Hi,
I read this with interest:
http://finance.news.com.au/common/story_page/0,4057,7766954%255E462,00.html
Note: this link will only be available while the article is in the ‘free’ area of news.com.au
In particular:
An economist with a US bank told CSFI the main threat with housing credit risk lay in a recession-induced collapse in house prices.So, here’s what might happen…
Those who have borrowed against ‘equity’ might be asked to repay some debt to keep the LVR to acceptable limits.
If they can’t repay then they’ll have to sell.
More supply with stable or flat demand will drive prices lower and thus a cycle of downward prices occurs to match the cycle of price increases.
Comments anyone?
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I was warned this type of thing might happen!
Thank goodness i have a great mortgage broker and accountant who speak to each other.
Being warned that this may happen several months ago. when i set up the loan for my first IP this is how it was done to avoid repayment should they decide to want money back.
IP in darwin is worth 220,000 but bought for 210,000
I borrowed 159600 (this is below 80%)
the other 50,000 odd dollars i used owners equity since my PPOR is 120,000 this is also below 80% (this involves a revolving credit)
The IP is negatively geared but positive cashflow, I then put in a 221D to advance my tax return. The accountant then sent off a business plan to the bank assuring them of my ability to repay the loan based on the numbers.
It was actually quite easy to do, but only because i picked my team of people way before i even looked at purchasing a property.
If anyone knows of a better way i would love to hear it.
shaunWould that mean, if people cant afford to keep up payments there maybe an increase of houses for sale, or even repossesions auctions by banks too …
That could be a good thing for future buyers anyway…[
]Regards,
Arty.[
]
“Why work to the age where you cant enjoy
what you have worked for !.” (Author: Me)221d
is that where you get a reduction in tax now.. due to the negative gearing of your investment??
so essentialy you get less tax taken out of your pay packet and you can use that to pay off your investment quicker.. unsure, but i do recall a West Australian real estate salesman being a big propenent of this philosophy (if it’s what i’m thinking of)
Is this right??
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
redwing
yes you are correct, this is where you get the tax benefits now. there are catches though. I have been told expect to be audited, but as long as you have all your paperwork correct this shouldnt be a problem. I wouldnt recommend this to any one who wants to be a little creative with their numbers again you wont win against the tax man.
Any one in canberra who wants the contact details of the accountant i use just let me know.Hi Steve,
I think I understand where your logic is heading here.
Highly geared PPOR owners flood the market
Market prices drop to meet the increased supply
Ex owners will become the new tenants in demand
Rent up & prices down will attract the investorSo far, it looks like an environment matching your positive cash flow principle.
However as the next wave of rentals become available, could we still expect +ve cashflow with an increased rental supply in a market of now higher interest rates?
Regards, Phil
Hi Steve,
Am I on the right track? I would be keen to hear your summary.
Kind regards, Phil
]
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