Hi Anita,

Thanks for your post and welcome to the community!

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1. In whose name did you buy the properties?

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In the name of the entity which we set up to contropl our property investments. I believe that owning assets in your own name is not the best idea as you can be sued and the lot is on the line. Instead Dave and I created a structure where we control our wealth without owning it in our own names.

In fact, to explain this concept further required me to create a product on the issue. It’s called Wealth Guardian.

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2. Did you have to get financing done for each property separately? Did you choose one bank & stick to it for all property financing? Did you have to take a bank in the same city where you bought properties or a bank in Melbourne dealt with all your financing? Could you please tell me more about this financing aspect?

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At the start we sought finance on a property by property basis. Later, we managed to obtain a block of funding. Thesedays, we’re lucky in that we have a track record and have banks that are willing to be more flexible and continue to lend, provided we continue to show good results.

We have only ever borrowed 80%, and all loans (except commercial) are on 25 year P&I terms. I think it is necessary, once you get into debt, to also have a plan to get out of debt too.

In the course of our investing we have used a multitude of lenders. I don’t discriminate… if someone wants to lend me money I’m open to the idea! []

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3. Did you take an interest only loan or principal & interest loan for properties?

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With the exception of commercial loans, where the term is usually 10 years and to do P&I would mean -ve cashflow, our loans are P&I. I wrote about this recently in a newsletter. Check the back issues.

Hope you enjoyed the book and look forward to seeing more of you on the forums.

Bye for now.

Steve McKnight

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Remember that success comes from doing things differently.
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Hi JackFr (my book buddy!),

Get friendly with a local real estate agent (they have has access to a magic database and can look up figures), or else pay for view I’m afraid.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

I’m happy to take over a property with an existing tenant, provided I have done enough checking to make sure I’m not taking over another landlord’s tenant from hell.

I’ve seen many landlords sell the property to be rid of the problem rather than trying to fix it.

One of the due diligence templates we complete is the “Property With Existing Tenant” form, which is included in the BuyerBeware product.

Look out for other things too… such as all the necessary documentation being in order and that the rent being paid has been paid and is not just the latest hike justifiying an increase in price.

It’s the things we don’t know that bring us unstuck.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

We have done prelim some work into setting up a charitable foundation.

The legal form/structure we delegated to our lawyer, who has reported back with a way forward.

The hard work though, is coming up with a mission statement and core set of values. In short, there is always a need, but finding your way to help is tough

My favourite Bible passage sums it up well:

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The harvest is plentiful but the workers are few.

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Matthew 9:37

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

For those who don’t know, debentures are debt security (ie. loans) of various time lengths issued by businesses, usually listed companies.

As the risk is higher than a bank term deposit, so too is the return offered.

Kavita’s point about looking at the independent assessed risk rating (such as S&P) is well made. No doubt there were some people who held Parmalat debentures that have just kissed their cash goodbye.

One thing to be especially mindful of is the liquidity of the investment… that is, how easily can you access your cash (sell the debenture) if you need to – and what are the costs involved.

Hope this has helped.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

I’ll have a stab at some of the answers although I recommend seeing an appropriately qualified and experienced professional re: tax matters.

Finance

I’ve looked into this and most major Australian lenders will lend on OS property, but they want Australian property as security.

This makes it tricky, so to get around this I have just jumped through the finance application hopes in the OS areas where I invest (don’t ask).

Such borrowers have lent 70% LVR, but I know of people who have secured 80% LVR. It all depends on the risk profile of the applicant.

CGT

I don’t know the answer to this one, but I would have thought that CGT only applies to Australian assets (ie. Australian source).

What is more likely is that there will be a double-tax treaty with Aust. and the overseas country that will outline how profits are taxed.

Bottom line: you’ll have to pay tax, but you shouldn’t be taxed twice.

Inspections and tax

If you have Australian income then expenses associated with earning that income are deductible. It’s a matter of the timing of the expense and whether or not you’re showing (or are likely to show) a profit from the investment on your Australian tax return.

If not (or in addition to?) Australia, then you should be able to claim the expense against any tax in the country where you are investing.

FHOG

I think so… but check this out. My understanding is the grant is only applicable to and in relation to properties in Australia. I’d imagine that you would have to be an Australian citizen though, in addition to all the other qualifying criteria.

Stomach Churning…

[] Fear is always present, but is overcome by isolating what can go wrong and having contingency plans in place and readt to roll out should things turn sour.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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*sigh*

Post moved as requested, and locked as discussion seems to have moved on. Let’s relegate this to the archives.

I see the point being made, but agree that a private e-mail would have been the appropriate first point of contact.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

It’s a time value of money calculation whereby at the end of 25 years of principal and interest repayments, the amount of the loan outstanding is $0.

Use these variables in the Excel PMT function and you should come to an answer of $62.82

N= 1300 (25 years * 52 repayments per aunnum)
PV= 35,200
R/i = 0.15481% (8.05% / 52)
First payment at beginning

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hey Richmond!!!

Congrats mate. I didn’t know you were getting married… welcome to the club.

No – I’m not melbear – just me.

As for 10 year loans… it’s not that hard to find out, you just need to dig further than the surface.

The infochoice website has it nicely packaged for you – just call the people who offer 5 year fixed terms to see if they also offer 10 year terms. I bet some do (wink, wink) but they just don’t advertise it.

Website (doesn’t seem to be running that quick):

http://www.infochoice.com.au/banking/homeloans/compare/tables/fixed/I/VIC.asp

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Mel,

That’s why Dave and I continued with the accounting business and set up other businesses too.

Banks don’t want low-risk, they want no-risk. Strange isn’t it that they had crazy lending practices in the high rise market, yet didn’t budge much with traditional investing.

If worst comes to worse, do low-doc loans where they just ask for an income declaration and the source doesn’t matter.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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