Forum Replies Created
Have a good flight Steph! Hope they show some good movies on the way over.
Cheers
MHi Pat
Sorry to hear of what happened to you. From your post, it sounds like you had a dodgy clause in your contract that the agent and half the people in Mandurah and their dogs could drive a truck through side by side.
I hear a lot of stories about people in your position. And you know what all of you have in common? A dodgy clause with loopholes galore.
If the agent drafted the clause for you, I suggest that you complain to the Legal Practice Board, on the basis that she was providing legal services without proper qualifications. Even worse, she was duty bound to act in the interests of the vendor, not you, and was therefore under a serious conflict of interest. I don’t know if you’ll ever get any compensation, but it’ll teach her to play bush lawyer and hopefully she won’t stuff up someone else’s contract next time.
If you drafted the clause yourself – maybe that’s the lesson. Hire the lawyer at the beginning. If the lawyer stuffed up, at least you could have a claim against the lawyer for negligence.
But the most important thing is – don’t let this discourage you from investing!
Cheers
MPoor Sue,
I really feel for you.
Did you keep a journal of all the telephone conversations and discussions you had with your mortgage broker?
If you’re stuck in the wrong loan, and the bank is refusing to change the terms for you, I’d make some noise and do something about it.
Firstly, it seems like you may have some recourse against the mortgage broker for misleading and deceptive conduct. Only you know all the facts, but one example is her failure to inform you of the high break fees.
Secondly, the broker may be acting as the bank’s agent. This means that the bank may become liable for the broker’s conduct.
Thirdly, if the bank’s lawyer actually told you that you could simply sign and hand in the documents, and redocument the loan later, that is clearly a representation from the bank. I’d hang on to that like a rabid rottweiler and not let go. Threaten to go to the legal practice board. Threaten to take the bank to the ombudsman. Threaten to take it to a current affairs show – it’s currently the flavour of the month. (Richmond any interest?)
Good luck.
Cheers
MPS The above is not meant to be legal advice, merely an objective, commonsense assessment of what could be done. You should also (and this is what the bank’s lawyer should have told you) go seek some legal advice from a decent lawyer.
Hey Scremin,
Welcome home (soon). Sorry to hear about the lousy immigration people, but just a few days in the nice sunny Perth weather will make you feel better, I’m sure (although it is a bit erratic at the moment).
I reckon $10,000 is more than enough for a 10% deposit on a country IP. Get something for around $50-70k, returning a decent rental, with some left over just in case.
I don’t think you should be in a hurry to buy anyway. Take it easy, settle back into the relaxed Perth lifestyle and start doing your research.
Anyway, all the best. I’m going to bed now *yawn*
Cheers
MThe lease agreement is very important with commercial properties. It’s going to have to be part of your due diligence. It should deal with stuff like who’s responsible for maintaining which parts of the property, default procedures, etc.
There are also additional risk factors with commercial property, some of which may be unique to the particular use of that property.
For example, what are the potential problems with a truck depot? Excessive loading or wear and tear of vehicle driveways and parking/loading areas? Contamination of the ground by leaking/spilled oil and fuel? These things could cost a lot of money to fix up (or “make good”, in lease-speak). Part of your due diligence will need to involve checking whether these could be a problem in the future. Also, does the lease impose any responsibility on the tenant to fix any of these problems?
You also need to work out the GST issue. For example, if you’re registered for GST, you may be able to claim the going concern exemption when you buy the property, and don’t have to pay GST on the purchase price. If you’re not registered for GST, you’ll have to pay 10% GST on the purchase price – I don’t know if you can claim that as an expense – it may go towards the cost base of the property. Also, if you’re not registered for GST and collect GST on your rent payments, that’s illegal. Tricky eh?
What it boils down to is: Know what you’re getting into.
Cheers
MHi Jo,
I believe that the property simply needs to be available for rent. So at the very least, you need to advertise it.
You’d be better off getting written advice from an accountant before you try to claim any of those expenses. Getting caught out by the ATO is probably going to be an unpleasant experience – audits, penalties and interest. I wouldn’t try it unless you were genuinely going to rent it out to someone who didn’t mind living there while the place was being renovated. However, they’d have to pay a commercial rate of rent as well, otherwise it might not work. If you’re going to leave your personal belongings in the house, that makes it harder – you probably only be able to rent it to someone you know and trust.
Arty,
I hate to be the one to break the news to you, but if you didn’t lose any money because of their stuff-up, I don’t think that they’d be liable to pay you anything.
Check with a lawyer. I hope you get a different answer, but I’m not holding my breath.
Sure you lost out on another house, but how can you quantify the loss in dollar terms?
I’d have to agree with AD here – is it really worth putting yourself through the emotional wringer just to get some satisfaction? Somehow I don’t think that Burnham are going to give in. And be careful with any statements you make about them – you might end up getting sued for defamation if you overdo it.
Don’t get me wrong – I was wholeheartedly in support of your plight when I first read your earlier post. And I get really angry when I hear all these stories about incompetent or unscrupulous real estate agents who cause their clients to lose money and suffer emotional distress. But you seem to have walked away relatively unscathed financially. Is it really worth wasting your time on these people any more?
cheers
MBut what kind of interest rate premium do you pay on these long term interest only loans?
Cheers
MHey Petrovski,
Unfortunately, this is not something that you can simply get a quick and easy answer on an internet forum.
If you don’t personally have experience with this, and don’t know anyone else who does, I recommend that you go see a business advisor. Many smaller and medium-sized accounting firms usually provide such a service. It’ll cost you money, but isn’t it better to get it right up front, than wing it and lose your source of funding if you hit a hitch?
For starters, here are some of the things you will need to work out:
Vehicle – company, unit trust, unincorporated joint venture/partnership, or a combination.
Entry terms – what share of the project does each party get? For example – what share do YOU get? If you’re not putting in money, but only your time and effort, how is that quantified? ie do you get any equity at all, or merely a right to share in the profits? eg one way is for you to charge the venture a consultancy fee, rather than sharing in the profits.
Return on capital – Are you entitled to any return on capital, or merely a share of the profits? What happens if there are no profits? Do you still get anything for all the work you’ve put in?
Further contributions – Will these be debt or equity? If debt, what level of security will they get? If equity, on what basis? eg how much dilution of existing shareholders will occur?
Expenses – Will you be reimbursed for all your expenses?
Bank financing – is there a maximum gearing limit?
Control – who runs the operation? Sure, major decisions can be by consensus, but most day
to day decisions will stall if you need to get approval for every single thing.Exit strategy – will each property be the subject of a separate venture, or will the venture be an ongoing one? What happens if things stuff-up and you’ll make a loss if you sell? Must the parties simply sell and cop the loss?
Dispute resolution – what kind of procedure needs to be followed when a dispute arises? Arbitration, mediation or expert/referee determination? Do the parties have the right to buy the other out (presumably at market valuation) if there is a deadlock that cannot be resolved?
Pre-emptive rights – Can either party sell their share in the venture to someone else? If yes, must they first offer their share to the other party? There are other variations, such as tag-along rights, drag-along rights and first rights of refusal.
You also need to think of the risk profile of your interest. For example, secured debt (ie bank debt) always gets repaid first, then unsecured (eg architects, contractors, suppliers, consultants, etc), and finally equity. Where do you sit in that range?
I think you’ll get the picture – it sounds easy until you actually sit down and try to cover the bases. It’s a bit of work, but it’s worthwhile getting some help.
Cheers
MHey aussierogue,
I’m reminded of this Simpsons episode where Homer was trying to think of a name for Bart, and said something quite wise – does it rhyme with any rude or nasty words? Because that’s what the kids at school will call them. Pity he couldn’t figure out what rhymes with Bart.
So here goes:
Hannah banana
Molly the wallyI can’t think of any bad nicknames for the others.
I personally like Samantha.
The thing about picking uncommon names is that they’ll be oblivious to it until they get into junior high, and then they’ll hate you for giving it to them until at least after they finish high school (sometimes later).
Cheers
MOnya Steve – that’s a very big response.
Check the outgoings too – not just rates and land tax, but also insurance, property management fees, etc.
I once came across this $30k unit. Returned $100 per week. Looked like a dream investment.
The only problem was the exorbitantly high maintenance and insurance costs (built into the strata levies). After deducting expenses, it turned into a serious loss-making deal. Even if I coughed up 100% equity, I’d only make a 2.5-3% return.
Cheers
MTranby-on Swan rang a bell for me – there were some long running disputes among various owners, which ended up before the Strata Titles Referee. It was several years ago, and I can’t remember what exactly was the problem, but if you’re looking in that area, I think some research is in order.
Kelly – If that’s where you bought, I hope there’s no problem.
Also – if you can’t afford it, is the bank going to lend you the money?
Cheers
MHey James,
You need to factor in your selling costs as well. If your poroperty is worth $340k and you owe the same amount, you’re going to be down by however much the agent’s commission and other selling costs will be.
Cheers
MHey Simon,
Don’t worry – you haven’t offended me mate.
My post, as with all my comments on this forum, are always intended to have general application. When I use “you”, I simply use it as a convenient label (I guess I could use “a person” or “someone” instead).
I agree with your sentiments, however my views are much stronger, in the sense that in my line of work, I have had many dealings with different State Revenue departments, and the honest truth (based on my experience) is that they will on occasion take an unreasonable and unjustifiably (ie no legislative support, and therefore incorrect) hardline, which causes the taxpayer to lose out, whether because the taxpayer decides that it’s not worth the trouble and expense to fight it, or because the taxpayer has to spend considerable sums of money on legal fees to fight it (and I’ve had a few wins too!).
You’re taking the practical approach, and there’s nothing wrong with that. I think it’s a sensible approach. You’re right of course – most homebuyers would not have the resources, time or inclination to fight the OSR, and even if they do, it becomes quite damaging emotionally and financially.
What I was trying to get at is that people should not simply be told that there is a minimum period of residence required. They should be given the choice to decide whether, based on their (legitimate) intentions with their intended PPOR, there may be difficulties in the future. For example, I’d hate to think that there’s someone out there who decided not to claim the FHOG because they were told that they had to live in it for 12 months, and they (for whatever personal reasons – eg work) could not commit to that requirement.
I myself should apologise for not writing my post in a way that made you think I was attacking you.
Please don’t stop posting your opinions – they are of course useful and valuable to us all.
Cheers
MHi Simon,
You said:
quote:
I think you need to be very wary advising people to act intentionally outside the spirit of the act. I know I wont.I’m not advising people to act outside the spirit of the FHOG Act, and am surprised that you thought that I was doing so. If you take the trouble to look at my previous posts on this issue, you would have realised that I am quite opposed to people rorting the system. I think that not only is it illegal, it’s reprehensible. I thought it unnecessary to belabour the issue in this post, since I already said to look at my previous posts.
But what I get really worked up about are people who spread misinformation. There is no requirement to live for any minimum period – not 12 months, and not 3 months. Sure you still have to prove that you lived there, but if it was your legitimate PPOR, I really don’t see how you have anything to fear. If you were trying to rort the system, then I hope you get caught out and not only have to pay back the $7,000, but also the $7,000 penalty, and also get convicted for defrauding the Commonwealth and get hit with a $20,000 fine! But if you were honestly living in the place as your PPOR, and didn’t meet the 3 month requirement (eg you moved in on month 11 after you settled on the property, and get audited on month 12 – ie you’ve only lived there for 1 month) – you should bl@@dy well fight any attempt by the government to make you pay the money back! The Qld State Revenue Dept. may set its own internal guidelines, but that is NOT the law. And just because they do it doesn’t mean they’re right.
Brownwombat – you’re looking at the wrong Act. That section you quoted deals with concessional stamp duty treatment on mortgages. It’s the First Home Owner Grant Act 2000.
Anyway, if it’s not in the Act or the Regulations, it ain’t the law (I know it’s simplistic, but mostly true). Looks like I get to drink my chardonnay myself…
Cheers
MHi guys,
I know I’m late, but thought I’d put in my 2 cetns’ worth (been working long hours lately – another reason why I need those positive cashflow properties).
There is absolutely NO legal requirement to live in the place for any minimum period in order to qualify for the FHOG. As long as you can prove that it’s your PPOR, you could stay there for only a week and still qualify for it. That said, it’s obviously going to be very hard for you to prove that if you moved in for a week and then moved out. That’s also probably the reason the FHOG auditors/investigators are asking for proof of 3 months’ residency. But I reckon it’s just a practical threshold, on the basis that if you’ve lived in the place for at least 3 months, it’s going to be quite hard to prove it wasn’t the PPOR, unless a rorter was stupid enough to admit that to them.
If you don’t believe me, read the FHOG Act (pick any State). If someone can prove me wrong and show me where in the Act (any of them!) it says you have to live in it for a minimum period of 12 months (or any minimum residential period, for that matter), I’ll send you a bottle of Goundrey Chardonnay (I have too many sitting in my place as it is). And I’ll pay the postage too.
Check out my other posts on this topic – I’ve done quite a few now.
Cheers
MHey EZ
I use XP, but haven’t had any problems installing or using your program. That said, I’d already installed some updates before I did so.
anyway, just wanted to say thanks for your program – it’s great! Very useful and easy to use. It makes my life so much easier when evaluating property deals.
Cheers
MHey Sooshie – it’s actually illegal for a company to engage in misleading or deceptive conduct. The Trade Practices Act give people who get burnt the right to seek compensation, among other things. What you’d usually do is to try to get the ACCC to take over the matter, so you don’t have to pay a fortune in legal fees trying to bring the scammers to account. The hard bit is actually trying to convince the ACCC to do so, given that they’ve got other dodgy operators in different industries to target as well.
Stu – the key term in the new FSR regime is “Financial Product”. But you’re right. real property is not a financial product. However, it seems that ASIC and the Federal Government are also taking steps to bring the regulation of property investment advisers under ASIC’s power. The question is when will it happen?
Cheers
MMike,
I wouldn’t do it if I were you. If you did so, you’d essentially be making a false representation for the purpose of receiving a financial benefit. That is classic fraud. You probably didn’t realise that, but it is. The consequences (hefty fine and even jail) mean that it’s not even worth your time contemplating whether to do it.
Cheers
M
