- Originally posted by resiwealth:
I have noticed that wealthy people stick close to each other. There are more arguements between unsophisticated relationships, because of greed and mistrust, than the other way.Totally agree resiwealth!!!
Once you eliminate the “desparation” associated with greed and the “must get rich at all (anyone’s expense) cost” type of mentality, a greater sense of peace (and purpose) is born, and as such, makes for mature and responsible communications.
Cheers,
Jo
So that is something that developers commonly do then?
I just would have thought the risk would be worth it. But I guess as the property is IN development they may not have a cashflow. Or, if they do have money set aside for repayments, any overruns in time is going to hurt profitability.
If I had a million:
– I could get a loan for 5million. BUT, I need to make sure I have at very least 30k a month interest to service the loan. But make *potentially* 5 times the profit.
OR
– I could buy a million dollar property. Overruns no issue.
OR
– Would it be possible to say borrow 5mil, use 4mil and use the 1mil as a ~3yr buffer for loan repayments? Assuming you already had the servicability, but didn’t want to use it on this loan.Obviously this is very simplistic thinking. Curious though.
I haven’t read the API article. But, the investor could have paid cash because it would be much easier to get the ball moving without a bank being invloved. He had the cash anyway. They could then contruct, or subdivide or whatever. Then when finished they could get finance on the final product on a much higher amount (hopefully), maybe even releasing all of the money they originally put into the deal.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Una….. you r only looking at it from your experience, which is limited.
There r theories and there r realities and in practice there is a major difference. Poor people think of gearing in a different way to rich people (top 2%)
To get to the next level u need to think out side the square …
Phil
resiwealth,
Im sure not my issue is gearing…? Obviously it’s going to be very negative until development finishes.
I see that my issue is not using the full leverage potentially available to them (he may have crappy servicability, but assuming otherwise). Unless I am not understanding you correctly.
I can understand the points raised by others.
Originally posted by unannounced:resiwealth,
Im sure not my issue is gearing…? Obviously it’s going to be very negative until development finishes.Gearing = Leveraging.
Negative and Positive Gearing just indicate whether cashflow covers costs.
Highly Geared = High LVR = High Risk = High Gains in a Bull Market = High Losses in Bear Market.
http://www.anz.com/australia/anzatwork/learning/investing_15.aspCheers,
F.
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