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  • Profile photo of Steve McKnightSteve McKnight
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    Wei,

    The 11 Sec solution is a filtering tool for properties that you see advertised to determine in a few secs. whether or not they stack up.

    It is not a ‘be all and end all’ property investing solution, but is designed to be a time management tool.

    Cheers,

    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 Felicity!

    How are you?

    Thanks for your post… let’s see if I can provide some answers…

    Buying Property

    If all ABC P/L is is a trustee coy for the ABC Family Trust, I’d just buy the property in the name of ABC P/L. The rest is fine to include, but I think that it is generally unnecessary if the Trustee only acts for one trust.

    Multiple Families in One Trust

    This is generally not a good idea for two reasons:

    1. If your trust makes a loss then because you have multiple families in the trust then the complexity of administering the trust increases dramatically.

    2. What happens if you have a fall out?

    A better option to discuss with your accountant may be a partnership of 2 family trusts… this has its advantages and disadvantages too.

    You could buy the property in the partnership name and the profits would wash down 50:50 to the two trusts.

    Perhaps you might also consider a unit trust with the units owned by your family trusts if the partnership idea is not appealing. Property purchased in the unit trust and profits shared based on unit holding (50:50) which flow back to your family trust.

    Bottom line… seek accounting advice.

    Other Agreements

    This would be wise. David and I have a partnership agreement. Perhaps also a ‘Heads of Agreement’ that spells out the relationship and the obligations of each party might be wise.

    My comment here is that it’s wise to have something documented… not for any good times, but just in case things get ugly.

    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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    Hi,

    Terry has corectly pointed out that we purchase cheaper end market properties and by the time you receive back the FHOG, you only leave a few thousand dollars in each deal.

    But on top of this you first need the money to invest.

    For many people it is their jobs. Since we are self-employed we don’t have that possibility so instead we run several businesses to generate this income.

    Among these are the accounting practice, seminar business and also our existing r/e companies.

    You point out that you are on a low income, so unless you can find ways to increase this, it would seem like your best bet is to seek a money partner and do joint ventures with them.

    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 Chris,

    How are you and Louise travelling? Hey – I’d love to know Louise’s thoughts on the big grizzly bear that’s rocking the stock markets at the moment…

    Anyway, about the calculator, remember there are many online tools which I have summarised of Property Investing.Com members in the links section of this website.

    If you are after a hand held one for on the road, then a good one (although a bit complicated to work) is the Texas Instruments BAII PLUS, which is available at Officeworks for $80. Click on the ‘Officeworks’ link to open up the relevant web page and then the ‘Product Features And Image’ link for more info.

    Best regards (as always),

    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 Stephen,

    Great talking to you before…

    In Victoria, because there is a sale contract there is no tenant-landlord issue. I include wording that spells this out in the contract just in case there is any doubt.

    Also see my comments about insurance – author FW.

    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 Mark,

    On my deals I do 80% LVR.

    I could go higher but I find my long-term access to funds drops off as lenders feel I am too highly geared.

    At the seminar there will be a lender who I understand can do 90%+ LVR on wraps for certain clients.

    Be there or miss out!

    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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    Great advice Terry!

    Thanks for your post…

    Matt, my only advice would be to be very careful with over capitalising on renovations etc. Sometimes the only sure way is the passage of time because valuers take an average on all properties in your area with coming up with a figure.

    It may pay to call one to discuss this – or maybe even a real estate agent in your area.

    Generally wait at least six months after buying and then go for a revaluation.

    Don’t be shy about asking your lender for money either… most places are falling over themselves to write new loans. Hey a senior bank contact called us the other day and asked if they could give us more because he was under budget leading up to year end!

    If only it was that easy in the beginning!

    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 Felicity,

    Congrats! You have managed to completely confuse me with your post [:)]

    As far as insurance goes, here are my thoughts:

    1. You should insure the property for land and building insurance the second you sign the purchase contract. It’s a bit like getting car insurance before driving out of the car yard.

    2. In a wrap you have two choices:

    Option A: Have insurance in your name and have your mortgage and your client registered as having an interest in the policy. You pay and then get reimbursed by your client, OR

    Option B: Have the insurance in your client’s name and have you and your lender noted as having a registered interest. Your client pays the policy and sends confirmation by way of a certificate of currency to you.

    If you go with Option B then make sure any insurance proceeds go to you direct.

    Whatever you decide, be very careful to ensure that you find out all the information about your client to ensure they don’t have a horrible past that may allow the insurance company to later claim that they wouldn’t otherwise of insured the property and that you didn’t make a full disclosure.

    Some time ago I was working with an insurance broker to develop a wrap specific policy that protected against this risk. Negotiations stalled when they went broke and now I’ve had to start the ball rolling again dealing with someone else.

    So much to do, so little time… I’ll report back if I hear any news.

    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,

    Time for a bit of Friday night posting!

    You ask:

    quote:


    I know there are 2 approaches to wrapping:

    1. Find the buyers, and get them to look for the property they want to buy & then you wrap it to them. Problem is you can’t buy below market, and they’d know how much you paid. Lower potential profit.

    2. Find the house, and then the buyers. Problem is you can’t guarantee that a buyer will come up. High potential profit.


    You are correct here. When I began investing in real estate I would adopt approach #2 and seek to find the right house and then run classified ads to attract people interested in the wrap concept.

    Later though, I realised that this was not an efficient way to leverage my time and sometimes the houses that I purchased well were nevertheless unattractive to potential buyers because of cosmetic reasons (ie. the carpet was the wrong colour etc.)

    Further more, from my experience I realised that clients who selected their own home were much easier to enrol in the idea of owning it – simply because they chose it!

    That’s when I modified my approach to finding people, empowering them to find properties up to a certain figure that ensured their repayment remained affordable and then getting them to do all the searching! I started buyingn properties from the comfort of my own office desk.

    I don’t agree with your statement about buying below market. With my wraps I often buy at market and then sell above market.

    I’ve found that adopting a policy of total honesty and full disclosure means that people aren’t upset that you make a profit when you don’t try and hide it. And those that are are people you don’t want to deal with anyway.

    I simply say “Look – I’m an investor. Does it seem unreasonable to you that I am going to make money from providing you with this opportunity considering that I’m going to work as hard as I can to make it a win-win for the both of us?”

    For me, approach #1 has been the far better.

    Regards,

    Steve McKnight

    ***edited to correct my mistake of having the nos the wrong way around!***

    Edited by – [email protected] on 20/07/2002 6:31:13 PM

    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 Gavin,

    The item you refer to is the Property Secrets Revealed folder that I created for the Break Free Events presentation.

    The offer was $495 for the folder and as part of the package you received a $600 discount off the upcoming Australian Masters of Property Investing event. As you can tell, for someone lucky enough to secure a seat, this was a great offer as you essentially received the product for free.

    This was a special joint-venture product that I did for BFE. At this point I have withdrawn the product, but I do plan to release it later in the year with a tapeset based on one-to-one interviews I am completing with a selection of investors who I feel have excellent advice for all property entrepreneurs.

    Stay tuned for more information in about October.

    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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    Join Date: 2001
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    Hi,

    quote:


    1. For a long term (more than 10 years) wrap, do you use variable or fixed rate interest with your lender. What happen when the interest rate changes or the 5 year fixed term completes, do you change the rate with the wrap buyer as well? Will it make the repayment amount really messy to calculate?


    I leave this up to the client I wrap to and piggyback their choice with my lender.

    Repayments can be messy to calculate, which is why I use software to do all the hard work.

    quote:


    2. Where can I find a wrap friendly lender/broker in Melbourne with rates close to a normal loan?


    Ah, the million dollar question. The answer is not ‘where can I’, but ‘how can I’? There will be at least one at the upcoming Australian Masters of Property Investing Seminar waiting on you to network with him at the event.

    Bye,

    Steve McKnight

    Edited by – [email protected] on 08/07/2002 4:23:52 PM

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    Hi Alf,

    Something that you wrote caught my eye and I thought it owuld be wise to flesh it out for all community members…

    quote:


    I bought a torrens title townhouse in cbd adelaide about 2years ago off the plan. I furnished it so it was utilised as a service apartment this gave me building depreciation of 4% and not 2.5%…


    Having researched this in more detail, here’s what I have found…

    The normal building income-producing building write-off is 2.5%, but because you are offering short-term traveller accommodation (ie. serviced apartment), you are allowed a 4% write-off.

    Of course, you are not entitled to a bigger deduction over the life of the project, just a quicker deduction (over 25 years rather than 40 years).

    Now your furniture is outside of this building writeoff deal – as it is a fixture and fitting and not part of the capital structure. Furniture is usually depreciated in five years or less.

    As for your deal…

    quote:


    This larger company is offering us a more comprehensive lease that ties the property up for about 20 years 5+5+5+5 at the end of each term they chose whether they want another term (if they do you have to give them the right of the next term). They are responsible for a signifanct part of the outgoings and management of the property. The catch is that you hand over the furniture to them for one dollar if they chose to go another term. There argument is that one has depreciated the furniture so it costs the owner nothing.


    Yeah – seems like a creative deal, to be sure. You need to weigh up the risk vs. reward, but I’d probably go for it depending on the value of your furniture. A couple of questions in the back of my mind though are:

    1. Do you have to replace the furniture every 5 years?
    2. How good is the reputation of the coy behind the rental guarantee?
    3. Are there any restrictions on you selling it?
    4. How are rental increases handled?
    5. How are the units booked and what is the penalty for vacancies and strategy for attracting clients?
    6. What are the management fees?

    You could always go 4 out of the 5 years and sell it in the 5th year to somebody else who probably won’t be careful enough to read the fineprint in the lease and it will become their problem.

    Having said that – watch out for a company that ties up management of the place but has a relaxed marketing policy about actually renting them, or worse, if they own the majority of units and have a policy of renting theirs out first and leaving yours vacant. It’s been done before by some dodgy folks in Qld!

    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!

    Interesting deal… I think you are right to consider your likely success being linked to the seller’s motivation.

    You know what I’d do..?..

    In this case I wouldn’t worry about doing the legwork yourself – I’d approach an agent in the area and express your interest in buying the property and get hi/her to do the legwork to approach them and gauge the interest.

    Remember, the seller pays the commission, so you haven’t lost anything and yuo are also leveraging your time.

    Reminds me of what an old manager of mine said… “when in doubt, delegate!”

    Cheers,

    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 Josh,

    Thanks for your post [:)] and congrats on your potential purchase.

    Re: your question about the FHOG. I have cut and paste the following text from the State Revenue Office web site…

    quote:


    ARE YOU ELIGIBLE?

    To be eligible to receive the grant, an applicant and the applicant’s partner must meet certain eligibility criteria.

    An applicant or the applicant’s partner must

    *be a natural person (not a company);
    *be an Australian citizen or a permanent resident;
    *not have owned a home before in Australia;
    *occupy the home as their principal place of residence within 12 months; (emphasis added)
    *not have received the FHOG before; and
    *not have entered into a contract to purchase or build a home before 1 July 2000, or not commenced construction as an owner builder prior to that date.


    On this basis I’d imagine that so long as you had the intention of living in the property within 12 months then you’d be OK. Perhaps be careful to only sign a lease with the tenant for less than 12 months from the date of purchase, otherwise it could be construed that you didn’t have the intention of living in it… otherwise why would you have rented it out for >12 months?

    As for your property… seems like a good starter property to learn the ropes with. Just be careful on the body corporate fees.

    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 CY,

    Let’s have a go at answering some of your questions…

    quote:


    1. What is commonly agreed between you & investor ? Is it 50-50 split, or do you just ‘promise’ him say 14% return?


    I don’t think there is an absolute standard as to what to expect, but in my opinion I think 50:50 is the default. I think it’s more about find out what the investor is looking for and then offer it. If they want a red Commodore, then give them a red Commodore. As for a % return, the normal ‘run of the mill’ investors seem to have a fixation with 10%.

    quote:


    2. Do we need to draw a written agreement ? What sort of guarantee do I need to offer to investor- this is to make sure that I don’t run & take his money.


    Yes, definitely! Agreements are not for good times but for bad times. I would draw up a Heads of Agreement in bullet point form and then get a solicitor to formalise it.

    Make sure you cover situation for the share of profits and losses.

    quote:


    3. What is the ‘minimum’ (if any) period that he must NOT take the principal back. Eg he gave me 30k , then if he want the all the money back (pulling off) in 3 months. I would be in trouble coz the monies is tied up in the deal.


    That’s why you have an agreement that spells out what has to happen in order to get the money out. Personally, I’d say the investor has his/her money tied up for the length of the deal.

    This is why some wrap investors only do 5 year loan terms and seek to have the client pay them out.

    quote:


    Lets look at the numbers
    Purchase prop 70k
    LVR 80% – Loan 56k
    Deposit 14k
    Closing cost4k
    Money upfront (investor pays) 18k

    Sell (wrap) for 85k
    Deposit from wrap buyer 7k- this leaves investor with net outlay 11k
    Assuming spread 250 pm or 3000 pa(2% interest spread)

    Now if I want 50-50 split, then ROI for Investor = 1500/ 11000 = 13.6%

    I thought 14% is a bit low for investor ??? what am I missing here?? How should I make it more attractive?


    It all depends on what the investor can get elsewhere. 13.6% is a lot better than 4% for low risk. But you’ll never know unless you ask people what they want! It doesn’t matter what you want when you need someone else’s money. Golden rule – he who has the gold makes the rules!

    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,

    I did some surfing and found the following information that seems to be relevant about title insurance…

    Source: http://www.oldrepnatl.com/

    quote:


    What is Title Insurance?

    Title insurance is an exclusively American invention. Its purpose was well stated in the first advertisement for title insurance back in the late 1800s:

    “This company insures the purchaser’s of real estate and mortgages against loss from defective titles, liens, and encumbrances. Through these facilities [the] transfer of real estate and real estate securities can be made more speedily and with greater security than heretobefore.” [circa 1876]

    Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.

    Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.


    Title insurance is a uniquely American concept and is not needed here in Australia as the process of conveyancing completes the checks that you would otherwise pay the Title company for.

    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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    Hi,

    I thought that it would be appropriate to point out that correct structuring will be a feature topic at the upcoming seminar.

    Chartered Accountant and tax expert Paul Harper will show you exactly how to set up a multiple entity structure that is both tax efficient and also appropriate to protect your assets.

    Paul will show you the correct structure (in fact the exact structure that David and I use) and then I’ll show you how I make use of it to secure unlimited finance.

    Book your seat early – call the office on 1800 660 630 to find out more.

    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 Mel,

    All the details you require are now available online at:

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

    I must warn you though that seats are filling quickly, so be sure to follow up quickly.

    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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    Post Count: 1,763

    Rob,

    I strongly recommend you do the numbers on this deal mate…

    As an investment, it has the smell of strong negative gearing about it, which may be OK depending on your strategy (save tax vs. make money).

    I’d also point out that the apartment complexes down here are underperforming from what I hear and read and advise caution.

    Remember to draw a distinction between fact and opinion.

    Thanks for your post and if you’d like to be more specific on the numbers I’d be willing to analyse it online as a case study for you!

    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 CY,

    Thanks for making your first post and I invite you to keep posting in the future too.

    I’ll try to answer some of your questions…

    quote:


    1. Do I have to tell my bank If I ‘m going to wrap the property? If yes, is it BEFORE or AFTER settlement ? What is the penalty (if any) if I didn’t tell?


    I would encourage you to adopt a policy of being totally honest with your lender and certainly put it in writing that you intend to wrap the property.

    Telling half-truths is no way to be investing tens of thousands of dollars.

    I am currently working with a mortgage originator who has mentioned that he’s sourced a financier who is happy to do wraps… I’m building the details as a new part to this website and hope to release it soon.

    quote:


    2. Do big banks /major financiers allow wrap? or do I have to settle with the ‘low doc’ products?


    Obtaining finance was certainly easier when I began wrapping than it is today and it seems that the big banks are not interested given the demand for home loan products associated with the latest boom.

    As for a low doc loan – I’d only use this product if you don’t qualify for regular finance due to the interest premium charged.

    quote:


    3. What is the ‘proof’ of home ownership to the wrapbuyer? (since I have the title in my name)- so that if I go bankrupt the house stays with them –


    Usually your purchaser will place a caveat on title stopping you from selling or refinancing the property from under them.

    However, there is no guarantee you can offer except to point out the biggest reason you’ll go bankrupt is if they stop paying… so as long as they keep paying then…

    quote:


    4. Do I have obligation to let the wrapbuyer know what is my loan balance ?


    No, although in Vic. you may need to establish that you are appropriately paying off your loan from the proceeds they pay you (ie. at least the principal version).

    But under a policy of full and honest disclosure – why wouldn’t you show them if it builds trust?

    quote:


    5. In NSW , can I legally pay IO to my original loan & charge PI to wrap buyer ? (increase cashflow)


    I don’t know the position in NSW, but I’d be very surprised if you could do this. I am certain that this is not possible in Vic.

    quote:


    6. If I put and/or nominee- and we have same day settlement with the wrapbuyer- do I still need to pay stampduty?


    CY – this is a question to ask your legal adviser as the rules vary for State to State.

    Out of interest though and for discussion purposes, in Vic. the nominee clause only applies where you know the nominee before you buy the property and they have appointed you as thier agent.

    You are also not allowed to earn a commission.

    That’s why I point out the need for appropriate legal advice in the State that you live in (NSW?)

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

Viewing 20 posts - 1,621 through 1,640 (of 1,699 total)