Hi Evan,

Do check out this link – https://www.propertyinvesting.com/topic/5086923-using-business-income-as-guarantor-to-a-loan/ – where another member asked a similar question.  Also, see where Steve also added some words to help.

If you have the older books, you will be missing the “Chapter 9” that I reference.  It has to be the updated book to get that chapter re Trusts.

Also, I used Search to look for other posts where Trusts were discussed.  This link is quite complex, and it includes some very good input especially from Terryw.  Here’s the link first :-  https://www.propertyinvesting.com/topic/5068817-home-loan-borrowing-using-trust/#post-5076652

Do look for this part of one of Terry’s replies :-

Some lenders will disregard personal guarantees as long as the borrower is paying their own way and the guarantor is not needed to fund it.

You will find the quote above at this link – https://www.propertyinvesting.com/topic/5068817-home-loan-borrowing-using-trust/page/2/#post-5076654

I found this whole topic was a great learning tool, with both Steve McKnight and Terryw adding very useful information.  I hope it helps you too,

Benny

• This reply was modified 1 year, 8 months ago by  Benny. Reason: Adding further links

Hi John,

I’ve sent you a Private Message,

Benny

Hi jcso,

Use Private Message for info like that (unless Sasha is happy for his phone number to be made public),

Benny

Hi Berm,

Thanks for that – I just tried myself and it appears to be a mis-directed link.  Having someone take a look.  I’ll reply again in here once fixed,

Benny

Hi John,

Not such good news from Chris there….  Now it seems to me you are left with “running the numbers”.

First off, do you have tenants in place?  If so, what is happening to them while repairs are carried out?  Are they OK to stay there while such massive repairs are undertaken?  If not, then what are their options?   Look too at the likely Interest cost of using a Credit Card – even at some exorbitant rate (e.g. 20%), it could be utilised while a Personal Loan is sourced, so any Interest costs on the Credit Card (if it takes a month to source other funds) might be as little as 20% x $25k / 12 = $420 or so.   That is likely less than a week’s rent, so yeah, go stick it on credit if it gets things done quickly.

A Personal loan could be as low as 8% Interest Rate too, so just 40% of the Credit Card rate.   That may also allow you time to “chase up other options via a lawyer” to see if someone else can cover the cost of this failure (as per earlier replies).  Surely keeping good tenants would be paramount, wouldn’t it?   Repair costs would also be deductible, so some of the pain may be taken away in that mode.  All is not lost…..

You’ve been served up lemons – can you work out how to make lemonade?  ;)

Benny

Hi Daeheon,

Congratulations for taking that first step on the path to property investing.  Did you have a goal re “How much to earn from our first property to enable us to grow?” or was it more like “Just get a foot onto the property ladder?”  Whichever it was, you have made that first step, so that is worth celebrating.

Do you care to share some numbers re “where you are” or “where you are planning to be”?   It’s up to you, and it is (of course) going to be public, so only share what you feel comfortable with.  To me, the numbers are always the important part.  Steve gets deep into these with his recent project “STEPS” that takes you through a VERY complete due diligence procedure.  It starts out with helping you to quantify just what you are wanting to achieve, then guides you toward the kind of property that might suit you best, and finally takes you through the very complex part (due diligence) – to the point where you will be as certain as you can be of each purchase you make.

An agent’s job is to present a property to you and invite you to purchase – however, depending on various State laws, they are not obliged to lay out all of the possible “downsides”.  Of course, if asked, they should reply truthfully (but then, if possible, that truth should be tested).  It is up to you to discover, and attempt to verify, these truths – that is “due diligence”.  This is where STEPS shines.

Re “what next”, or “How can investors keep purchasing investing properties”, that comes down to (largely) cashflow.  If your situation has you struggling to pay the mortgages, or limiting your savings regime, then it is up to you to find ways to increase that cashflow.  This can be done in a number of ways (always with the blessing of your advisers – accountant, lawyer, etc), and here are a few thoughts:-

1.  Saving is a slow way to grow wealth, but investing savings to create wealth makes sense – like, if you can spend savings to grow rental income or equity in a property, then run the numbers on these options.  It may be that renovating may cost in the first instance, but it might give your equity and rental income a huge kick along.

2.  Adding any “missing” things that allow a rental increase are worth exploring – e.g. ask your tenants if there are things they would like (and would be prepared to pay an uplift to have them) and see if you can provide these for little cost.  e.g. If the house isn’t insulated, or airconditioned, what are the costs of each, and would the $ uplift in rent MORE than cover the loan costs to implement these (or use savings and gain $x a week).  What about a carport if there isn’t one?   Landscaping?  A garden shed if there isn’t one? etc.

3.  Consider whether changing to Interest Only loans would be beneficial in your instance.  Again, an accountant’s input would be crucial here.

4.  Itemise your skills and risk profile to determine just what path might be more beneficial for you.  Would learning to develop properties hold some interest?  Certainly, though a very active role, the dollar outcomes can be outstanding.  Is that for you?

5.  Renovations?  Buy/reno/sell properties (quick turnover for large cash injections to assist with the next buy/hold asset).

Daeheon, do consider Steve’s words too – they go something like this – “The first stage of investing is accumulation – at this time the focus is on growth.  Residential investing works well in this phase.  Once you have amassed the required amount of Equity, then switch your investing focus to Income rather than Growth.  Steve recommends Commercial investing at this stage, where a tenant pays most/all expenses and the income provides your needs for living.

One final thing – part of purchasing each IP is knowing HOW and WHEN you will need to move it on.  i.e. Plan your exit BEFORE you buy it.

I hope that gives you food for thought.  Do come back with any questions,

Benny

Hi Charlie,

Check out the “Training Centre” on the Home Page.  There are hundreds of articles about all aspects of property investing.  They are broken down into categories (e.g. Buying, Selling, Renovating, etc) so you might be interested in those to do with Buying.

Other than that, in a nutshell there are plenty of variables to consider.  Common ones are :-

Is mining the ONLY employer in town?  If so, what happens when it suffers a downturn?  Where do the workers go?  Do they leave town?

What is the ratio of rentals to owner-occupied?  If heavy on rentals (>30%), then these are all your competition.  (Especially in bad times !)

Is the mine thinking of providing their own accommodation for FIFO workers?  It has happened before!   What happens to your IP then?

Can you get finance?  Some lenders won’t look at some regional towns.

How difficult is it to manage a remote property?  To get tradies to fix things?  Is the town big enough to have a few RE agents?  If only one or two, you are CAPTIVE to them – what if they are both no good?

Whenever you buy, you should always have an Exit plan worked out.  e.g. If times went bad for the mine and its workers, how would you exit this property?  Who would you sell to if times were tough?  Can you hold on until better times come around again?

Just a few thoughts out of left field Charlie.   Keep on searching – the answers will come,

Benny