If a bank foreclosed, they will have a judgement on the owner for a certain amount. If they sell and their is money left over, this goes to the borrower. If there is a shortfall then they will go for further legal action to recover the extra amount (including costs), they may then be able to sell further property, garnish wages, or maybe even bankrupt if the amount is big enough.

Terryw
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Which state are you in?

In mosts states you will have to issue a notice to vacate, if they don’t leave then you can evict them – with a court order. You can also get an order for money owed and maybe go after them a few years later when they are working and back on their feet again.

Terryw
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You may not go broke making a profit, but you may be able to do a lot better.

This is not a small unit is it?

If there is no CG potential, then I cannot see the point in buying such a property. making $50 (eg.) per week for 100 years may not be worth the effort. Think about the effect a rate rise or a major repair will have. Also think of the opportunity cost – what could you have done with your money instead. Also what about your borrowing capacity being used up too.

Terryw
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The best book i’ve read on PI is Peter Spann’s.

Terryw
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Some lenders also offer 100% finance for the purchase of investment properties – eg. St George.

Terryw
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Hi Bridge,

it is under s118.145 of the Income Tax Assessment Act 1997:

http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.html

Terryw
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Richard, I think Carlin was implying he had to switch loan types to one with a higher rate.

Carlin – is that correct? I think the rate is a bit too high. Depending on the loan amount you should be paying around 7.37% with a major bank on one of the propacks. And Bankwest offer the Lite Plus home loan at around 7.35% – from memory, with 100% offset.

Terryw
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Hi

What she could do is get a loan of up to 90% of the value of the property. This can then use this as 20% (or 10% etc) on a few other properties.

eg. if it is valued at $300,000, 80% of this is $240,000. This can be in the form of a LOC.

She then goes out and finds another property valued at $300,000 and gets a $240,000 loan on this and then uses $60,000 deposit from the LOC.

Terryw
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Hi

Why do you say you should have looked for postive cashflow property instead when you have done well from what you have done?

Selling investment property means you will have to pay CGT and there will be costs with agent’s fees and legals etc.

If you then use the funds released to pay off the home loan you will be saving interest (which is not deductible).

So you should do some calcs and see how much you will have to pay and how much you will be saving.

Once you have sold these and paid down the home loan you will also probably want to buy some new properties and this will mean more stamp duty and costs etc again.

I don’t think it is a good idea to sell one and pay down the loan on the remaining investment property, even if this will mean the property becomes cashflow positive. As this will mean your tax deductions will decrease while your non deductible debt remains high.

Terryw
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You just have to keep on saving hard and to try to add value while reducing expenses and maximising rent.

Terryw
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