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Ok mine is more a current harrowing story of trying to obtain finance.
Found studio unit which almost fits 11 sec rule. Solicitor says contract is fine. Sign subject to inspections and finance. Inspections come back fine. Use current broker to try and secure finance for this small deal. (This is after said broker stuns me by asking why I would want to buy any more property.) Find out two weeks later finance has been knocked back as studio is less than 50m and bank does not lend on property that small. Try via different bank using same broker. Broker advises a few days later this lender now wants information which broker knows I cannot provide.Whilst trying to obtain loan via second bank through broker I take matters into my own hands and thanks to this forum find lender who does small units. Apply over the phone. Within an hour receive notice no valuation is necessary and I have conditional approval. They only need to verify some details (pay etc) the next day, but all should be fine. Thrilled as I only have extension to 5pm the next day from the vendor to go unconditional.
Next day, this lender rings me to say things have now changed drastically and the whole thing has gone to senior assessment officer and I would find out more tomorrow. Find out the reason being some payroll @q#$ at my employer talked to the bank and told them I work a minimum of 4 hours a week earning a pittance of less than $130 a week(as opposed to working 45 hours per week and earning a decent salary). Furious. Unable to obtain further extension from vendor. Property slips away at 5pm.
Next day: My solicitor rings with the news the vendor decided to give another 5 days extension. More running around fixing up my employer’s lies. Then bank finally realises property is furnished and thus would not be worth what I am paying for it (I know other similar studios in same area have been selling for more) and they need to do a valuation now.
Story is still continuing as I write. What my employer screwed up appears to now have been fixed. Valuation has been ordered and am eagerly awaiting result. Have till Friday to go unconditional and probably have to settle a few days later.Hope this provides some useful information for newbies. Rest assured I have learned a lot from this so far already (this is not my first IP, but it is the smallest so far).
If you don’t stretch your limits, you’ll set them.
WOW! With a potential 6 incomes you should be able to do very well. I had trouble with the fact of how an ordinary person could do what Steve has done until I read he actually had 4 incomes (Dave, Steve and their wives) of which two (what I would imagine to be rather large incomes, being accountants) were purely dedicated to financing property. On top of that there was income from two internet based businesses (one of which is this one which was apparently started early on in 1999). Most couples would only have access to two incomes, so I would assume you could only manage a lot less than Steve, depending on how much time you can allocate to sourcing the properties and organising finance etc. Plus it would take you a fair bit longer between deals to save up the next deposit.
On top of that there is the question as to what you would be comfortable with. Steve has obviously done a lot of “wraps”, but if you are not comfortable with that it could take you longer again.Just make sure you actually have the funds to cover all of the deposit in a bank account as you may otherwise find it hard to get a deposit bond. I was told by a not very friendly person that my idea of security wasn’t good enough and they wanted to see evidence of cash in the bank.
Even though negative geared property can save you tax money and thus you get $1700 (as per above example I think) back into your pocket, you are actually worse off. Every dollar you depreciate lowers the property value, so when you come to sell you pay higher capital gains tax.
Example.
Property purchase cost $100,000
Depreciating $5000 per annum for 5 years.You sell said propery for $150,000 after 5 years. Normally you would pay Capital Gains tax on $50,000 at a rate of 50% (as you’ve held property for more than 12 months). Which means you would pay CG tax on $25,000. BUT because you depreciated $25,000 over the course of the 5 years ($5,000 per annum), you actually pay CG tax on $75,000 at a rate of 50%.
Bottom line, instead of paying $12,500 CG tax upon selling you are actually facing a tax bill of $18,750. That’s $6,250 more.At least that is my understanding of it so far, after all I’ve learned.
Or look a bit further afield. I just found something selling for less than $100k (advertised price), apparently rented out for $220 a week. And it’s not in a country town, but a city.
Haven’t spoken to agent to confirm if the ad is true yet (it’s after hours), but could be promising.We’re currently considering what to do long term with out IPs which are thousands of kms away. Rentals are currently all with different agents and the one agent who has offered to manage all of them at a discounted rate (slightly better than other agents rates) appears to be adding more headaches rather than alleviating them. This agent currently manages one of the properties, which is due to settle tomorrow and I only found out this morning rent monies for the month have all gone to the old owner. So after I just informed my solicitor of having to redo all settlement figures to take this into account, I receive a call from someone else in the rental dept of said agent telling me the rental money for this month has been withheld. Guess it’s up to me to decide what I want to believe.
Makes me think of the possibility of managing the properties myself and just having an agent or someone near the IPs to fall back on should there be a need for a tradesperson to repair something. Has anybody done this? Have you experienced dealing with tenants is too difficult, ie they expect too much from you? Comments and suggestions are welcome.Sad but true, one of the people I work with told me he has to negatively gear because he pays too much tax.
Whilst it’s pityful that most people have such closed minds to think making a loss is a good thing, it’s good for people like us as that leaves the positively geared properties for us to buy. [:0)]So there are two fees in QLD. Interesting. I have a few properties in the same QLD area. One of the agents up there has quoted me a “discounted” rate of 7.5%, provided I let them manage all of my properties in the area. Judging by what others are paying for management in the sunshine state I’m now thinking that is not such a good rate after all. Any comments?
Three weeks to find out you were declined is way too long. I also tried Aussies recently and they would only offer 85% LVR which wasn’t what I was after at the time. Managed to find someone who was more than happy to lend 95% LVR (which is what I was after at the time).
I think a lot depends on whether or not the rental income is taken into consideration when assessing the application.
Don’t give up. But also don’t just sit back and wait for a broker or loans manager to do all the hard work for you. After all it is in your best interest to keep chasing things.Only thing I would be wary of is that you can potentially loose your entire investment.
Say the buyer defaults on the primary mortgage, the bank/lender holding this mortgage has the right to reposess the property and sell it to recoup it’s investment. Anything left over goes to the person holding the second mortgage. If nothing is left over you loose your money. At least that is how I understand it works.Likewise, should the buyer default on the secondary mortgage (with the higher interest rate), there is not much you can do legally to recoup your money (ie I don’t think you can reposess). Someone correct me if my understanding is wrong.
Guess higher return means higher risk.
Thanks everyone for your suggestions. Unit is 26 square metres. Have already lost one unit thanks to nobody (including the broker) telling me about the size issue until it was too late. Had both of them in the one application, which went sour. [
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Have an extension on this one until Thursday and it looks like CBA will pull through. []
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