Hi Andrew,

One thing to look out for when making an application for the cash out portion. There are many lenders who will flat out not lend for the purpose of paying a deposit on a commercial property, they consider this a business use and will try and push you into a more expensive business facility. You need to use a lender that will either not require a specific purpose for the funds or is comfortable with the purpose being business related. Given that the security for this loan is a PPOR, you should not accept paying a premium because of the purpose, there are lenders that can cater for your needs.

Regards

Hi Craig,

If you don’t think there will be much growth in the property then its really a no brainer, sell it. Nobody can be certain as to what will happen with property prices, as long as you make an informed decision you should be content that it is the best decision you could have made at the time, whatever happens.

I’ve always thought that the decision to sell a loss making or neutral property should be easier than the decision to sell one that is in the money as you don’t have the issue of generating a tax liability. If you have an on going, non deductible debt then you will get a certain and relatively high return by reducing that loan.

Regards

You can’t know the future, you can only predict. Taking any sort of leveraged position is always somewhat of a gamble on the price going up, sometimes you will be correct and sometimes not. The problem with OTP properties as compared to existing properties is that a reduction in value can create an issue with settling, whereas there are no margin calls on real estate so once purchased, if a property reduces in value over the short term it doesn’t matter unless you need to sell.

Regards

Hi Catts,

I don’t disagree with your assessment of the world economy, although I don’t believe the US is in very good shape at all. The major difference between now and pre GFC is that a large proportion of the risk lays with Governments and Central banks, most of whom have large debts denominated in their own currencies. Countries that issue their own currencies can only become insolvent by choice, as they have the option of creating more money (printing). For there to be a major crisis with Central Banks there needs to be a loss in faith in currency, such as we have in Venezuela at the moment or the Weimar Republic pre WW2, I think we are a long way from that occurring although I feel it is inevitable.

Regards

Hi Mark,

Primarily they can reduce interest rates which would most likely have a positive impact on property prices. A significant drop in property prices would have a dramatic effect on the stability of the banking system, so while they want growth reduced and are actively seeking this through various policies they do not want prices going backwards.

In the context of quote above I was referring to anything that happens in the near future i.e. next few years. I probably should have said “problems that occur in the short term”.

Regards

Hi JT,

When considering high yield properties you must recognize that their prices tend to be very volatile. Mooranbah is perhaps an extreme example of this. This can, of course, work in your favor but it can go both ways. For the most part people who are starting out lack for capital rather than income, if this is the case for you it is probably a safer bet to look at less volatile markets as the timing of your next purchase is less likely to be influenced by your capital position than income. Income is always important, but only in the context of how it assists you in reaching your goals.

Regards

Great post Jacqui,

There is a lot of poor advice given, particularly in the media, with regard to whether interest only or P&I loans are preferable. The fact is that all you are doing by paying down a loan is reducing the options you have with your available cash, and potentially costing yourself money in reduced future tax benefits. In the case where the loan has an offset account, this is for zero gain in terms of reducing interest payments. There are circumstances where someone might want to pay down a loan, but it is important to note that this decision is unlikely to be for purely financial reasons. The greatest value in using an experienced and knowledgeable broker is to have all these pros and cons explained to you in the context of your own personal circumstances.

Regards

Hi Jon,

While getting cash out against an unencumbered property is more difficult than lending to fund the purchase there are plenty of lenders who will do this for you, particularly if you apply for finance prior or shortly after settlement. The main issue is maintaining the tax deductibility of the loan. When you access the equity, there will be no immediate use for the funds so what you do with them from that point will determine whether the interest is claimable or not. It’s far cleaner to preserve your cash and borrow to assist funding the purchase, then there is no doubt what the use was for and you can use your cash for whatever purpose you want.

Regards

Hi Mac,

The first thing you nee to realise when you are looking at both designers and town planners is that you are not buying a loaf of bread, these are not commodities and the quality of the work will impact whether you get a permit at all, the time it takes, the cost of building and the end sale price. If you choose by price alone, it will invariably be an expensive mistake.

With smaller developments you can often get away with the designer also obtaining the town planning permit, but this rarely is as good as having a separate town planner and designer if it is a difficult application. The difficulty comes down to how much you are pushing the envelope and the attitude of both neighbours and the council.

You can either find a draftsperson or architect first and get them to engage a planning consultant or visa versa. tend to think you are better off going t a town planner first and get them to recommend a designer as the difficulty of their job is directly related to the quality of the design they are working with.

There are plenty of sole practitioners and smaller firms that are local to your area that would be fine but, from a biased point of view, I would recommend my father, Frank Perry from Perry Town Planning http://www.town-planning.com.au 0396621999. He’s probably pretty well known around here by now a he has presented at a few of Steve’s events and for the RESULTS mentoring guys.

Good luck with your project.

Hi Martin,

A lot depends on what sort of property it is and the actual size of the loan. Being Doctors you can possibly get better terms than people in other professions, but such concessions tend to be easier to get for smaller eg sub $1 mil loan amounts. If you put aside your profession you will be able to get somewhere between 70% and 80% LVR contingent on the size of the loan, the type of property and where it is located.

Regards
Alistair