I have permission to share the name of the insolvency company we are using.

They are De Jonge Read, and have offices in QLD and Victoria. We are in SA and have never met them – everything is done over the phone / email.

I have no affiliations with this company and get no rewards for advertising them! They charge a fee for their service (which I will be claiming at tax time!)and even that can be paid in installments (they won’t start work though until it is half paid). People have commented on the fee they charge, asking if we’re not throwing good money after bad with no guarantees. Like I said, we did due diligence on this firm, and after doing this, recognized that we would be in the same position in 20 years (not bankrupt, but not having moved forward). This is not something we could be solving on our own.

We are currently waiting for LMI to be paid out. This is interesting because our bank says we never paid it (keep records people!! We have proof!!). They now agree we did (it was paid to a different company years ago, and now the bank self-insures – we got lost in the mix). So I have been checking daily since November to see if it had been paid out, when actually it was never going to be because the bank didn’t realize they could claim it. They would have eventually just come after us.

The LMI process takes…. forever, it seems. Once it’s paid out, De Jonge Read will start negotiating the remaining debt for us. This is what we have paid them for.

I will keep you posted…..

Lets us know what you decide, Anton. I seem to have hijacked your post!

Regards

Cathy

Thanks for your comments Benny.

We too tried to “ride it out” and wait until either capital growth occurred, or rents rose significantly. We were putting our lives on hold, and having to be creative (we took in Homestay students) to make ends meet.

I would just caution against your second point – about losses being retained.

If you short sell a property that has a mortgage on it – the bank will want the short amount – it can’t just be carried forward to be offset against any future successful property.

If you sell and the loss is crystallised – as in our case – here’s what generally happens:

1. If you paid LMI to purchase the property in the first place, the bank will approach the LMI company to pay out the loss. Then the bank is happy, as the mortgage is paid out. Then… the LMI company will seek you out for that amount. The LMI you paid was on the bank’s behalf, not your own.

2. If you didn’t pay LMI, the bank will just come after you for the shortfall. If you own any other properties that are cross-collateralised with that property, they can force their sale – this can include your PPR . Even if you have other properties that are not cross-collateralised (i.e. they are with other lending institutions), you may be forced to sell them (and possibly in a fire sale to get the funds quickly) and sell for less than you are hoping for. If you can’t come up with the short-fall at the end of the day, bankruptcy looms.

Before you panic about bankruptcy – it should be your LAST RESORT.

Here’s what we did.

We engaged an insolvency firm, after doing due diligence around this. If it’s okay, I will post their name here, otherwise you can PM me.

We kept paying the mortgage, “business as usual” from our end. We are therefore driving this and have control.

We sold the property, but not as a fire sale (we sold it, not the bank – it was not “mortgagee in possession) (as I said, $365,000 capital loss). The bank had to give approval for the sale because it was being short-sold. Letters were exchanged to have us acknowledge that we’d be responsible for the shortfall.

We are now in the process of waiting for the LMI to be paid out. In the meantime, because we now don’t have the rental income from this property, we can go onto “Hardship” which means we don’t have to pay the mortgage each month, or we can negotiate what we will pay each month.

Once the LMI is paid out, LMI will come after us. This is where the insolvency firm does their job – they get details of our financial picture (any other properties we own, debt on them, income, everything) and negotiate with the LMI company what we will pay back of the shortfall. From other people who have engaged this firm, that negotiated debt has typically been “cents in the dollar” – we  know people who’ve paid 9c in the dollar, others who’ve paid 16c in the dollar. I understand it’s a little higher these days. As an example, if your shortfall was $100,000, and the negotiation was to pay back 15c in the dollar, you would need to pay back $15k. Then, debt resolved. It does not go on your credit record. And you have not gone bankrupt. Yes – you need to come up with that shortfall, but usually there are a few ways to do that too.

In one case, I know of someone who had a 1 million dollar shortfall after short-selling 2 mining town properties, he had to pay back a bit over $100,000, and he got to keep his 8 other investment properties (the 2 rogue properties were not cross-collateralised with any of the others).

To us, this sounded too good to be true. There is also the risk that none of this will work, and you will go bankrupt (this insolvency company has never had that happen, and I don’t believe they’ve lost a PPR yet), but your contract with them will acknowledge that this is a possibility – they list every outcome and make no guarantees (because, they can’t!).  It took us 9 months to decide to go ahead, and now we’re wishing we had done it earlier. I cannot tell you how it feels to not have this property anymore.

If you want more details or have any questions, I am more than happy to share anything – some things I’d rather not go on the forum though as our process is not over.

Good luck.

• This reply was modified 4 years, 8 months ago by  CMS.

Hi Josh,

Do you have any current thoughts on Moranbah and where you think it might be heading? Interestingly there have been NO posts on Moranbah since before November last year. I know this tells a story in itself  but there are still new mines being built in the area.  Cheers!

JayT,

Feel free to PM me, I have disengaged PRE a few months ago and am happy to share my reasons why, but I'm not happy to put negative press on here without them have an ability to reply.

Cheers

Cathy

Back to Moranbah – postal voting is in progress for the BMA EA – commenced April 27 and ends May 18. Hopefully this will see an end to the strikes and some renting of houses.

I've also been receiving some reports from "Infrastructure Spotting specialist Flynn De Freitas" – 2 very positive reports about Moranbah. Has anyone heard of him? Is there some underlying reason why he is writing these reports? (so far he isnt spruiking any property developments there….) 

Of course part of my DD included vacancy rates – it would be remiss of any property investor not to. In the weeks before Christmas there were few to no vacancies which is when rents (some) shot to just under $3000. January and Feb are typically the slowest times of the year – it just doesn't usually "stop" like it did this year. For the other 10 months of the year, typically houses that are sensibly priced usually have a vacancy filled within a week. I should take back my "sensibly priced" comment – before Christmas companies were paying any asking price without a second thought. I knew about the post Christmas slow-down so we established a buffer accordingly – those who don't have one and are vacant would be hurting right now. For us, this is about cash flow and not capital gain, and even with reduced rent (if it comes to that long term) we are still in front and this will more than cover for the current vacancy. Moranbah has historically had a few "downers" over the years but it has picked itself up again fairly quickly and surged forward. Really if you look at the current and planned projects there is no reason not to expect similar now.

I agree with some comments in the article – yes it seems RE agents are keeping properties on the internet for an excessive time. I am curious about the comment about BMA not signing leases for 3 months – I spoke to BMA who said "never", but then a local agent said that they will at some point, but in the interim they are saying this to stop people calling them. Hard to know what to believe. I still think that it doesn't matter what rents are dropped to, if no one will rent – when theh time comes and houses are needed again, I think that reasonable rents  (well, for Moranbah) will be agreed to – back to supply and demand. I suppose part of me has to believe this because I want our place rented out! On the other hand, we are fortunate (sensible) enough to have a buffer that will see us through this (I have heard of devastating stories already from other investors who don't) – but we don't particularly want to see a buffer eaten up by this, especially given what the repayments are.
Not sure how I can "bite the bullet and make a decision" – we have dropped the rent and happy to drop much further, also keen to sell even at a loss just to be done with it, which isn't likely at present with no one buying- there isn't much more we can do unless anyone has a suggestion. I know there are projects ahead and the weather is clearing – I don't think Moranbah is going under any time soon – I also know BMA is losing millions while striking occurs so there will be an end to that too – also aware the strikes are not about rents (a small part, but not a war-stopper as such).

Keen to hear if anyone rents or sells in the short term though.

It's been 5 weeks now since settlement with no tenant. Gossip suggests that this won't end any time soon, with some saying up to 6 months. Who can predict this though?
Does anyone local have any thoughts? At this stage we will drop our rent to the minimum and offer a 6 month lease, and hope someone takes it. My thoughts are though, that even if we offer it for $1, if there are no renters, then it makes no difference. With all these new projects happening though, where are all the people? They can't all be in Mackay.

We settled on a property in Moranbah nearly 4 weeks ago and it is still untenanted.
The week before settlement, there were few vacancies and now they have gone through the roof – 37 have been added to realestate.com since yesterday (total at present 138).
We are now wondering if we need to sell already and if we would recover costs (which seems unlikely – people are dropping asking prices for sale also).
Apparently BMA held an EA meeting in Moranbah on Saturday where they announced they won't rent any more properties – instead, employees are expected to pay the bond and have their personal names on the lease, and pay the rent (but will be fully reimbursed by BMA) – so now apparently is a period of "adjustment" according to one real estate agent.
 This doesn't help us and I am panicking.
We purchased so we could fund another property for lifestyle (we won't be purchasing now).
I did my due diligence and foresee that Moranbah will be active for at least 20 years, probably more – where will they house famililes to keep them together??