[MooseheadMember@mooseheadJoin Date: 2006Post Count: 42]

August 8, 2007 - 11:54 pm

Thanks for the reply tall2z, that answers some of my questions.  With regards to the scheme you described above, who holds the mortgage over the properties?  Does the bank that wrote the loan retain it or is it part of the deal sold off to the investors?  Or, does the bank offer a different security entirely?

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August 8, 2007 - 6:27 am

Something to keep in mind when the next housing affordability beat up story makes the news:

http://www.news.com.au/business/story/0,23636,22208735-14302,00.html

Households are spending about the same on housing as they have before, but a lot more on the air-con, 2nd fridge, dishwasher etc…

Interestingly less is being spent on food and clothes to support this habit it seems!

Discuss!

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August 8, 2007 - 5:12 am

Hi Richard… couple questions from your posts –

You say most loans in Australia aren't securitised – this surprises me as I would have imagined a lot of the debt would be in the housing market and secured against property?  Similarly business debt would be secured against assests?  Or do you mean that when the loans are aggregated and sold off, the seller provides no security?

And when you say St George securitises against 30% of its loan book… what is the security?

Apologies if these are stupid questions… I was oblivious to the workings of the second-hand credit/debt market before this whole sub-prime scandal

Regards
Moose

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August 6, 2007 - 6:45 am

A few people have mentioned giving books to a partner to get them inspired/converted What about for the parter that doesn't read much?  I would love to have my girlfriend on board but unless theres a version of 'Rich Dad' that is presented by Tyra Banks (she loves Next Top Model) then I don't see it happening…

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August 6, 2007 - 6:24 am

Interesting post… but who is Fannie/Freddie??

Could this happen in Oz?

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August 6, 2007 - 6:13 am

I'm interested to hear experiences of anyone who has a negotiated an option on a simple residential deal?  In theory it sounds great… especially for developments because you could get the approvals happening without having the holding costs eating away at you.  But I wonder how you would get an regular old vendor to agree to this.  What sort of option fee would be considered reasonable?

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August 2, 2007 - 6:13 am

Bah, what's the rush.  I like to have my appointment with my accountant in Oct/Nov so I can be sure I have all the statements I needs from managed funds etc. 

Another bonus is you then get your refund around Xmas.  Presents for all!  lol.

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July 31, 2007 - 5:13 am

Here's my take and I am climbing into my flame suit as I write it.

I don't think the government should be held responsible for providing affordable property.  Accomodation yes, property no.  People need to stop thinking that they are 'owed' a choice of nice houses in nice metropolitan suburbs that can be bought with a first home loan.

There are a lot of other investments that are out of reach of the average Joe, but no-one is calling for the Govt to make them more affordable!  Why should it be different for houses?  The performance of the housing market is evidence of a strong economy and good financial policy for the Government, for which they should be commended if you ask me.  Any effort to artificially make housing 'affordable' will just upset the market balance and benefit no one.

But you can't live in other investments you say, everyone needs a home, a man's home is his castle etc.  So rent!  Save the money you would have paid into a mortgage and when you have enough, invest it.  Invest in something that you have considered on its financial merits ONLY, not clouded by the emotions of find a 'home' to nest it.

/rant over!

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July 24, 2007 - 1:02 am

I am getting my next loan with Investors Direct and have found them quite good so far.  The consultant I talk to has a large portfolio herself and has recommended a strategy for me to do the same myself.  No complaints so far.

And certainly better than going to the banks yourself, won't be doing that again!

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July 19, 2007 - 6:21 am

I think Beenleigh is a great investment choice

I bought a 3 Bed house in Eagleby in late 03 for 185k, rented for $190.

Signed contracts to sell it a month or so ago for 265k, tenant in there is paying $240 pw.

Good times.

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July 12, 2007 - 6:47 am

Thanks Elka I think I get it now. 

I just assumed as soon as you moved & declared your old place an IP everything would be deductible but it's not that simple… the devil is always in the detail isn't it.

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July 11, 2007 - 6:34 am

Yikes I am getting confused here.

Elkam could elaborate on what you mean by planning ahead and using an offset account?  Sorry just not following there.

I would have thought that whichever house your are not occupying could be considered as an investment property in the eyes of the ATO and therefore any interest accruing against would be deductible.  Not that simple? 

ie

1.  Refinance PPOR for purchase costs & deposit of new PPOR

2.  Move into new PPOR

3.  Rent out old PPOR transforming it into an IP

4.  From day one that IP is tenanted, interest accrued against it is deductible

This leads me to another question …Does an IP have to be tenanted to deduct interest?  Can you negative gear land for example?

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July 11, 2007 - 6:22 am

On the topic of joint tenancy.

Say you wanted to purchase a property with a partner but one person was contirbuting a larger share of the purchase costs & ongoing costs.  What would be the best way to set up ownership such that any profits (or loss) are distributed in unequal shares according to some agreed split?

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July 10, 2007 - 5:17 am

Good explanation v8ghia, cleared some things up for me.

What do you think about the strategy of going to the 'strict' lenders first, then working your way down to lenders like Rams who are fairly lenient?

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July 10, 2007 - 1:51 am

I think it's very unprofessional the way banks don't really explain how they are planning to structure your loan.  It's almost as if they will cross by default and only savvy investors (ie people who been burnt before, or heard of other who have been) will realise.

Recently I applied for a pre approval with my banker at the NAB.  They couldn't comprehend that I didn't wish my existing IP to be security for the next purchase.  Almost like I was talking a foreign language…

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July 6, 2007 - 4:30 am

I've been living in Adelaide for over 3 years now, and the market has continued to surprise me.  If you look at the fundamentals, the picture is not good, but this has not stopped house prices moving up steadily over the last couple years.

Some of things that worry me about the market:

– Small overall size of market compared to other capitals
– Weaker & less diverse local economy
– Very small annual population growth, mainly dependant on international immigration (interstate migration is -ve)
– Oversupply of dwellings forecast to deepen (new approvals vs new dwelling requirements)

HOWEVER… in the face of all that, well located properties near the city and/or beach are doing very well. Plus… and this is the clincher I believe… houses are much more affordable here than other capitals.  Where I live in Prospect, basically the first suburb north or the city, I'm renting a new-ish house that would be worth mid 300's.  Try and find that in Melb or Sydney!

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June 28, 2007 - 3:17 am

G'day Brent

I found myself in a similar situation to you a couple years ago so I thought I'd offer my advice…

1)  Trusts etc.  I think for your first couple of IPs, there is nothing wrong with holding them personally.  Especially when you are a high income earner and going for 'buy and hold' cashflow negative IPs, having them in your name lets you access all the tax benefits.  Plus, getting loans is easy and there's no cost/stress to set up a trust/company.  After the first couple IPs, I would recommend owning through a company/trust for the asset protection benefits and other advantages which become more important as your wealth grows.

2) Fastest way to grow a portfolio?  Not sure I can offer anything other than pick one strategy and stick with it!  If you are time poor, pay people to do the work for you and benefit from thier experience.  Buy properties that you can improve immediately to give your equity a kick start.  If you are after some income, I would suggest a margin loan for some commercial LPTs rather than buying IPs in a regional area.  I know there's lots of people who swear by this strategy but personally I don't like it for a few reasons.

3)  How to live off a portfolio with no cashflow?  Simple answer is fund your lifestyle from a LOC secured against the properties.   As long as your portfoliio's value is growing faster than your lifestyle costs (& interest) then you are home free.  Obviously strict financial discipline is required plus a net worth of 2-3 million to be viable (from my estimates at least…)

Just my 2c

moose

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June 26, 2007 - 3:26 am

I think it's a valid question.  From my limited experience most agents don't like offers with any non-standard terms included and I've heard more than once 'I don't think the vendor will be interested in that so I'm not inclined to pass it on…'

I'm not sure what the answer is.  Threatening the agent usually doesn't work… you need them on side to make the deal most of the time.  Maybe putting your offer in writing, clearly explaining the terms, could be a good way to go.  Easy for the agent to pass on and you get to decide how to present the offer to a degree.

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June 26, 2007 - 12:41 am

Before I get into commercial property directly, I'm planning on building up some holdings in LPTs.  Factoring in the work & stress involved with managing a commercial property I think it would be hard to beat the return of the high rated LPTs which require next to zero personal management oversight!  Maybe one day when I'm a little more 'seasoned' as an investor but not right now   Anyone had success in getting a decent LVR on a margin loan for LPTs?  Say 60-70%?  Oops there I go thread hijacking again. Sorry.

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June 24, 2007 - 2:13 am

While we're myth-busting… anyone care to bust this one?

I've heard… that once a company has 2 years of financial history showing some profit, the company can borrow without any of the directors needing to provide guarantees or declare their personal income.