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Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 18, 2011 - 1:50 am
It is a split loan, the business cost 175k on total. So my family members loan is 70k and only pays interest on that amount. The security is the equite in her home. Her name is on the business loan (her70k) and the leases.
Sorry Terry, im probably not giving you sufficient information. This is just my understand of what is going on.
She is going to see the account this week, so hopefully she can find a solution.
Thanks again for your help
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 10:58 pm
Thanks for the reply Colin. I also might add the the partners say thay "cant afford" to buy her out. Even though they have a couple of investment properties around the place and seem to have a decement amount of money.
So would you suggest to get the partnership valued and try to sell the share to the other partners?
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 10:47 pm
They don't own the building, just the business. The lease to the storage shed and shop is another 6 years.
Is the family memebers business loan able to go over onto say or home loan? If she was able to get out of the business. In other words take the loan with her and have her name taken off the leases and business. She says she doesn't mind just leaving the 70k in there.
Or is their no way out?
Apologies for the late reply, I have changed houses and have not yet got the internet connected.
Thanks a lot for the reply Terry, very much apreciated!
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 6:10 am
It's a partnership, my family memeber owns 40% and the other two 40 and 20%
It is a fruit and veg shop in a block of about 6 shops (all connected too each other)
http://maps.google.com.au/maps?hl=en&q=old%20tudor%20launceston&gs_sm=e&gs_upl=63l469l0l750l4l3l0l0l0l0l0l0ll0&bav=on.2,or.r_gc.r_pw.&biw=1920&bih=849&wrapid=tlif131062340320311&um=1&ie=UTF-8&sa=N&tab=wl
if that helps.
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 4:48 am
The difference being the 70k is against the equity in her home. And if for any reason the the friend and husband cannot pay, she is obviously liable for rent on the place aswell as rent for the storage shed etc. Im also not sure of the exact details of the loan they have together, I know she said she has a loan of 70k, woudl they only come after the house if she coulodn't afford to pay off that 70k?
If she did just leave and leave her name on everything, would she not be liable for anythign payments that the other 2 partners couldn't make?
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 3:22 am
I know pinkboy, lesson learnt it would be safe to say.
Does anyone else have advice for my family member? Is their any accountants around at the moment?
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 14, 2011 - 12:52 am
I agree bjsaust, it can easily be left out though, considering they were best friends and had been for 20 odd years.
And thanks for your input.
I would of thought it would be possible to just sign over my family members side in the business over to the friend and leave with the loan, or this ALOT more complex or even not possible?
Does anyone have any other feedback or if there is a way out?
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 1, 2011 - 2:42 am
The library is a great idea, will have to check that out.
Thanks Derek, no im not struggling Just no point of buying nurmerous books when I will be on one for a few weeks haha. It's just about choosing which book is going to be the most beneficial, but I will definitly have a reade of the Yardney book you suggested.
Thanks though , much appreciated.
Chris89
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@chris89
Join Date: 2011
Post Count: 49
July 1, 2011 - 1:02 am
Thanks Derek, Im going to buy that book shortly. I read about the book and does sound like it will answer many ofmy questions, thanks alot!!
I have also looked into a few books that you suggested Jamie. Struggling to just buy one rather than numerous you guys have suggested haha!
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 12:40 pm
I assumed that thanks heaps mate!! You have help me very much.
And yes, we should have skyped haha!
Thanks for your time and reacting well to the million and one questions I put on the table
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 12:25 pm
Sorry Jamie, would you also mind answering the above question from your comment, it would give me a lot better grasp of the idea.
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 12:19 pm
Sorry, I have one other question to finish.
Is the idea to keep the IO loan on the IP until I sell in say 20 years? Or would you change to pay it off? Or is the aim to only pay off when u sell down the track
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 12:14 pm
Very smart man Jamie, that makes sense. Thankyou so much
I will keep reading my books and use any resource I can and hopefully have a great understanding on everything to make the jump into the market.
Thanks again
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 12:00 pm
I would definitly be converting it to an IP, I plan to spend no more then 300k on my first property. I have a much more expensive idea for the home I would like to live in down the track.
So it would be better for me, knowing I will convert to an IP to get an IO loan and pay the minimum repayments and pay into an offset account? Which I could then move around to any property I buy yes?
Would you be able to explain to me what situations would benefit getting an IO loan a and a principal & Interest?
With an IO loan, do I pay the same amount of interest as I would on P&I or is it the same?

Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 11:37 am
If I had an IO, am I paying more interest then I would be on P & I?
Would it be more beneficial to me to just have the 5% deposit rather than save for 10%? is the mortgage insurance much different between the two? I guess what im asking is, is it worth saving for 10% deposit to save on mortgage insurance?
This is why I said about negative gearing, I have always had an agressive mind set. I want things to happen now rather than later. Would u be paying as much of your PPOR off as possible, whilst the equity goes up then buy an IP? This would be my logic, please correct me if im wrong.
I agree with you on it not being a good strategy, it does not make sense.
My apologies for being a newb, but im very keen on trying to get my head around this so I can jump into the market.
btw, im based in Melbourne.
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 11:20 am
that is another good idea!
It seems like a double edged sword, both have their advantages and disadvantages.
The only way I would see it working is to basically pay off my PPOR and then save the amount to become neutrally / positively geared when I go to buy my IP. Which would many atleast 10 years before I am able to, atleast by myself.
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 10:54 am
Heath Workman wrote:
Chris89 wrote:
From what I have read, negative gearing is the way to go, however from the posts I have read here everyone says positive gearing is better? Is there a better and worse? Would I still be able to buy as many properties with positive gearing? As it is obviously going to take a longer period of time to buy a property am I correct?
I haven't read I Buy Houses so I obviously can't comment on the strategy it teaches but I would have said exactly the opposite and I believe most of the people on this forum would agree. You will be able to buy far MORE properties if you stay positively geared. A positively geared property means that the income generated from property (rent) is greater than the total holding costs (eg interest, coucil rates, insurance, maintenance) per year.There for you end up with more cash in your pocket than you would have had before the purchase. Negitive gearing is when the holding costs are more than the return so you end up loosing money week to week, some people are happy with this trade off due to growth in the value of the property and of course it has the added bonus of the tax benefits. So to wrap that up, if you negitively gear you will evenually max out and not be able to buy and more properties because the ones you already own and draining your pocket to much to service more debt, where as if you positively gear your servicability is basically limitless. There are more experience investors than me on this forum who will come and give their two cents soon too.
Thanks for the insight heath .
The reason I said that was because would it not mean I would need a saving of say 120-150k on a 300k property to be neautrally / positively geared? Therefore taking many years to achieve this, if im already paying off a PPOR?
Please let me know if this understanding I have is completely wrong
Chris89
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@chris89
Join Date: 2011
Post Count: 49
June 29, 2011 - 10:50 am
Thankyou for your time Jamie, much appreciated . I have a few more questions if thats ok?
For my first property (PPOR) would a PI or IO loan be better? Should I look to shave as much as I can off the principal before buying an investment property? Or would it be better to pay the repayments and save the rest to purchase an IP to be neautrally/positively geared?
Would it be a good aim / goal to buy an IP 2 to 3 years after I purchase my first home?
What amount would I need to deposit on a 300k IP if I were to be neautrally geared and the rent being say 300pw? Would it be simply to the point of where my repayaments equalled the rent pw?
My pay is likely to increase to the high tax bracket when I am ready to buy, would this put me in a position where negative gearing would be the best strategy? Is it the best strategy based solely on the tax benefits, or is there more to it?
Thanks again