Hi All,
I am in a bit of dilemma here. We signed a contract for a $320K OTP apartment couple of years and it is supposed to settle April this year but now the building won’t complete until end of this year. It is likely my wife will lost her job within the next few months (victim of offshore IT outsourcing !). Therefore we may not be able to get a loan to settle the contract. As far as I can see we have couple of options and any opinion from all you gurus will be most welcome. The contract was signed in our names and/or nominee.
1. We have sufficient super fund to cover the cost. Hence set up a self managed super fund either to settle the contract or as tenant in common if I don’t want to use all of our super fund.
2. Set up a hybrid trust to settle the contract. Convince my brother and brother-in-law to have a share in the apartment, so four of us can apply for an investment loan and lend the money to the trust.
3. Walk away from the contract, I know it has to be the last resort.
Any other suggestions will be appreciated. Sometimes I feel this chasing after financial freedom is all too hard, it will be much easier just to live off some of the hundred of thousands of tax dollars we gave to this government !As Mortgage Advisor said, you can get loans pre-approved, I think that most lenders keep your application valid for the following 6 months (?). If your wife has been with the company for a while and her position was made redundant, she should hopefully receive a payout package which would help out with the repayments while she looks for work.
If this isn’t the case, maybe she should start looking for new work now?
Cheers
If you can’t get a normal loan, I guess you can alway get a low-doc-loan (higher interest) which does not require evidence of income.
Kind regards
Jet Dollars
[Retire Young, Retire Rich] [strum]SetMeFree,
I empathise with you and your wife’s situation. Unfortunately there are many people in a similar situation to yourself and there are many players who are responsible.
Firstly I agree that it is a tragedy that our government taxes those who earn a high wage soo much (as I have said before I am not against streaming income from the rich to the poor) but not at the ridiculous levels we do here in Australia. If we had a government who were willing to reduce taxes don’t they realise it would also stimulate our economy and also indirectly increase other taxes (GST). With more money in our pockets we would be able to increase our consumer spending (rather than just doing it through credit) and therefore boost our local economy. It would also provide people with the opportunity to invest more and take the burden from the government in the future.
We also can’t forgot those individuals who have promised to make people multimillionaires in a few years. It has taken me 40 years (im 55 now and started work at 15) to make a multimillion dollar portfolio and it is a tragedy that people have offerred many people false dreams. A lot of people have fed off the fears of people and advised them to invest in areas that they were not knowledgeable about. Property is like any other investment, it is important to understand a person’s risk profile, insurance protection, ability to service debts, spending patterns, etc. before advising which financial instrument is the most appropriate for that individual. Unfortunately the Australian public has been sold the false hope that by investing in property we will all become millionaires with a passive income of $500K per annum in just 5 years. Well yes this is possible but not after 5 years. Like I said it took me 40 years to build such a portfolio but our societies desire to have everything now feeds this “need” to have it all now. I truly hope that some of the pain that we will experience in the next couple of years as a society helps us to get back to basics. To learn the basic fundamentals of investment, to stop following the herd and to know when to cut one’s losses.
I think you are in that position. With regards to the super fund there are a lot of issues in your strategy which I do not have the time nor ability to answer in this forum. My only suggestion is to consultant a good accountant and/or tax lawyer.
You really need to sit down with your accountant and work out a few things:-
1. What is the current market value of this property ? Basically what will you get if you sold now and how much of a loss will you make by selling.
2. Can you afford to service the debt (taking into account revenue from renting the property) without your wife’s income. The IT sector has been hit very hard here in Australia. The same has happened in the UK and is only recently coming back from a couple of years of difficult times. Even then the days of earning 1,000 pounds per day are over. Those rates went down to 300 pounds per day and are now back to 500 pounds per day depending on your skill set. I am not sure what your wife does but I would be budgeting for the fact that she will probably not find work for about 3-6 months. Outsourcing to India has become fierce and will continue in the future.
3. You need to do a comprehensive cost/benefit analysis and do an NPV (Net Present Value) analysis over a 5 year period. This will assist in determining what decision to make. You will need a competent accountant. If they stare blankly when you say NPV go elsewhere.
4. Learn from the experience. Learn that having a multimillion dollar portfolio isn’t everything. I don’t know where you live but the best things in life are always cheap. A coffee ($3) with friends discussing politics, music, sport, sufferings, joys. This is what life is about. A walk with your wife in a local park. Visting a local art gallery. Experimenting sexually. All things that don’t cost much but make life wonderful. Don’t worry if this experience costs you but it is what you take away from it. Remember that other people have lost millions but have also gained it back. Focus on the important things in life and the other things will follow.
I would even consider a NODOC loan which needs no ABN, no evidence of employment and no income stated.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I am expecting a number of OTP purchases needing settlement this year to be worth less than the contract price. I have already seen some concrete evidence of this.
There are options available depending on the individuals circumstances. Walking away from the contract isn’t always a choice. You may well be responsible for marketing it again and any shortfall in sale price from your offer.
All the best to you.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Yes increased demand will lead to demand pull inflation. However this assumes that future demand would exceed current demand. I would argue that the current level of demand would remain constant however the funding for that demand would be through savings rather than through debt. Increased equity in property prices has already fuelled demand for consumer goods and this has had little effect on inflation due to small increases in the interest rate to stabilise the demand and therefore the inflation rate. We could have a good economics discussion on this one. Remember however that in a global economy there is also competition and so prices ( particularly for goods) are constrained by the perception of what something is worth. Just because we have higher inflation doesn’t automatically assume that prices will increase. It is the demand for something that will increase prices. I am arguing that the demand is already present and is currently being funded by increased debt.
Regarding a loss from selling. Just talk to many of the Docklands investors. They have put $20K deposits down to purchase properties for $900K that will now only generate $700K in the current market. If they go ahead with these contracts (and many have had to) then yes they are in a capital loss situation.
And as regards to experimenting sexually. Well I have been happily married for 30 years so it hasn’t cost me anything except having a very happy wife. I am not talking about sleeping around. But then again most couples haven’t heard of anything except the missionary position. No wonder they have more interest in their children’s activities than their partners.
Thanks everyone for your kind advice. We will try to get a loan and see how it go. Hopefully it is just a small obstacle in our journey to finanical independence.
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