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February 29, 2012 - 1:53 am

FYI – Fixed rate is starting to go back up.

Bankwest has increased it by 0.50% as of this Monday.
Westpac has increased it by 0.20% as of last week

Another banks are set to follow suit…rem fix rate does NOT run in conjunction to the variable rates decisions….different funding lines.

I would say fix if it works to your advantage:
1. It allows you to budget
2. Improves your position
3. You can afford the fix rate on offer + it make sense.

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February 28, 2012 - 12:10 pm

Not sure what your asking or wanting to know??

Let me take a punt
1. You may have equity in your property; but you need to be able to AFFORD any increase in your loan as well
2. Drawing out equity from your property = increasing your loan by the amount you draw out

Say you have $50k equity available in your property; your income needs to be high enough to afford a 50k increase. so really if the bank advise you can only afford another 10k( which is peanuts)…it sounds like you won’t be able to afford the amount your after.

10k is not a lot; do you agree with what the bank as told you? they could have gotten it wrong, i know i have in the past… mistype by one decimal place
Before considering how much equity you have, you need to know for sure how much the bank will lend you ie your serviceability.

Regards
Michael

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February 28, 2012 - 12:01 pm

More??? who says….

Family trust, unit trust, discretionary trust – at the same discounted rate as personal borrowers 6.4% etc…
Hybrid trust – Depends how it’s set up and how complex
SMSF – Normally changed at the SVR with no discounting ; but some lenders do provide some discounting
Property Unit trust – Depends how it’s set up and how complex

Having a corporate/company trustee is fine.

Question is; what sort of trust do you have and how complex is the set up?

Regards
Michael

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February 28, 2012 - 11:48 am

blocka wrote:

if the banks lend at lets say variable 6.5% and fixed 6.0% and people choose fixed, and rates go up 0.5 % the bank looses by 1.0% BUT if rates go down the bank wins or the losses are less,
so if rates are going up which i dont think they will why would they banks lock people in so low ? makes no sense unless they know they will be dropping rates soon and if they can lock people in at higher then variable they win……..just my thoughts

The bank will ALWAYS win….when they fix your rate, they will also secure the funding with their funding line at a set rate for a set period of time- They will always maintain their profit margin. The only risk they take is YOU defaulting on the loan….interest going up or down is not a major risk factor for the bank to consider; as they migrate this change into their business and variable residential loans

Bank loses when they have poor management , risk control or bad funding source/business model.
If your a share holder of one of the big 4, you could access their annual report which provides a break down on their profit – it wont tell you how much their funding cost are etc…BUT Generally speaking the banks makes a larger profit from variable then from fixed,..even if the rate does up or down..

Regards
Michael

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February 28, 2012 - 6:06 am

AALLII wrote:

I am considering developing 5 units on a single title. All are three bedders with 2 car garages in a suburban location. I have been advised that big 4 banks will only consider 3 or 3+ unit development as commercial and consider rates at approx 11%.
This does not seem reasonable to me as the property will be secured anyway.

This is also my first project and we have little assets to back it up so technically I would be relying on a very detailed and thorough forecast with independent valutions to support this forecast of likely profitability. What are your thoughts on this? What method do you guys think I should consider.

Dont know about the 11% part…

Bu buying a block of 5 and BUILDING a block of 5 are considered as 2 kettle of fish! and are priced accordingly. But def not 11% with the big 4 unless you have a very weak proposition ie unstable income, first investment etc…

Regards
Michael

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February 22, 2012 - 7:11 am

Chen- i haven’t looked over your numbers, but just a quick tip as im subdividing one of my IP in the North west district as well ( Cheltenham — > Hornsby council).

1. There are diff type of subdivision, if you want it to be torrent title then it will need to be a min 500+ squ ( depending on council) from what i understand + a 1.5m set back.
2. However if you subdivide as a strata title or company title the min squ meters requirement is reduced + less set back less and 700 squ meters ” may” be possible.
3. Different street have different set back requirements, especially corner blocks
4. Everything can be done as an exception as long as you have a good reason + design plan- ie you may need to build a smaller duplex etc..

Talk to the town planner + read the council’s DCP.

Regards
Michael

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February 22, 2012 - 6:59 am

If the flood ratio if 1:100 or more…then it should be fine.

If it’s less then 1:50- i would do further DD.

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February 22, 2012 - 6:58 am

I presume your talking about North Wentworthville in NSW??

If so; Parramattta council has a list of houses/street that are flood prone with their associated % – don’t have a direct link for you, but i do have the report and if you do a search on the council’s website for ” Water management / flood studies” you should find your answer there…

If not it will be in the sale contract of the place your thinking of buying, under section 149- Flood prone.

Regards
Michael

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February 13, 2012 - 12:59 pm

Scott No Mates wrote:

What are the chances of reasonable rates on a block of 8 one bedder townhouses/villas in a rural location? I see some potential to convert to two  bedders down the track?

1 bed + Rural….expect to be commercial….

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February 11, 2012 - 11:32 am

Rockian, have provided an excellent summary.

Just note – section 94 contributions cost diff council to council..it ranges from $2k- 40k+

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February 10, 2012 - 5:31 am

ttcb75 wrote:

Thanks Richard,

I know it can be done, but who will do it?  Everyone i am talking to is talking commercial rates. Bankwest will do a very reasonable commercial rate, however all other lenders are offering over 8%.

For a deal this “unique ” ( well according to the big 4 banks anyway) -i would suggest you speak to Richard if you want a resi rate + a deal that works for you …

Even if we named the lender;
1. You will not have access the senior credit managers who approves these deal- but instead you will get someone from a call center who have never ever heard of a block of units lol
2. The bank knows you have no idea what to expect + have no past dealing with them…so they can charge you more if they want….and you would still think it’s a good deal compared to a commercial loan.
3. The person taking over your file may not deal with block of units on a regular basis –

Just one note: valuation on these properties are normally the biggest issue and can take up to 2 weeks in some instance.
+ MAX LVR is 80%

Give Richard a call and you won’t need to worry or look back.

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February 9, 2012 - 12:27 pm

House Call wrote:

I have a newly formed SMSF and want to borrow to purchase a commercial property at approx 40%LVR. ( Value $350k, already have $200k deposit)

Commonwealth bank wants me to pay $3300 to see their financial advisor before I can even apply for their super product, called SuperGear.  I don't mind paying good money for good advice but not when I already know what I want.

What should I do? Has anyone had experience buying commercial property with super?
Any recommendations on who to borrow with?

Up to 60% LVR with a commercial lender in the SMSF field is not an issue– however most banks with commercial SMSF will need you to see a financial planner before they will approve your loan, no matter how low your LVR is.

Regards
Michael

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February 7, 2012 - 3:38 am

http://www.rba.gov.au/media-releases/2012/mr-12-02.html

Yep that sucks

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February 4, 2012 - 2:36 am

booge wrote:

Forgive my ignorance, but how come?

PPOR- Is a non -tax deducible debt..while the IP is.

Regards
Michael

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February 2, 2012 - 2:52 pm

mattsta wrote:

regarding the expenses, I would think that you can claim it if you conduct investment properties as a business (well that's how I can claim it in my experience). I'm self employed so it's easier for me to claim it as such. I'm unsure for people who hold a regular 9-5 job whether they'd be able to.

Talking to an accountant is a good idea for knowing the facts about that though

That’s correct.
You can’t claim educational expenses unless you conduct a property investing business etc…( which you would claim from the business income) OR you can prove the educational expenses related to a IP you hold ( ie paying for a town planner etc…)

Also why not give Jamie or Richard a call, you will have the piece of mind that your dealing with a professional property investing savvy broker; the only cost involved is the phone bill….and no you won’t be able to claim that $0.25 back

Regards
Michael

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February 2, 2012 - 2:43 pm

This is a classic case of how getting the right structure is so important, beats any “cheap rate” on offer. Also an example of how bank staff will just get you the deal that’s easiest for them and “who cares what happens 1-2 years later” …

Anyway solution.

Your broker is right in saying that you shouldn’t “redraw” the loan from the IP to pay for the PPOR as the total loan will no longer be treated as a tax deduction.

Your accountant is also right in saying you can re-structure ( more like you WILL have too) your loan in order to reverse the transaction.
I have one bad and 2 good news for you…lets start with the bad.
Bad news- your gonna have to most likely switch bank.

Good news- Switching banks, sounds like your bank manger you been dealing with either isn’t trained with basic tax and property investing strategies + forced you to cross, even though you didn’t need to.

Good news- it can be fixed, but what ever you do …DONT redraw at this point in time. – you will need to re-structure.

Regards
Michael

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February 1, 2012 - 12:58 pm

Accountants selling Amway plans hey…business MUST be tough lol.

On a serious note, 20% of a investment minded broker’s job is to find a suitable lender to access finance, the another 80% is loan structure, planning, working out which way method achieve a higher tax benefit, lodging Governments Grants, cost to tax benefit comparisons ( LMI and leveraging) and proving recommendation on timing and property investing should the question arise. Let’s face you need money to make money…and money smells better if its not yours…but the bank + it’s tax deducible especially for high income earners

But i get where your coming from, you need direction “overall/ bigger picture”; speaking to a financial planner may help; but honestly i have a feeling you may be disappointed also, as FP makes money from selling you Financial products + some money from providing advice- that’s how they make the big money….they hardly make any money form giving you “advice” only.

So the question is, are you ready to take up a financial product, including property investing ( which is a product itself), or are you after advice/ direction only at this point in time ( which is more then fine)??

This weekend, sit down and write and think about the following:
1. What do you want to achieve in the next 3 years?
2. What do you want to achieve in the next 5 years?
3. What are your strenght and weakness -financially speaking + information wise
4. Any goals you MUST reach within the next 3,5,10 years?

5. How stable is your job? ( might be high income now…but you never know)
6. can you see yourself in this job for the next 3 years? or at least maintain this sort of pay + same work type?
7. Do a budgeting costing sheet
8. Do you expect kids, major expenses , marriage etc…in the next 3,5,10 years?
9. Work out how much tax you paid in the last 2 years?, just look at your tax assessment

After you get this “brain storm” running, do some research+ speak to another like minded investors or friends, and see how you go. ONLY Then will i suggest you speak to a FP and a accountant- as you will have a better idea of what you need/what at this point in time = much easier for them experts to plan accordingly + it makes more sense.

Regards
Michael

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February 1, 2012 - 12:21 pm

Just answering some quick concerns you may have Steve.

1. Your income is quite high, so your probably paying quite a heft tax every year ( which is a good problem to have ^^)
2. It’s good that your thinking of changing your loan to I/O
3. I would suggest an offset account as well, to offset your PPOR debt in a tax friendly way
4. You have roughly $28,000 equity that you can draw out without the need of LMI – HOW you draw this out is VERY important as it will have some impact on how you can claim the tax.
5. The next IP i would suggest you leverage as much as possible, and keep any spare cash against your PPOR offset
6. Don’t cross, in fact in your situation you won’t need to. no matter what the banks tell you.
7. Loan Structure is key

– How much you can borrow/ afford to buy/invest, will depend on many factor’s that i won’t bother listing here…

Regards
Michael

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February 1, 2012 - 12:14 pm

steve3110 wrote:

Hi everyone

I am hoping someone can recommend me a good accountant or financial planner here in Perth with property experience… I'm a newbie to this sort of thing but I'm trying to educate myself.

I am considering purchasing an I/P but am a little confused with the process of using equity from PPOR to do it, how much would be a sensible amount to spend on an I/P, how not to cross collateralize etc

Hence I  thought speaking with a professional would make good sense

My current situation

PPOR 360k….My mortgage 260k

Have around 20k cash

I plan to rent out my current PPOR and change to I/O as I'm planning to share accommodation

I wish to purchase an I/P or at least a plan to move forward with

My income is around 120k 

Any help would be appreciated

Kind regards
Steve

The questions you are asking you could easily get from a investment minded Mortgage broker; as the questions are more directed towards investing in property and how you can structure your loan to draw out the equity in a tax efficient way + what your borrowing capacity is + if you should cross your loans or not ( short answer to this is no 95% of the time).

Plenty of good investment minded brokers on this forum, else ask your friends or family if they have used any brokers in the past they would like to recommend.

Regards
Michael

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February 1, 2012 - 11:50 am

My comments are directed more towards St marys, Willmot, Dharruk and those surrounding areas ( Blacktown is ok)

Experts been saying the area is going to grow for the last 5 years, but most place will grow in 5 years time ( how much depends on your expectation) …nothing new.

Recently there has been more hype in the media because it’s one of the few places that actually HAVEN’T gone up, compared to it’s counter part surrounding suburbs …so hence rental yield is a lot more attractive, doesn’t mean it will have CG though.

Reason why some BA sells this area so heavily is because it makes the client ” happy” as they can see instant return…recommending an area with higher chance of good CG is not something a lot of clients will be happy with as they can see the return especially if it’s costing them quite a bit to hold .

—-

Do i know the blacktown area? i wont say im a expert…but as an active investor of both CG and Rental yield property in Sydney + i live 20-30 min away from Western Sydney i can say; im ok buying in black town.
But i personally would stay area from Willmot, Dharruk and those surrounding areas unless you have the patience to wait it out + aren’t scared of a few “nasty” tenants.
Don’t get me wrong; great place for cash flow, but poor CG.

Your statement about “When population grows people rent then ultimately buy in the same area.” – can apply to MOST suburb…if im going to invest into a CG area; i want to see CG within 3-5 years.

If it’s for Rental yield, then i would want a way to continue to ramp up the rent- ie dual occupancy + purchase below the market value…i expect “some” CG , like 2-3% per year + give or take 1-2 years with no growth i would be happy with. Any more i’ll take it as a bonus.

Regards
Michael

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