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  • Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
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    Bris 22,

    I would welcome your comments on the pros and cons of both products and invite you to publish them here.

    This is an open community where you are welcome to post your opinion… and I’m always open to comments about how my product can be more effective and better value for money.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hello Matt,

    You seem to be on the right track.

    The finance left in the deal would usually be a second mortgage. The only ‘x-factors’ in such a deal would be the time of the loan and the interest rate. Most 2nd mortgages that I have seen haven’t been for more than 5 years… but this is certainly something that can be negotiated on a case-by-case basis.

    You could do up a simple spreadsheet to cope with the numbers using the @pmt function.

    I might have a go at something and put it up for people to download as a freebie if enough people ask.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
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    Hello Gavin,

    Thanks for your post.

    At the time of writing the wrap manual we were led to believe that the only option was to pay off what you received as a wrap off your loan.

    However, we have since had a review of legal opinion by several people. Now, while not advice and not a substitute for getting separate legal opinion, we are now led to believe that you must pay the principal component off your loan, but you may keep the interest component.

    Now in practice this is a difficult thing to do because the P & i components of payment change.

    I think that the best way forward is to seek to redraw your loan say every six months and then take out the interest component but only if you need to.

    The only other option I can think of is to have a split payment system where you receive the interest and the principal goes off your loan. Set a benchmark figure and then adjust it every six months.

    To this day David and I allocate 100% of the repayment off the loan because by doing so we decrease debt and increase cashflow. This is not out of necessity, but as part of our overall cashflow management.

    And Mike – thanks very much for your great post and contribution to the forum. How’s the website going [:D]

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
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    Hi Rolf,

    Welcome to the Property Investing.Com community. I appreciate your post and welcome you to contribute at any time.

    You write:

    quote:


    can you define the difference between a guaranteed loan and a real loan where start-up company loans are involved, where the directors have either minimal funds and or experience in property related projects ?


    Let me say up front that if you cannot pass the usual lending requirements for funding then you will find it hard to proceed to secure finance in your own name.

    Such people shouldn’t give up… they just need to either:

    1. Seek money partners
    2. Look to do no-doc loans

    My structure / strategy has worked very well for me though considering that I’ve been able to borrow over $6m on a taxable income of less than $40,000 per annum and next to no personal assets.

    It would work even better for people with more income / assets (such as their own home etc. (I rent)).

    A problem that many investors find is that they quickly become ‘maxed out’ when the borrow in their own names because lenders impose a debt servicing ratio of roughly 30%.

    This means that once your loan service costs reach approx. 30% of your income then you may experience trouble gaining further finance on the same terms as the loans you have already secured.

    The way I have worked around this problem is to borrow in a company structure and then go personal guarantor.

    This works in two ways…

    1. Once the company structure has reached a maximum lend then we just replicate the structure

    2. We place multiple guarantors under the structure – being me, my business partner and also our accounting practice.

    The effect of doing this is:

    1. Because we only guarantee rather than borrow in our own name – we are not personally ever maxed out. The Company structure may be (and that’s when we replicate)… but me/we as individual guarantors are not.

    2. Becuase of the multiple guarantors under the loan – we can leverage off a greater pool of money (ie. combined gross income)and borrow more money.

    Now for a few words of warning…

    A. Just because I do this does not mean that it will work just as well for everyone else. But it does mean that it is possible and perfectly legal too.

    B. I always provide full disclosure… but I can only answer the questions on the loan application forms presented to me. To date I have never been asked to specify what loans I am guarantor for since these are contingent and not real debts. (Although they become very real if the contingency crystalises!)

    C. I am not looking to deceive or hoodwink anyone here… it’s not a loophole, since that implies something that is just not the case. It is a legitimate way to structure your affairs to gain asset protection and has been used by many, many wealthy people for many, many years.

    D. Finally, what I have provided here is the briefest of overviews. The way that I do this is much better explained in the Masters Of Property Investing Seminar Notes.

    Once again Rolf, thanks for your post and please let me know if something that I’ve written conflicts with your knowledge / experience.

    Regards,

    Steve McKnight

    P.S. People with minimum property investing experience need to become educated first well before trying to implement advanced financing structures such as this.

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi again,

    Just read your post on Somersoft…

    Everything there is fine, but I just disagree with Rolf said, because in my experience there is a big difference between a guaranteed loan and a real loan.

    I guess it all comes down to what you believe you can do, who you listen to and how dedicated you are to getting results.

    Always operate within the law…

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Wei,

    Why were you slammed?

    quote:


    How do you guys go about structuring it? Is it as simple as purchasing in a trust using a corporate trustee (like every man & his dog does), and then borrow up to the limit, and then replicate the structure? The guys on Somersoft seem to agree that the loans guaranteed by an individual will be recorded against their personal credit history, while Steve mentioned that this is not the case.


    I can only speak for me where it is not recorded… but even if it is… so what? It’s not a real debt as such…

    To date I have never been asked a single question about going guarantor on the loan for any of our investment properties purchased via the structure outlined at the seminar and included in your course notes.

    Mate… when it comes to structuring there is no perfect answer for all people. If you have made your mind up about the right structure for you then the next step is to actually buy something.

    Don’t worry too much what other people think… it’s what you think that matters most.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hello Stephen,

    Thanks for your feedback.

    I believe that GST would be payable on new homes built and wrapped… but it would only be payable once when you acquire it from the builder.

    There would not be any GST when you wrap it.

    One possible outcome that could be explored is getting the end buyer to pay the GST that would otherwise have been payable if s/he had purchased directly… I don’t know how to word / construct this outcome though.

    I don’t think that you would not be able to claim back the GST, since it relates to a private residential dwelling.

    BUT – I’m no GST expert and I doubt anyone could give you a definitive answer.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Akira,

    The First Home Owner’s Grant is an incentive introduced by the Federal Governemnt and acts as a subsidy for genuine first home owners.

    The grant currently sits at $7,000.

    The FHOG legislation allows the grant to be payable in vendor finance / installment sales contracts with varying conditions depending on the State that you live in.

    In Vic & NSW, the grant is payable when the person moves into the property, which allows the investor to receive back an immediate cash injection and reduces the nett amount of money left in the deal.

    If the person moves out of the house then it is his / her responsibility to pay it back.

    I usually take the FHOG as my lead’s deposit, which is how I am able to offer what I do for people without savings.

    As far as more information on wrapping goes, visit:

    https://www.propertyinvesting.com/files/content.asp?cid=wrapintro

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
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    Hi,

    What you are describing here is a property-focus approach to investing. That is… find a property that appears cheap and then harvest it.

    Sensibly, you also recognise that you will need the right person too.

    Why don’t you advertise for people to establish whether or not there is a market / demand for your idea (as a wrap).

    Alternatively, is there any demand for that kind of housing as a normal rental… do the numbers stack up?

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi,

    You can do absolutely anything that you want when you have the vision and energy to do it.

    You can certainly do wraps out of town, but only when you have the systems and procedures behind you.

    The system that I use is well explained in my Wrap Library.

    Regards

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi,

    The lawyer that we use is Mr. Frank Libman. You can contact him on 03 9888 6255.

    We previously used Mr. Lewis O’Brien but found that Frank offered a comparable service for a cheaper price.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hello Camilla,

    I thought that I would do some research on this topic for you…

    The Reserve Bank

    The Reserve Bank of Australia is an independent organisation to government and is charged with the responsibility of settling monetary policy.

    Monetary policy is the way that an economy can be stimulated or restrained by affecting the price of money. In times when spending needs to be constrained then the cost of money increases – when stimulation is needed, the price of money falls.

    The Reserve Bank of Australia controls monetary policy via setting a key benchmark interest rate called the ‘Cash Rate’ – which is the rate generally applied on overnight money markets.

    Lenders then take the base case rate and add on a margin when setting home loan interest rates… so as the Reserve Bank changes the cash rate, so too do lenders who price their loan products at the cash rate + % margin.

    An excellent link to show how the cash rate has moved since January 1990 is: http://www.rba.gov.au/Statistics/cashrate_target.html

    Changes To Interest Rates

    Movements in interest rates must be ratified by the Reserve Bank of Australia Board. The Board consists of nine members and meets generally 11 times per annum on the first Tuesday of each month.

    Monetary policy is discussed at these meetings and movements in interest rates are generally announced on the day after the meeting.

    Once a change is announced then it may take a few weeks for lenders to pass on the movement as they must also manage their internal credit risk and mix of loans:deposits.

    Advising Wrap Clients

    Provided you run your wraps under a system, advising of changes to interest rates is not a administration problem at all… it’s just a standard letter to each wrap client. Less than ten minutes work.

    I hope this has helped.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Good evening,

    Wei – mate, we spoke long and hard at the seminar about creating win-win outcomes.

    Don’t take this personally… just accept that in this case it is not a win-win outcome because the agent is not happy.

    The La Trobe Valley is a small place… I suggest that you consider editing out the agent’s name as there is little or nothing to be gained by publishing it on the forum.

    Learn from Darren’s comments and look to get people on-side rather than burning bridges. You never know when you might need it to escape!

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Rod,

    Interesting post…

    My thoughts are that there are plenty of people who are interested in wraps. As such, people may disqualify themselves for any number of reasons – such as a prior criminal history, poor credit history etc.

    It’s nothing personal, but I would just say that the risk is too high for the return and then turn my attention to helping other people.

    Re: your idea about not putting them on the policy… BAD IDEA! If something was to happen then you can bet the insurance company will find out about it and deny the claim. That’s a risk that I wouldn’t want to invest with.

    I think that if you must wrap to these risky leads, then it can only be done so on the basis of full disclosure to an insurance company under the guise of expecting to pay a higher premium. Perhaps go to insurance brokers rather than a company, since I’ve heard of some brokers who are experts at high-risk deals.

    Bye

    Steve McKnight

    **edited to fix up a few typos**

    Edited by – [email protected] on 08/08/2002 10:45:09 AM

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi!

    Pls send me an e-mail to [email protected] and I’ll forward the backissues url.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hello Alison,

    Thanks for making your first post and welcome to the forum… great to hear from you [:)]

    When it comes to qualifying wrap leads you need to understand that you are not just dealing with “bank rejects” and as such a poor credit risks.

    There are lots of people who would be great clients but the major lenders have ignored… self-employed, older persons, high income earners but no savings, ex-bankrupts that went under for personal or domestic reasons (divorce etc.)…

    Now as for qualifying leads… the 10 critical questions that I ask, which are outlined in the Wrap Library, all focus on trying to determine if the lead is someone with a victim mentality.

    If they are then I won’t go further as from my experience these are the people that will default later on when some other need becomes more urgent (like a new phone etc.)

    Hope this has helped.

    Once again… thanks for your post.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Mal,

    Good idea to make your post and I hope you get a few contacts from it…

    Perhaps leave your e-mail address too… recent privacy upgrades to the sit have removed the ability for people to see private e-mail addresses.

    Also, by way of some general tips, when finding money partners… look for money rich / time poor people. Perhaps health professionals etc.

    Then also consider networking with rich people’s advisers… accountants, lawyers etc.

    Get many lines in the water and you can catch several fish!

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Nick,

    Thanks for your feedback and thanks for making your first post… I hope to ‘see’ more off you on the forum…

    I think that you make a fantastic offer… anybody in Queensland looking for a wrap lead? Perhaps you’d like to leave your e-mail address in a post too.

    To protect people’s privacy / e-mail addresses we have recently taken away the ability for people to e-mail directly.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Imron,

    Welcome to Property Investing.Com! And all the way from China too… awesome!

    quote:


    I’m an Australian, who’s currently living and studying in China.


    Hey – great! Pls tell us more about what you’re doing as it is certainly something very different. Is it an exchange type situation?

    quote:


    Just recently, the idea of becoming financially independent at a relatively young age has become more and more appealing to me.


    I certainly understand! Good on you for looking for a new possibility.

    quote:


    …and figured that property investment seems to be the way to go.


    I’d be interested to know the reasoning behind why you have come to this conclusion. There are so many ways to invest in property, and so many property investing outcomes… I guess what I am asking is ‘what outcome are you looking for from your property investments?’

    quote:


    Obviously the sooner I could reach financial independence the better, however I’d still like to stay overseas both studying and working for a few more years if possible.


    Well great! That gives you time to develop an action plan that can combine capital collection (cash in) with investment activities (cash out). You are perfectly placed.

    quote:


    I guess what I’m looking for is to hear of people’s opinions/experiences regarding whether it is better to start off with a larger amount of capital in a few years, or a smaller amount of capital in just 1 year or so (or possibly even no capital and now [:D])


    Well, I think that you can only score a goal while you are in the game. My opinion is that it is better to get in asap and learn the ropes than holding off. I now say “you are only one deal away from financial independence… it’s that one great deal replicated many times over.”

    quote:


    Regarding the latter two options, how feasible is it to invest in local (Australian) properties while living overseas and only returning home occasionaly during that time?


    Mate, only you can answer this question… you can make it as easy or as hard as you like. The key will be to leverage your time and to do that you’ll need to build a team around you. Regularly coming to this website is a step in the right direction too.

    quote:


    Also, as an unexperienced but highly-interested newcomer to this field, I guess I’m just interested in hearing other people’s experiences of how they first set off down the path towards achieving financial independence, and the initial costs/capital that was required to do so.


    Good idea… I’d be interested to see the posts from a other people about this too.

    Imron, thanks again for your post. Your contribution is always welcome.

    Regards

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi,

    What I’m going to reveal is the way that I have been able to secure unlimited finance using a relatively simple structuring system.

    In fact… I’m doing the notes for it right now!

    See you at the seminar!

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

Viewing 20 posts - 1,601 through 1,620 (of 1,699 total)