[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 3, 2008 - 8:22 pm

I don't dispute what SNM says, but personally, I think the additional expense for the comfort of having a solicitor "in the loop" is well worthwhile. Of course, this is only if your solicitor is a high quality property lawyer; not if they're just the local solicitor who does a bit of everything. We're talking a difference of < 0.1% of the transaction size.

If everything is straightforward, yes, a conveyancer will be fine. But the problem is that one never knows beforehand which purchases will be straightforward and which will be challenging! I've seen people find themselves in a difficult transaction, and trying to find a lawyer at that time is unnecessarily stressful. I also think that using a conveyancer sends a message to the other party that you're "penny-wise and pound-foolish"; I know that I've had several transactions of this kind which got difficult, and I believe I got the better outcome in every case, because of having a solicitor on my side.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 3, 2008 - 8:04 am

I head north rather than south, and use Active Financial Answers in Maroochydore. Extremely knowledgable about structures and asset protection for property, in particular.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 3, 2008 - 8:01 am

Firstly, can you get a better PM, who is more in-tune with resi property management?

Can you get somebody – maybe even a fellow forum member – to go and check the place out and let you know how things are looking?

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 2, 2008 - 3:43 am

I think it's very hard to go past Ikea for cost-effective kitchen cabinets (eg Udden range) and bathroom vanities. Check out their range at http://www.ikea.com.au so you can pick what you want before you go.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 2, 2008 - 2:42 am

MB = mortgage broker

And welcome to Australia

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 1, 2008 - 9:25 pm

djac wrote:

What do you mean by I.P. and P.M?

IP = investment property
PM = property manager

Great source for these and other terms: http://www.somersoft.com/forums/showthread.php?t=9382

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 1, 2008 - 9:22 pm

djac wrote:

I'd rather take over existing repayement with the original loan remaining with the current owner/investor

I'm suspecting you're from the USA; unfortunately this kind of arrangement isn't possible in Australia. Actually, not in exactly the way that it's done in the USA, but you may be able to buy via a wrap or lease option.

djac wrote:

I need to explore low doc opportunities. Any ideas on how I can go about digging for  these low doc opportunities.

Make an appointment with, or email, a good mortgage broker. I'd seek one via the means I PM'd you about. Just to clarify, "low doc" refers to a type of loan product that would be in your name, not just to all opportunities that don't require much documentation. As mentioned, buying via a wrap or lease option could be a good option for you.

djac wrote:

Is it acceptable in Australia to place in an ad in the local newspaper soliciting for such opportunities? Any help with the wording will be appreciated.

I'd post on the forums I told you about, saying you want to buy via a wrap or lease option – there's bound to be some forum member who's wanting to provide a wrap or lease option who may be able to help you.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 1, 2008 - 8:30 pm

Financing is now so complex and varied in this country (thanks to banking industry deregulation!) that I wouldn't talk directly to a bank for anything other than the most straightforward of situations (and I wouldn't do it even then). Unfortunately there are very few knowledgable staff in branches anymore; the branches are really just processing centres. You need a mortgage broker, and preferably one accustomed to financing challenging deals. I'm not sure, but there may be low or no doc mortgage products that would be suitable for your circumstances.

If that doesn't work out, and you have some equity, you may look at doing a joint venture with somebody local. For example, if you have $50K in the bank, team up with somebody who can borrow $450K but has no deposit, and go halves in a $500K property – you put in the $50K and pay expenses on $200K of the mortgage, they look after $250K of the mortgage.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

March 1, 2008 - 4:59 am

They can copyright their CAD file, but they don't own the design. So you don't own their digital CAD file, or any print-outs that they produce from that file, but the original hand-drawn designs still belong to you (or the draftsman, depending on your arrangement with him). Copyright is not a blanket thing that covers every aspect of the document; it's much more complex than that. This fact sheet may help you:

http://www.copyright.org.au/g017.pdf

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 29, 2008 - 7:15 am

Because only students can (practically) live in it, you'll get a lower LVR, only 60 or 70%. For me, that's the main disadvantage.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 28, 2008 - 3:01 am

I'm having trouble making clear the distinction between information, and "the entire application". Let's see if some examples (even if imperfect) give the idea.

To check their credit, your agent may need their TFN, DOB, maiden name, etc. The agent uses this info to ring the credit checkers, confirm they have the right person, then get the credit check info back. You're entitled to know the results of the credit check, but there's no need for you to know their DOB or TFN yourself.

They have former addresses and agents listed so that your agent can ring up and check what they were like as tenants. You're entitled to know anything relevant that the agent finds out about that tenancy – eg if they paid on time, if they damaged anything, etc – but you don't need to know the street address of their last residence.

And yes, I'm talking about where you go through an agent; it is different if you're managing privately, as outlined. Once you involve an agent, that agent has a legal obligation to only give you the information that you need, which as illustrated, is a subset of the entire application.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 28, 2008 - 1:09 am

OK, we could speculate all day (or for several days). i just rang the Office for the Privacy Commissioner, and exactly what I suspected is true, is the case.

When a tenant gives you as the landlord (without an agent) an application form, they're choosing to give you that information, and that disclosure is not covered by the Privacy Act.

When a tenant gives LJ Hooker (for example) an application, LJ Hooker is bound by the Privacy Act, and can only disclose to you – the landlord – what is necessary for you to make your decision. So they can tell you any relevant information – including credit history etc – from that application but you are not entitled to a copy of the original document. That would be giving you more (ie a copy) than is required to make a decision (the information from that document).

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 27, 2008 - 9:24 pm

Agree with JL re asking the tenants if they want a/c and heating, and if they can pay more for it.

I find that you can make your tenants happy even with gestures that cost nothing. For example, just keeping them informed! If they ask for a repair, and it's going to take more than a day or two, I drop them an email apologising for the inconvenience and briefly explaining why. I keep the tone very friendly and tell them I hope that they're enjoying living there. I also tell them of any planned improvements, and ask if they have any feedback (eg colour preferences, or whether there are other things they'd like attended to first).

I've found that tenants are very appreciative of information, and when they see that you are responsive and do care that they enjoy living there, you're no longer an "anonymous landlord" and they're much less likely to get stroppy about anything. If things go wrong in future, they'll assume it's a communication breakdown or something beyond your control, rather than bombarding the real estate agent with complaints and assuming that you're just blowing them off.

If it's true, I tell them that I intend to own the property for a very long time as an investment, and that I hope they'll be my tenants for as long as I own the property. For many tenants, the uncertainty of the property possibly being "sold from underneath them" at any moment is a major source of stress, so if you can reassure them on this front, then do so. It doesn't bind you if circumstances change, of course.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 27, 2008 - 8:41 pm

Linar wrote:

The solicitor's interpretation of the RTA is bollocks.  The application for tenancy is, by its very nature, an authority for the customer's (tenant)  information to be supplied to the client (you).  You have instructed the PM to be your agent (agent being a person who acts for you), so if they are entitled to look at the information, of course you are also entitled to look at that information.

Are you a solicitor familiar with privacy law, or is this your opinion as a non-solicitor? I ask not to be a smart-ass – I'm not a solicitor either ("not that I like to brag" ) – but because I can think of many examples where an agent has access to information, where their client does not. So I don't think that this general principle (that if your agent is entitled to access, therefore so are you) exists in law, but I'm happy to be corrected if mistaken.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 25, 2008 - 11:48 pm

Offer at least some deposit, even $100. Isn't your deposit your "consideration" for entering into the contract, and without offering any consideration, you can't bind the vendor if they, for example, get a better offer? Not sure – what do the legal eagles say?

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 25, 2008 - 11:48 pm

Offer at least some deposit, even $100. Isn't your deposit your "consideration" for entering into the contract, and without offering any consideration, you can't bind the vendor if they, for example, get a better offer? Not sure – what do the legal eagles say?

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 25, 2008 - 9:18 pm

Good morning. Don't be embarrassed – it's difficult to draw the line between making the explanation detailed enough, but not overwhelming you! So when you want more, ask away.

The first issue is protecting yourself from litigation, divorce etc – as you say, "asset protection", and is a reason you don't want to be cross-collateralised.

If you use equity from one property as a "deposit" on the purchase of another, the two properties are said to be "cross-collateralised". Let's say that you're purchasing an IP, in a Trust for asset protection, but you use equity from your PPR as the deposit. Something goes wrong at that IP – tenant trips on ripped carpet and severely injures themselves, for example – they sue, and get a big judgement. The Trust's assets – the IP – are liquidated. Because the assets of the IP include equity in your PPR, your PPR will also be liquidated, so that the litigant can access that portion of the PPR that were used to buy the IP. You will get the remaining portion of your PPR in cash, if that's any comfort, but you've lost your PPR.

There may be an opportunity to refinance your PPR and pay out that equity in cash, but whether you could do this in this situation is not something you want to gamble on. Better instead to refinance your PPR NOW, take the cash, and apply it to the IP investment.

The other issue is limiting the lenders' access to your portfolio. There is a lovely little clause in every lender's mortgage contracts that's referred to as the "all monies" clause. What it says is that any money (or other assets that the lender has a claim on, such as properties over which they hold a mortgage) can be used to satisfy any debt with that institution.

So let's say that you have all your finances with one bank. You have a PPR mortgage, an IP mortgage, and a bunch of cash deposits. Let's say that your IP goes bad – perhaps it's destroyed and for some reason it's not covered by your insurance because you didn't have the right policy (could write a book on that alone). The bank forecloses, and they don't get enough money from selling the IP to cover your debt. So then they take all the cash deposits, and they still don't have enough. So they sell your PPR, too. Note that structures (Trusts etc) that may protect you against external parties such as litigants etc as outlined above, generally won't protect you from your lender, as they usually require "personal guarantees" for all mortgages, meaning that your personal assets can be used to satisfy the Trust's debts.

If you instead had cash deposits with bank 1, PPR mortgage with bank 2, and IP mortgage with bank 3, it makes it a little more difficult for the lender to get everything. Admittedly, not impossible, just more difficult, because it changes the costs required to liquidate you. If everything is with one bank, it's very simple for them to liquidate everything. If they have to pursue multiple lenders, there are costs involved with the process required to seize assets from each other lender. If your portfolio is spread thinly enough, it may be uneconomical for them to get at the assets you have with other lenders. For example, if you have a $10K cash deposit with the same lender as has foreclosed, they'll take that with very little process required; if you have $10K with another lender, it may cost them near that much to do all the paperwork etc to get it, and the lender may decide not to bother.

Hope that helps and isn't too overwhelming. And don't take it as gospel – I'm just an amateur who's tried to educate herself, and this is what I've deduced.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 25, 2008 - 9:30 am

I think your having been sent the applications in the past was unusual. I've had about 20 tenants over about 15 years and about 7 properties, and I've never seen an application. I think that you should be allowed to have any relevant reassurance that you want – eg if they're on a tenancy database, if they've been bankrupt, or if they've entered a debt agreement – but I confess I can see the agent's concern at providing you with the entire package. The agent verbally telling you the information is very different to you having that information in writing. If you go public and say "I was told that my tenant John Doe has been bankrupt", that garners very little attention, even if John Doe is famous. But if you can publish a signed declaration in John Doe's handwriting that he's been bankrupt, it's an entirely different thing…

The agent is responsible for controlling the information. In the office, they have policies for handling and storing sensitive information, and everybody's signed non-disclosure agreements, but if they give it to you, they have no control over what you do with it. Whilst I'm sure you're not going to be irresponsible, imagine if you or somebody in your household posted it on the internet? The real estate agent would get sued!

I think you have a right to ask any relevant questions that you want and get answers, and even have the agent view the proof. But providing you with personal information about the tenant in writing is, in my view, unnecessarily invasive of the tenant's privacy. If you were managing the property yourself, the tenant would know that, and by applying, would be choosing to entrust you with that information. But when they provide it to a big organisation like a brand name real estate agent, I think they (reasonably) anticipate that the organisation will protect their privacy, and wouldn't expect that copies of the entire application would be provided to the landlord.

For what it's worth, I also think that with the vast majority of tenants that go bad, there's nothing in the application that would give you any indication that you should expect problems. And most tenants who default on rent choose not to pay, rather than being unable to pay, or their circumstances change during the tenancy, eg job loss. Not much you can do to prevent that!

If you know your PM and have a good rapport with them, I'd be inclined to trust them to provide you with a summary of the salient points.

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 25, 2008 - 7:56 am

Why do you want to see the application itself? I usually have the PM ring me and give me a few salient points eg "They've been employed by Telstra for 3 years and are still employed there, they last rented in Geelong and the PM there says they were great tenants, there'll be 2 adults and 1 dog living in the property, and they want a 6 month lease." What else do you want to know?

I'm wondering now if I'm too trusting. Well, OK, I know I'm trusting – but don't you have to be, to let somebody occupy a multi $00K asset of yours?

[trakkaMember@trakkaJoin Date: 2004Post Count: 257]

February 24, 2008 - 9:11 pm

When I referred to 12%, I meant that you usually have to pay approx 12% for a second mortgage or vendor finance, and I was quite happy to pay this much interest, but the vendors accepted my offer of 9%.

History: yes, I started smaller, but let's say I climbed the curve pretty steeply as I gained confidence. I bought maybe 5 or 10 standard $200K-ish resi properties (sadly didn't hold them; sold them all before I got educated when I got sick of the drain on cashflow ), to a $720K resi property that I've developed to be worth $1.6M (my student accommodation in Spring Hill, outlined in detail elsewhere), and now this purchase. Fortunately my hubby has a very strong PAYG income and we are both comfortable with debt, so I'm proceeding aggressively. If you feel comfortable with it, there's no reason (in my opinion) why you have to do smaller deals. The larger deals may not be any more complex or require any more work, but have the potential for much bigger profits (and losses, conversely).

I do, however, now find myself in your situation: spare servicability but no deposit, which is why I sought vendor finance. Other options: 106% LVR lend (resi only), personal loan or credit cards for deposit (of course you need an exit strategy to pay out this debt ASAP), second mortgage.

And yes, if you can add enough value with a reno and pull out extra equity from another property, then of course that's an option. Just be careful to draw the equity out as cash and pay a CASH deposit for the new purchase, rather than using an equity deposit, which has the effect of cross-collateralising.

Good luck!