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inez, please re-read my post!
TMA
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First Home Buyer WebsiteMost people do not undertake illegal renovations on their property. Option 1 will cost you from the tenant and won’t stop the Council. Option 2 will cost you a lot more to get approval which I doubt will come. Option 3 has buckleys of happening!!! No-one I know would pay an extra 50% rent for a rumpus room. Option 4 will realise a much lower price due to illegal renovations.
By the way, you do know any insurance you may have on the property is null and void due to the illegal structure don’t you? If your building burns down or a tenant hurts themself, it is all over!
TMA
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First Home Buyer WebsiteOnly the person who’s name is on title can deduct the interest. You would put the title in the name of the person with the highest income if tax deductions are driving your decision.
TMA
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First Home Buyer WebsiteWow, you are easily pleased oshen!
TMA
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First Home Buyer WebsiteStacking equals lying equals fraud.
For example, you buy a property for 200k. You ask the vendor to put 300k on the contract and kick you back 100k (why they would do this I don’t know as they would have to pay CGT on the extra 100k as well). You pay the extra stamp duty. The contract is stacked!
You go for a loan later and request a valuation. The valuer asks you how much was paid for the property. You tell them 300k. There is the lie!
You submit the loan applicationand fill in the box that asks for purchase price of the property. You write 300k. There is the fraud!
Read the fine print in loan offer documents. This is illegal and can result in the lender taking possession or calling in the loan.
Now the next bit really confuses me…
Originally posted by Terryw:Then after settlement apply for a loan to release your funds. If you have purchased well, the valuation should come up higher and you may be able to get a loan close to 100% of what you paid for.
Where does the income come in to obtain the loan? You will not be getting any more rental income by ‘stacking’ the contract!
This practice is pretty dodgy Terry. Please tell me you have never done it!
TMA
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First Home Buyer WebsiteThat is not 95% LVR. I thought that was what you were talking about. I have done heaps of these for old clients as I am sure many brokers here have also done.
I have done a loan in excess of 150% “LVR” of purchase price!!!!! Woooooohoooooooooooooo!!!!!!!!!!!!!
The client bought off the plan in 2001 for 290k. Valuation in 2003 was 560k. Loan amount was 438k at settlement!
It is also common with advantageous purchase.
All lenders I know will also base LVR on valuation instead of contract price regardless of time limit but may restrict actual lending to contract price if there is no valid reason for the difference in prices.
In devil’s case, it was a completed renovation causing the valuation to include the improvements to the property instead of land only.
The only nice thing BankWest seem to have done here is waive LMI on the minimal amount above 80% LVR. This would be not much more than the cost of the second valuation paid for by the client. What was it, about 0.2% of loan amount?
I still think they are the pits… wait until redraw is needed!
TMA
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First Home Buyer WebsiteAnd this is not dyslexia, it is incompetence!
TMA
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First Home Buyer WebsiteI totally support investing while renting. It is usually cheaper!
TMA
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First Home Buyer WebsiteIf you feel uncomfortable about talking to the older gentleman yourself, I would be talking to the local home nursing care services to tell them about the old man and his ‘situation’. He may be incontinent and suffering from a bit of dementure. They will certainly pay him a visit to ensure he is ok, healthy and living well. They will also help him clean up if it is required.
TMA
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First Home Buyer WebsiteI would go with buying the home to live in for 6 months and then moving out to rent a place to live and rent the property. That way, if in NSW, you pay no stamp duty, you get the FHOG, you get a 6 year CGT exemption, the whole property becomes fully deductible and your overall cost to hold the property should be less when it is rented out depending on how much you pay for the place you rent to live in.
Also, whoever is telling you prices are high and rents are low at the moment is a bit confused. Prices are coming down quickly in many areas and rents are stable or moving up as people are staying away from property in many cases. It is a great time to find some bargains!!!
TMA
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First Home Buyer WebsiteThere are much better opportunities for a lot less. I would stay right away from that area.
TMA
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First Home Buyer WebsiteOffices will be at the lower end of the LVR market. They are higher risk.
TMA
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First Home Buyer WebsiteRegarding your first question, YES.
TMA
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First Home Buyer WebsiteThat is true Alistair. Also, there is always the 100% no deposit loans with FHOG where the stamp duty savings (in NSW) and the $7,000 grant will pretty much cover all expenses up to a purchase price of around $250,000. The rates on these are not to bad (around 0.8% – 1.5% more than normal).
TMA
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First Home Buyer WebsiteOOOOOPS… Thanks for that. I meant non-government run organisations.
My point was that they are very influential in the economy and people’s lives and not run by the Government.
TMA
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First Home Buyer WebsiteOriginally posted by Michael Whyte:One point I think TMA is missing is that when you retire from salaried employment, the intent is to live off your investment structure. This does not necessarily mean that you will be living off the surplus “income” in your structure above expenses. You may be neutral and living off surplus “growth” at a lower tax rate.
I have not missed a thing!
I think you are missing the point that there are so many ‘IFs’ and ‘BUTs’ in the ‘LIVING’ off equity strategy one of which you outlined above. It has way too many variables and too much risk to be considered as a serious strategy to be used.
Of course, given you have no salaried income then you need to be neutral or better. But even if you have a small income and a lot of growth, then you can still draw some of that growth to live and leave the surplus growth in the structure.There is that ‘IF’ again. What happens if you have a small income and NO growth? Nothing is absolute!
OR…
What happens if you are lucky enough to have your LVRs low and then the market does a quick about face and you can no longer draw equity because your LVRs have shot up? You still only have a small income but now you have a lot more debt from previous draw downs. What do you do?
If the market dips across the board and you haven’t diversified across asset categories then your surplus growth might not be as high. In this instance you might consider changing your level of gearing to increase your surplus income so you don’t rely on your growth to fund your lifestyle.Get off the eggshells mate! I don’t know how your mate considered your comments balanced. Your surplus growth might not be as high can easily be your surplus growth can be non-existent or negative.
When you suggest changing your level of gearing when tough times hit, surely you are not suggesting selling some property??? What a poor plan and a great way to end up with nothing over a long period.
I believe that proper investing is diversified across a lot of asset categories and even across sub-markets within categories.And here is the point you are missing….
INVESTING!!!!
I have said it many times and I will say it again… ‘LIVING’ off equity is not investing. It is using your asset base to fund non-deductible personal expenditure which would only be required by those who cannot afford their current lifestyle and their levels off debt. It is a recipy for disaster.
It must be made clear when discussing using equity whether you are referring to ‘LIVING’ off equity (which I think is ridiculous) or ‘INVESTING’ off equity (which I totally support 100%)!!!
I think you speak of ‘INVESTING’ off equity (which is a fantastic plan for any investor) when you write ‘LIVING’.
I noticed someone made mention of the elderly living off their equity. Reverse Mortgages are a totally different ball game which I support for those who have no inclination to invest and want to improve their lifestyle. The BIG DIFFERENCE between reverse mortgages and ‘LIVING’ off equity is that one has to be repaid in life and the other is only repaid in death or moving into full-time care! They are not even close in comparison.
TMA
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First Home Buyer Website<Edited: Rob, some good points made but lost in the personal jibes that, in my opinion, weren’t as bad as they may have seemed. Stick to playing the ball mate and be open to different opinions under the “let’s agree to disagree” philosophy.>
Notice how the interest rate was conveniently left out…
There has been such products around for years. Other lenders offer more than 105%. It is no big deal.
APerry, to address your comment, this product is marketed to higher income earners who spend on lifestyle and wake up one day thinking it is time to buy property.
They stop renting that $3,000 per week waterfront unit, start eating in instead of restaurant dining every night, lay off the expensive champagne, buy a silver watch instead of a gold watch and take 100% plus loan to buy their home and pay it down very quickly.
TMA
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First Home Buyer WebsiteWA Finance Brokers need to be licensed. Any broker outside WA can operate in WA if they can get licensed. There are two way to get licensed (ignoring all other requirements)…
1. Live in WA
2. A Director of your company lives in WA and holds the license.Either way is not practical for single operators not living in WA. This requirement has been challenged on Constitutional grounds, protectionism and restrictive trade practice back in 2004. This ‘residency’ requirement should be dropped in the very near future.
You can thank ME when it happens!!!!!!!!!!!!!
WA brokers will hate me though as their businesses will drop off.
TMA
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First Home Buyer WebsiteOriginally posted by Terryw:Some people have more than 1 property and have no need for any extras. A simple IO loan is all that is needed.
Don’t get defensive… I am allowed to ask questions. So, where is all the extra funds going????? Devil, do you have more than one property????
For the 95% loan with no LMI, this was for a new client as well, and it seems Bankwest are willing to do this as a matter of policy. As long as LMI are not involved (ie LVR 80% or less based on valuation), they can approve these sorts of deals.Is this an oxymoron??? What do you define as a 95% loan when LVR is less than 80% based on valuation????
TMA
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