the exercise of different tax rates (resident vs non-resident).
All going well, I should have a possibility to stop working full time by the time we depart. I have based my FIRE calculator on different excellent websites: madfientistfinancial mentor and of course my guru MrMoneyMoustache.
I have not made any choice to stop working but I would like to work part time. I also factor that my wife will continue working.
In parallel, I have started a list of things I want to do when I’m “semi-retired”. Ideally, I still would like to be in sales and office for companionship and entrepreneurial spirit but also would like to help others to have a better life: Physically and financially, and mentally. Plenty of nice projects. As it turns out, I’m not the only one and I want to have no regrets in my life!

6/ Issues with our IP:

My agency has recently run into trouble. The OKT has seized their trust account. As a consequence, we have not received our March rentals until yesterday!
During the process I have also realized that they have forgotten $400 of rents last financial year!
A sign or not, I received a call this week from a rental agency which would charge 5.99% instead of the standard 7.7% I’m actually paying…

However, I still plan to stay with them… why? For a few reasons:
– I still trust them and believe that human error can happen. They have since invested into a software to avoid this issue again. They have been really awesome with driving and protecting my investment, being investors in RE themselves. They are great communicators and have reassured me all the way before the issue occurred.
– We have no real financial pressure since we have built the offset account. This is the good that happens when you invest defensively
– I believe that they’re going to be even better not to lose clients from now on
– That’s a boutique shop and I’m sure they would go bankrupt if people started to leave them
– Shit happens, you have to ready for it…

7/ Blog projects:

Lastly, I hope to find more time to enhance my blog. I don’t want really to write more as every article takes a lot of time to build but I would like to work on a new theme and make it more accessible. I would still like not to charge for nothing on it, to avoid losing the audience.

I plan to:
– Get more on Mrmoneymoustache forums and others to get myself known
– Re-do the website with new sections (earn more, spend less and invest wisely)
– Intro social media at a stage
– Translation in French for my oldies
– Start networking with FI French community

A lot going on!
See y’all!

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