Forum Replies Created
Hi Dana,
Where do you want to live ultimately? If it is in Sydney then buying an investment property there makes sense as it means that any further strong growth in that market will benefit you, whereas if you are not in the market it may be significantly more difficult to enter in the future. Conversely if the market does not grow strongly, or goes backwards, in the near term it won’t matter so much if it is a property that you either plan to live in or are happy to live in.
Regards
Hi Andrew,
One thing to look out for when making an application for the cash out portion. There are many lenders who will flat out not lend for the purpose of paying a deposit on a commercial property, they consider this a business use and will try and push you into a more expensive business facility. You need to use a lender that will either not require a specific purpose for the funds or is comfortable with the purpose being business related. Given that the security for this loan is a PPOR, you should not accept paying a premium because of the purpose, there are lenders that can cater for your needs.
Regards
Suncorp used to be very good for this sort of loan, as they didn’t have a premium on their LOC, but clearly they are not competitive any more. You can set up an appropriate structure, as per Richards suggestion, and pay under 4% for the money.
Regards
Hi Craig,
If you don’t think there will be much growth in the property then its really a no brainer, sell it. Nobody can be certain as to what will happen with property prices, as long as you make an informed decision you should be content that it is the best decision you could have made at the time, whatever happens.
I’ve always thought that the decision to sell a loss making or neutral property should be easier than the decision to sell one that is in the money as you don’t have the issue of generating a tax liability. If you have an on going, non deductible debt then you will get a certain and relatively high return by reducing that loan.
Regards
I already have a decent sized property portfolio, I’m just sitting on it and reducing debt through cashflow. Outside of properties I have invested in a number of gold producers on the ASX, as I see gold as a good hedge against any further crises in financial markets and also against falls in property prices. However, I sold out of these positions last week because the profits I was sitting on were too good not to realise. I now want to get back in, but need a pull back or to find some different companies to the ones I was following and investing in. I still hold some exposure to the agriculture market, which I intend to increase slowly over time, this is a much more long term play and hasn’t made me any money yet.
You can’t know the future, you can only predict. Taking any sort of leveraged position is always somewhat of a gamble on the price going up, sometimes you will be correct and sometimes not. The problem with OTP properties as compared to existing properties is that a reduction in value can create an issue with settling, whereas there are no margin calls on real estate so once purchased, if a property reduces in value over the short term it doesn’t matter unless you need to sell.
Regards
I don’t think it is correct to say that OTP properties are rubbish, though certainly a lot of them are. What people considering these types of properties have to recognize is that they are playing a leverage game, if you can contract a property at today’s prices but settle in 2 years and prices are higher then you will have made a very good ROI. Where the problem lies is where either the market goes backwards and/or the contract price includes a premium for the expectant higher price. Anyone buying off the plan should not pay $1 more than what the price would be on the day of signing the contract and probably should expect a discount given that they are assisting the developer to lock in their revenue on completion and probably also to comply with their construction loan contract.
Regards
Hi Catts,
I don’t disagree with your assessment of the world economy, although I don’t believe the US is in very good shape at all. The major difference between now and pre GFC is that a large proportion of the risk lays with Governments and Central banks, most of whom have large debts denominated in their own currencies. Countries that issue their own currencies can only become insolvent by choice, as they have the option of creating more money (printing). For there to be a major crisis with Central Banks there needs to be a loss in faith in currency, such as we have in Venezuela at the moment or the Weimar Republic pre WW2, I think we are a long way from that occurring although I feel it is inevitable.
Regards
The CBA offer at the moment is pretty compelling, but there are also some smaller lenders that are very competitive. We have a white labelled Resimac product that is at 3.99% (term loan with offset or LOC) with no penalty for interest only, but the catch is that it has to be secured against a PPOR. We had the same rate for IP’s for a while, but unfortunately it has gone up a little though its still competitive at 4.39%. There are some other decent offers out there as well.
Regards
Hi Mark,
Primarily they can reduce interest rates which would most likely have a positive impact on property prices. A significant drop in property prices would have a dramatic effect on the stability of the banking system, so while they want growth reduced and are actively seeking this through various policies they do not want prices going backwards.
In the context of quote above I was referring to anything that happens in the near future i.e. next few years. I probably should have said “problems that occur in the short term”.
Regards
I think the question of whether house prices are in a bubble is a very interesting one. My personal view is that they are, but I also do not think it will be popped any time soon. There are too many vested interests in their not being a correction, notably the banks and the Gov itself. Having said this, I have no doubt that at some stage this will all end badly I just don’t expect it will be any time soon as the Gov still has a lot of resources it can throw at any short term problems and would rather sacrifice our lifestyles than to have the financial system ruined.
Hi JT,
When considering high yield properties you must recognize that their prices tend to be very volatile. Mooranbah is perhaps an extreme example of this. This can, of course, work in your favor but it can go both ways. For the most part people who are starting out lack for capital rather than income, if this is the case for you it is probably a safer bet to look at less volatile markets as the timing of your next purchase is less likely to be influenced by your capital position than income. Income is always important, but only in the context of how it assists you in reaching your goals.
Regards
Hi Pete,
I suspect Richard will have this situation sorted for you pretty quickly. Goof luck and make sure you come back and let us all know how you go.
Regards
Great post Jacqui,
There is a lot of poor advice given, particularly in the media, with regard to whether interest only or P&I loans are preferable. The fact is that all you are doing by paying down a loan is reducing the options you have with your available cash, and potentially costing yourself money in reduced future tax benefits. In the case where the loan has an offset account, this is for zero gain in terms of reducing interest payments. There are circumstances where someone might want to pay down a loan, but it is important to note that this decision is unlikely to be for purely financial reasons. The greatest value in using an experienced and knowledgeable broker is to have all these pros and cons explained to you in the context of your own personal circumstances.
Regards
Hi Akhilla,
You have issues of both asset protection and servicing to consider when making this sort of decision. As was mentioned earlier it will not necessarily greatly alter your borrowing capacity to have only one of you. Having said this, you really need advice specific to your current situation and goals. Sorry I can’t be of more immediate assistance.
Regards
Hi Jon,
While getting cash out against an unencumbered property is more difficult than lending to fund the purchase there are plenty of lenders who will do this for you, particularly if you apply for finance prior or shortly after settlement. The main issue is maintaining the tax deductibility of the loan. When you access the equity, there will be no immediate use for the funds so what you do with them from that point will determine whether the interest is claimable or not. It’s far cleaner to preserve your cash and borrow to assist funding the purchase, then there is no doubt what the use was for and you can use your cash for whatever purpose you want.
Regards
Dave,
Even if you have a poor credit history, you can still probably borrow given your LVR isn’t too high. You should either supply some further info re your situation on here or contact one of the forum brokers directly for a confidential chat re your situation.
Hi Mac,
The first thing you nee to realise when you are looking at both designers and town planners is that you are not buying a loaf of bread, these are not commodities and the quality of the work will impact whether you get a permit at all, the time it takes, the cost of building and the end sale price. If you choose by price alone, it will invariably be an expensive mistake.
With smaller developments you can often get away with the designer also obtaining the town planning permit, but this rarely is as good as having a separate town planner and designer if it is a difficult application. The difficulty comes down to how much you are pushing the envelope and the attitude of both neighbours and the council.
You can either find a draftsperson or architect first and get them to engage a planning consultant or visa versa. tend to think you are better off going t a town planner first and get them to recommend a designer as the difficulty of their job is directly related to the quality of the design they are working with.
There are plenty of sole practitioners and smaller firms that are local to your area that would be fine but, from a biased point of view, I would recommend my father, Frank Perry from Perry Town Planning http://www.town-planning.com.au 0396621999. He’s probably pretty well known around here by now a he has presented at a few of Steve’s events and for the RESULTS mentoring guys.
Good luck with your project.
I don’t want to buy into this argument as it is very personal to a lot of people, but I would like to say that it is untrue to claim that the Communist dictatorships mentioned above had no religion. They, and Nazi Germany for that matter, were cults of personality that developed into State religions. Dogma is dogma and is always dangerous, for the vasty majority of religious people, their beliefs bring a lot to their lives, there are others who are perfectly happy without religion also and that is great for them. The use of force, by the state, to control populations is the problem, it doesn’t really matter what it is in the name of.
Hi Martin,
A lot depends on what sort of property it is and the actual size of the loan. Being Doctors you can possibly get better terms than people in other professions, but such concessions tend to be easier to get for smaller eg sub $1 mil loan amounts. If you put aside your profession you will be able to get somewhere between 70% and 80% LVR contingent on the size of the loan, the type of property and where it is located.
Regards
Alistair
