Forum Replies Created
We've bought two places that we had the condition of access before settlement on. We had no problems at all, and got the work done (cleaning, painting, minor repairs) and tenants moving in day after settlement. Cashflow from day one – we love it!
If you don't settle in time you run the risk of vendor benefitting from any work you do, but just need to ensure you DO settle on time!
The document here in SA is called "Licence to Occupy" and all agents know about it, even if they don't promote it.
cheers,
CarlinThanks for that info.
When you talk about exit fees are you talking about the fees involved in going off the fixed rate (which I assume is now higher than the variable rate) before the term ends?
cheers,
CarlinHi Cattleya,
Lenders (banks or otherwise) can easily track what you're doing, no matter what paths you send your money on. We're being upfront with what we're wanting to do here, with both lender A and lender B. We could stay with lender A and we know we can borrow sufficient funds, but we are trying to get the bulk of the loan from lender B because lender A has us tied up in excessive cross securisation.
Also, we are uncomfortable having all our loans with the one lender.
BTW, if we DID borrow with lender A we would not have to pay LMI, due to adequate equity in current PPOR and IPs and solid evidence of serviceability.
cheers,
CarlinThanks for clarificatin Cattleya.
You were very wise to organise the money in advance and have it sitting in your account while you looked for something to buy.
Our situation is different – our 'timing and planning' has been lacking! We've already signed a contract – cooling off period is delayed so we have a bit of time (not much) up our sleeve.
Lender A had already told us we could borrow $200,000 – we have lots of equity (65% LVR) and good serviceability. So hoping that our request for $40,000 (property is $180,000) isn't going to be an issue. We had to tell them it's for investment property purchase as it's one of the available boxes to tick on the form – so they must have a fair idea of what we're doing.
Still waiting to hear if Lender B will come back with the remaining 80% of the loan. So we're in a bit of limbo at present.
I agree – LMI is to be avoided!
cheers,
CarlinThat was an interesting timeframe analysis.
Can anyone do the same for Adelaide?
That's a great transformation. Those floors have come up a treat.
cheers,
CarlinHi Cattleya,
thanks for sharing your experience.
with your personal loan from Citibank for the deposit, I'm assuming you weren't able to claim tax deductions for the interest you paid?
If that's the case, then why didn't you take out an interest-only investment loan?
By the way, the API edition that explained this loan structure was Feb/Mar 2004 (p64 – 'Structuring for the future'). The author was Stuart Wemyss.
cheers,
CarlinGreat to hear from you again Mel.
When you get a chance, would love to see some photos – but no rush, cos I know you're working hard.
all best,
CarlinThanks for the responses.
WJ Hooker – what I'm proposing is not uncommon and is something that's recommended by loan experts (there was a whole API article advocating this approach). We're not just looking at it to avoid LMI but also to avoid further cross-sec – we've allowed current lender to tie us up in knots.
We are in a position to easily borrow the deposit required from current lender.
Hemingway's one of my favourite authors – thanks for that timely quote. I, too, think the climb back up will be swift – but mine's just a gut feeling.
Daniel – the advice you got is the same I got from two accountants a couple of years ago.
Terry – Why would you want to give money away to family members beyond your children, just to save tax? I certainly don't want to be supporting "non-working cousins". Can't see how that's using property investing as a means to the good life (holidays et al). Or is the idea that you give them the money just to bypass tax, and then they give it back to you? Tricky arrangement, if that's the case.
In the time I've been involved with IPs (since 97) the best fixed 10 year rate I've seen was 6.99% (not sure what the comparison rate was). Has it ever gone lower?
I'm confused…again!
Terry – You say we could reduced CGT on sale of IPs by having them in a trust. But couldn't the same be achieved by super?
ie: If I sell an IP that's held in my name just before I turn 60, and then put that money into my super fund (and pay 15% tax), can't I then withdraw it after turning 60 and pay 0% tax?
If that's not how it works, then how does it??
thanks,
CarlinI think wrapping is illegal here in SA. Shame.
CarlinIn answer to Terry – we would sell some properties to pay off the others so that we had unencumbered properties delivering rental income in our retirement. Once retired we won't be able to afford all the mortgages.
We already have a super fund to put that money into, so why bother setting up a trust?
Yes, the rules to super could change again, however a reversal of the current favourable aspects of super (eg: 15% tax if you withdraw income after turning 60) would be as electorally unpopular as past attempts to end negative gearing have been.
Re-asset protection – neither of us are in "at-risk of being sued" professions and we have solid insurance cover over all our places. Anyway, I've heard of people who sue getting to money held in trusts.
Would love to have a SMSF for investing, but can't see us getting sufficient funds for one anytime soon with three young kids to raise.
Plan is for 10 properties by 60, and to pay off about 5. Income from those + our defined benefits scheme should be enough to keep us going once we stop work.
Carlin
Trusts have always confused me, even since I first enquired about them on this forum ages ago. Conflicting advice from forumites and accountants = our IPs to date (just 3) have been bought in single or joint names.One of the many things I don't get is – if you are a buy-and-hold investor who plans to sell some properties just before turning 60 and put the capital gains into a defined-benefits super fund, then withdraw that money after turning 60 and use the $$ to pay off the loans on the remaining properties, then why bother with having trusts?? All you'll have to pay is 15% tax on half your capital gain.
Am I right, is this a good strategy – or have I missed the mark again?
Carlin
Fixed at 5.99% for three years – sounds ok, but what about the comparison rate. That's what really counts here, isn't it??? In many case the difference between the advertised rate and the comparison rate (usually in very small print, if it appears at all) can be quite substantial.
That's why I like Members Equity – their rates and the comparison rates are one and the same because they don't have fees or charges. They're still streaks ahead of the most lenders as far as I can tell. And no, I don't work for them. I'm just a happy customer.
cheers,
CarlinTake it easier bzmum. From the workload you're describing I'm worried you're going to run yourself down.
Thanks for sharing your journey.
Carlin
Anyone who thinks the FHB grants will ward off house price drops longterm should read page 27 of The Australian's "Inquirer" section.
It makes it very clear why Australians are just next in line behind the US and UK. Put simply, too many of us are hocked to the hilt, unemployment is rising and – despite what those with vested interests in talking up the market would have us believe – there is NO shortage of rental properties in many areas of Australia.
By all accounts we're heading for a perfect storm and Rudd's $10b taxpayer funded party is just postponing the inevitable – and possibly making it worse.
As for Michael Yardney, I have never once heard him say 'now's not a good time to buy'.
Scamp, you unfortunately fell into that ol' trap of oversaturation in your attempts to scare people off property. It's a fine line, and maybe it's a cultural thing that you just don't get, but you've passed that tipping point of credibility by going on and on and on with the same verbal dribble. It really worn thin with most of us.
And, no, I'm not one of those "property always goes up" types. I just happen to believe that if you really do your homework, do the sums, know an area inside out and have the smarts you can buy well in ANY market.
We appreciate your input, but it's time to take a break.
