Hey all,
Read an article in Money (October) written by Stephen Zamykal about something called Leverage Loans. I then went and purchased his book (from amazon) and proceeded to read it. I was just wondering if any one has read the book and or has used his system for purchasing an investment property. I read the book but i am still a little confused, if any one could explain the concept in a different way that would be great also.
Hi Kade – I've never heard of it. What's the basic idea?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hey Jamie,
Heres a link to a scan of the article, will be easier for you to read it than have me explain it.
A gimmicky loan term taken from the commercial sector to baffle the newbies. Your just using existing equity to finance another purchase.
Leveraged loans in the commercial sector where LVR's of 60% are common was/is often used to releverage up to even higher levels with concomitant higher rates that would then be onsold into the loan market. These types of loans are common in the M&A and Leveraged Buy Out (LBO) commercial world.
Is his type of structure common in property investing?
Kade wrote:Is his type of structure common in property investing?It is THE method. Build equity then leverage up, wash rinse repeat.
Great in theory just that valuers, lenders and mortgage insurance get in the way of it be more than that.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Has any one read his book ?
Sounds like the standard strategy – see Jan somers books from 20 years ago.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yeah true, wish i understood it more. I understand the way of using equity in a house to get the deposit for next property. But he uses the leverage loan to pay for all out goings on the investment property, repayments, stamp duty etc, and all payments go into it. So its like a line of credit and you only pay interest on what you use. And as you get more properties using the equity you just increase the cap of the leverage loan. That's my understanding of it.
I didn't think that's the usual way to go about it, as i thought most people just paid into their loans or their rental payments went onto their loans.
When you use equity is that a loan?
I have not got an investment property yet but i am trying to learn as many things as i can. This concept of his was a little hard to understand.
If you have non deductible debt you should pay this off first, so you set up a LOC on any property and borrow to pay investment expenses. It is pretty simple and straight forward
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yeah currently paying down some debt. My partner has a property which has 70k equity in it, but her name is not on the loan atm. We will be rectifying that soon so that we can use half the equity to get ourselves an investment property. I want to use a buyers advocate as i live in a mining town and its expensive to fly to check out places.
Was thinking this leverage loan idea sounds like a good idea, was just after more info on it or well other perspectives.
Kade wrote:Yeah currently paying down some debt. My partner has a property which has 70k equity in it, but her name is not on the loan atm. We will be rectifying that soon so that we can use half the equity to get ourselves an investment property. I want to use a buyers advocate as i live in a mining town and its expensive to fly to check out places.Was thinking this leverage loan idea sounds like a good idea, was just after more info on it or well other perspectives.
If her name is not on the loan then it is probably not on the title – she is basically paying off a property owned by someone else. Take care.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Its with her sister, we are getting her name on both so that we can use the equity.
Kade wrote:Its with her sister, we are getting her name on both so that we can use the equity.That is good, but it will incur stamp duty, legals and a new loan. Also the sister will need to go on any loan to access the equity
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yeah our financial advisor is sorting this out for us. She just could not be on the loan due to bad credit rating caused years ago when her credit card number was used to purchase 10 ipods +15k worth of other stuff. None of it was ordered by her but the bank still sued her. So she had to wait.
Yeah we are both on over 100k each atm and we live in a government house so no rent at all. Should be in a better position than we are but we are working on rectifying that. Yeah might just have to message her.
In regards to the equity we only wanted to use half to help us start our portfolio. But yeah i guess if she has to be involved thats ok with me i am sure the financial advisor knows what they are doing.
Hi Kade
If your partner has a default on her credit file than see if the loan services in your name alone.
Are you dealing with a financial advisor or a mortgage broker? There's a big difference between the two.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Yeah she has a Default but it has been over 7 years now so it should all be gone. Yeah we go through Yellow Brick Road, so they are yeah financial advisors & mortgage brokers.
Hiya Kade
It would be worth while checking our your partners credit file (if she hasn't already). You can order online for free (takes a couple of weeks to arrive) or pay for an express service http://www.mycreditfile.com.au/
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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