Forum Replies Created
well MR HG wells you are a nice piece of work. sorry buddy but you are one major &%^#. You mention that you found your property based on insights given in this forum whereby otherpeople have shared their knownledge and insights and then you highlight the fact that you are not going to share information in return.
Well what goes around comes around.
sorry but i think its too simplistic. I came up with a very high wealth score, but i definately dont feel wealthy. I think a better way would have been to divide the net investment asset by 20 and then compared to your income.
just make sure its the right one, there is another book called something like 'millionaire property investors secrets exposed'. While it has one chapter on michael yardley, there are a number of chapters on some other so called property investors, who if you do a google search on them, might be shonkey in their business practices.
Personally i dont think Michael should have contributed to this other book, because if some of the other people end up being suspect of shadey activities, Michael could receive negative publicity (guilt by association).
Sorry but this sound absolutely crazy. Its just like the adjustable rates mortgage situation in the USA, where people signed up for teaser loans of a couple of per cent only to find out that two years later the interest rate skyrocketed.
In this environment if you cannot afford a decent deposit STAY away. The market is at historical highs, housing affordability is at record lows.
I'm sure i will get flamed for this, but in the current environment you had better be very careful. Sure property moves up on average around 10% a year, but this doesnt mean every year, its only a long term average.
How would you feel paying around 10% interest and seeing droping or no capital growth for 10 years. Everything moves in cycles.Heres another article from the australian:
http://www.theaustralian.news.com.au/story/0,25197,22240105-643,00.htmlLOW-DOC lender Bluestone has cited the US mortgage crisis as the reason for its move to hike lending rates by up to 0.8 per cent, predicting the nation's big four banks will have to do the same.
Bluestone is the first local home lender to lay direct blame on the sub-prime meltdown for a sharp increase in its funding costs, and then pass it on to borrowers.
The $3 billion lender told customers yesterday that interest rates on its products would increase in a range of 17-55 basis points, on top of last week's 25 basis-point rise in official rates announced by the Reserve Bank of Australia which would also be passed on. A half per cent rise is 50 basis points.
Bluestone's rates now range from 7.8 per cent at the lower end to 12 per cent at the top end for borrowers who are self-employed, have troubled credit histories or have high loan-to-valuation ratios.
Chief executive Alistair Jeffery said the nation's big lenders, including the Big Four, would also have to lift their rates, possibly outside the normal RBA cycle, due to escalating funding costs.
"I'd expect rates for existing customers to rise, because banks' cost of funding has risen and they will not want to risk their profit margins," he said.
However, before that, they were likely to act on their carded rates for new business, writing more loans at the standard variable rate rather than offering 70-80 basis-point discounts as part of so-called professional packages.
Mr Jeffery said he was "highly confident" the banks would review that practice.
Bluestone, with one quarter of its borrowers having prior credit problems, is in the same sub-prime segment in the US where lending excesses peaked in 2006.
However, the company's average loan-to-valuation ratio of 75 per cent is far less than the 90 per cent-plus average in the US.
Its shareholders, apart from Mr Jeffery, also include ABN AMRO and Barclays Bank, and it has $1 billion of committed term funding.
Last April, Bluestone cleared its Australian lines with an $800 million securitisation that leaves it with spare funding capacity as the US fallout hits these shores.
Mr Jeffery said Bluestone had lifted its rates after guidance from its bankers on its likely cost of future funding.
"It presumes current conditions continue and the markets are open for business, but the spreads for our bonds are wider in a distorted credit environment where the supply and demand balance is upset," he said.
"We have a lot of warehouse capacity, and we don't rely on the short-term commercial paper market, which is where the impact of the liquidity stresses are being felt," Mr Jeffery said, adding there was no question of "profiteering". The rate rises, he said, were an accurate reflection of the lender's higher cost of funding.
In an update to customers, Bluestone said the arrears and loss levels of sub-prime loans, particularly the 2005 and 2006 vintages in the US, had been increasing sharply, and this had "spooked" the markets.
There were current estimates of $US100-$US175 billion of total losses, unnerving credit markets because it wasn't yet clear where those losses would emerge.
"It is highly likely that more bad news will flow from the US sub-prime sector in the weeks and months to come, as the losses are crystallised," Bluestone said.
Unconfirmed reports also began to emerge yesterday that other small, local lenders had lifted their home-lending rates by more than the 25 basis-point RBA hike.
This would also suggest they were feeling the heat from higher funding costs.
Here is an part of an article from a link in propertyinvesting.com;s in the news:
http://www.news.com.au/heraldsun/story/0,21985,22247779-661,00.html?from=public_rss
The crisis in the markets for commercial paper and mortgage-backed securities is hurting non-bank lenders, many of whom have been passing on rate rises last week that are above the Reserve Bank's official 0.25 per cent rise.
RAMS last week increased the rate on its Interest Saver Home Loan by 0.28 per cent and leading non-conforming lender Bluestone has said it will hike rates on some mortgages by up to 0.8 per cent.
Last night market research firm Cannex reported that another leading non-bank lender, Aussie Home Loans, was hiking rates on investment home loans and premium mortgages by 0.32 per cent.
sorry typo, last paragraph should read ….. many inexperience investors who have NOT hedged against financing risk, will be exposed and burnt
The banks will take reposession if you cannot offord to refinance under the conditions of the market at the time of refinancing. Lets look at a few hypothetical situations if there is a credit crunch
Situation 1) Buyers of securitised asset products demand a 20% equity posession in a property otherwise they will not buy the paper
Situation 2) Buyers demand securisted asset products to have the loan applicants with debt servising ability of less than 25% of the repayment
Situation 3) If the two above siutations cannot be met then the interest rate must be 5% above government 10 year bonds.In any of these situations, if the borrower couldnt afford to do it, then the lender may take possession of the property.
If you read the financial press about RAMS this could already be happening. RAMS cannot find buyers for 5 billion dollars worth of securities debt. Without knowing the full details, RAMS say for example issued loans at an interest rate of risk free bond rate + 25 basis points. However the market has become more risk averse, so it is not interested. The 25 basis point premium is not enough to compensate for the risk. Now RAMS is in trouble, it either has to securitise those loans at a higher interest rate and suffer a huge investment loss or try to keep them somehow on their own balance sheet. What ever the situation, for future loans RAMS is going to have to increase the interest rate of new loans in order to offload them to investors.
Another situation is in the US now. Before you could get a lo doc loan for say 50 basis points above the 30 year government bond. I read one recent article that says that now you need to pay 400+ basis points above the bond yield.
For the last 15 years we have been experiencing an easement in credit terms. If the cyle starts to swing back to a credit tightening not just in terms of interest rates, but lending conditions, many inexperienced investors who have hedged against financing risk, will be exposed and burnt.
dont want to sound like a scare monger, but i think you need to be VERY careful at the moment. Especially if applying for lo doc loans. With the current sub prime mortgage crisis you could find yourself in a LOT of TROUBLE in the months to come. One hypothetical situation (and yes at the moment its only hypothetical) is that if the current credit crunch continues you may suffer from two problems:
1) If you are on a variable loan, you might find your interest rate skyrockets, the reason being that even if official interest rates stay low, if investors of securities mortgages become risk averse, they will only buy the securities paper if it has a VERY GOOD YIELD to compensate them for the risk. This means that the numberous lenders out there will be forced to charge higher interest rates in order to securitise their loan. Most of the non-bank lenders securitise loans, they dont keep them on their own balance sheets. In simple terms they issue you with the loan then on sell that loan. If this occurs then even loans with the big banks will increase as they will be able to increase their margins.
2) If you try to offload your property you may find you are trying to sell into a depressed market (when other people are trying desperately to sell as well), thus you may incur a massive capital loss.Just a note to be careful and FULLY UNDERSTAND what you are doing and have some form of insurance plan. For example if net rents are 8% and i can borrow on a fixed rate for 7.5% fixed for 10 years. Then the cash flow will sustain the loan and the rate is fixed so i am not exposed to interest rate risk.
I recently bought 3 investment properties early this year. However i bought them because of an arbitrage situation where i basically make a nearly guaranteed minimum return of 20% p.a return on investment. In a nut shell, CBD melbourne residential property was in a pretty bad slump after 2003, with everyone including banks shunning the area because of over supply. However this also presents opportunities. Earlier this year i noticed rents increasing dramatically as supply had dried up and vacancies were under 1%. All properties purchased had a car park (which can be rare now in the CBD areas and were bigger than standard size). Each is renting for 7.5 to 8% gross return. To hedge my risk i put in 25% of my own money, left 25% on a variable, but FIXED 50% for 10 years on a rate of 7.18%. This left my exposure at only 25% (the variable portion).
Property expenses will take out around 2% of the value of the property leaving a net rental return of say 5.7% of the property value. On 75% leveraging the debt % is around 5.4% (75% of 7.2% average interest rate) with only one third of the debt being exposed to possible future interest rate rises. Thus the property financing will just about break even BEFORE any tax adjustments.I am not saying this to boast, but rather to show some of my fellow investors and investors to be, that if you want to go into property investing you need to treat it like a business. Dont just buy and finance based on current market conditions. Make sure you have an action plan to hedge your risks against unforeseen circumstances.
I dont want to sound like a scare monger, but i think you need to be VERY careful at the moment. Especially if applying for lo doc loans. With the current sub prime mortgage crisis you could find yourself in a LOT of TROUBLE in the months to come. One hypothetical situation (and yes at the moment its only hypothetical) is that if the current credit crunch continues you may suffer from two problems:
1) If you are on a variable loan, you might find your interest rate skyrockets, the reason being that even if official interest rates stay low, if investors of securities mortgages become risk averse, they will only buy the securities paper if it has a VERY GOOD YIELD to compensate them for the risk. This means that the numberous lenders out there will be forced to charge higher interest rates in order to securitise their loan. Most of the non-bank lenders securitise loans, they dont keep them on their own balance sheets. In simple terms they issue you with the loan then on sell that loan. If this occurs then even loans with the big banks will increase as they will be able to increase their margins.
2) If you try to offload your property you may find you are trying to sell into a depressed market (when other people are trying desperately to sell as well), thus you may incur a massive capital loss.Just a note to be careful and FULLY UNDERSTAND what you are doing and have some form of insurance plan. For example if net rents are 8% and i can borrow on a fixed rate for 7.5% fixed for 10 years. Then the cash flow will sustain the loan and the rate is fixed so i am not exposed to interest rate risk.
Sorry should have given more information. I live in Victoria. I own a few apartments as investment properties under a trust structure, all purchased earlier this year before the market skyrocketed. However i am concerned what my land tax bill will be. Thats why i am trying to get an idea upfront before i get hit for it in 2008.
Any ideas out there????
Is it on the annual rates notice????
can someone tell me, is the site value the amount used when calculating land tax? I just bought a couple of IP, but have just been told about land tax on the land value of the IP. How do i find out what is the 'land value'?
Help appreciated.
