I have some property in Japan, and am interested in China too. My friend has pruchased there and has made huge gains and positive cashflow.

Terryw
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Hi

So you basically need more 100%+ finance? What happens if the developer can’t settle?

Your best bet is probably to just delay settlement. You have about 3 weeks from when you need to settle until, the developer needs to settle. If you don’t settle on the required date, the vendor usually gives you a few days, then they issue you with a notice to complete. You then have 14 days in which you must settle. So if you can drag out the vendor initially, you may be able to stetch it all the way to when you settle with the developer. But if the developer does the same thing to you, you may be stuffed.

What about offering $$$ to the vendor to settle later, and/or the developer to settle early?

I have access to private lenders, but they are reluctant to lend for land at high LVRs, and you would be looking at 6-10% per month interest.

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Hi

Yes it is confusing trying to decide what to do. Steven makes a good point that if you hang on to your IPs you can use the extra income to help pay off your home loan. But you will also lose some in tax.

If you sell, you may pay thousands in CGT. This could be minimised by selling one per financial year.

But, if you sell a property, you will have to buy a new property to replace it, so that may be another $20,000 in stamp duty and costs. And then there is the agent’s fees on the sale, and other selling costs.

Another option is to form a trust, and sell to your trust. or maybe your wife. She could buy your property or your share, borrow to do so, and you put the proceeds of your sale into your home loan. This will still result in all the above costs, but you can save on agent’s fees and still ‘keep’ the property. ie you will know that you are buying a good property.

If they are performing well, it may be better to keep, or to sell to your trust.

Terryw
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I agree with Simon, it may be possible to borrow, but it appears you may be overstretching yourself.

To borrow against a farm using a no doc loan would mean high interest rates and very low LVR. So this will eat into your return as well.

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There are only two LMI companies which makes it hard. Both have certain requirements for maximum exposure levels per client, meaning they will only approve lends up to a certain total amount per borrower. This does not matter which bank you go with, all adds to the total. Offhand, I don’t know what the limits are for full docs, but for low docs they are $800,000 for PMI and $750,000 for GE. So this will limit the number of loans you can get that are mortgage insured. And watch out, most of the small lenders have all of their loans mortgage insured no matter what the LVR (Macquarie, RAMs etc).

You may be better off just refinancing a few properties at a time. If they are cross securitised, you can apply for a release of security with the current lender, and then refinance that property with another lender. The remaining security will have to be valued enough to support the remaining loans with the origianl bank.

It shouldn’t be a problem refinancing IO loans, maybe you meant they were fixed? If so, you could have large exit fees, and it maybe better to wait.

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Hi Tom

I’m not really sure what you mean, but you cannot use a wrapped property as additional security. ie you cannot cross securitise a wrapped property. So you will need a 20% cash deposit for the next one. (Or you could use another unwrapped property as additional security).

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ajgebhard

I wouldn’t say asset protection is only of concern to business owners.

Other advantages of trusts include:
– taxation, trusts can save tax and claim things that an individual can’t
– Estate Planning. Passing assets on via a trust can be easier and cheaper with possible CGT and stamp duty savings.

Terryw
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I agree with Pete, it is not income and I can’t see any lender regarding it as income. Even if you were receiving interest, it is still unlikely that they will take it into account for serviceability. This is bacause, you could simply take it out of your account at anytime.

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These are trusts established offshore, usually with the intention of hiding assets or income, often in tax havens. Do a search on google for ‘tax haven’ and you will find a lot of stuff.

Terryw
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What happens when you lend him the money and he just drives off into the sunset?

It is very hard to get bank finance for these homes as they can be easily moved. So you wll have the same risk, you will also find it very hard to finance and will have to pay for most of it in cash, making it a low return. And what if he defaults? you will have to take back a second hand transportable which may have dropped in value.

Terryw
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