I suspect that the bank will probably require you to borrow money on the unit to pay off the loan on the house. Given that you’ll have quite a comfortable level of gearing on the new unit loan, you may want to make sure that your house (which will now be debt-free) is not cross-collateralised to secure your unit loan. You will have to pay some loan application and discharge costs, but I’d see that as the cost of restructuring your finances.

Even if the bank did agree to transfer your mortgage, there will probably still be fees you have to pay. You also need to make sure that the house is released from the existing mortgage.

A mortgage broker can advise on whether my suggestion works. I wouldn’t ask the bank – they would simply tell you to go for the option that would give them the most security.

Cheers
M

Hi Marilena,

Have you tried a mortgage broker?

Maybe Stuart (www.prosolution.com.au) or Terry ([email protected]) can help you. If they are not in your locality, maybe they’ve got some tips on how you can find a good, ethical broker to help you.

Cheers
M

p.s. I don’t get anything for recommending these guys, other than a buzz from helping my fellow forumites.

G’day coslett,

For commercial properties, there is generally no obligation on the agent or seller to give a GST inclusive price, unless they’re targetting “retail” customers. I believe that the ACCC has developed some guidelines on what is “retail” and what isn’t.

If you’re simply looking at a stock-standard commercial property, advertised in the commercial property sales section of the paper, then I doubt that the agent has to give you a GST inclusive price. The rationale for this is that commercial buyers are likely to get a GST input tax credit for GST on the commercial property, which they can offset again their future GST liability.

Stuart is right – if you buy the commercial property as a “going concern”, then it could be a GST-free supply.

However, it is important that you comply with ALL of the requirements in the GST Act (see section 38-352):

1. YOU the buyer must be registered for GST.
2. the contract must state that the supply is of a going concern
3. the seller supplies you with all things necessary for the continued operation of the business.

Even the ATO has had trouble getting to grips with what circumstances satisfy the statutory requirements (for the supply of a going concern). You can get more information by visiting the ATO website and getting hold of the latest Tax Ruling on sales of going concerns.

With respect to Stuart, I don’t think that a conveyancer is qualified to properly advise you on whether or not you can satisfy the going concern requirements. You’ll need to get professional tax advice from a tax accountant or lawyer (including what you need to get from the seller, and the GST clause that needs to go into the contract). It may cost you a thousand bucks or so, but compare that to the pain (at least in cashflow terms) you’re going to suffer when you find out that you have to fork out an extra whopping 10% of the purchase price to pay for GST.

Cheers
M

I think that the voice of moderation should rule. What’s the point in attacking others? If you really wanted to, you could always find something about someone you didn’t like to focus your attacks upon, and come up with a whole bunch of reasons as to why your attack is justified. But is this constructive?

What’s constructive is if Mr Reed volunteers the solution to the shortcomings in RK’s books as eagerly as he criticises them. However, Mr Reed is after all entitled to his own view, and I don’t doubt that there is some truth to what he’s saying.

What matters to me is that I was one of those “people schlepping along doing a half-ass job of managing the financial aspects of their lives.” And indeed, “Rich Dad Poor Dad [slapped me] up [the] side [of] the head and [told me] to clean up their acts”.

Could I have done it without the inspiration and simple teaching on cashflow and assets vs liabilities in RK’s books? I don’t think so. Call me dumb, but I was meandering along for 3 years, eagerly, and even desperately, trying to learn the tools and concepts to achieve financial independence. I thought I was doing okay, but always felt that there was more I needed to learn. I made a bit of money here and there, and bought big boys’ toys on finance to “reward” myself. Ironically, the amount of money I was paying each month to service my loans would have been more than enough to service a decent investment property. Eventually, it all unravelled – too much debt, no real assets.

Then I stumbled on RK’s book on day while browsing in a bookshop. The price of $29.95 almost put me off buying it (how pathetic was that!), but I decided to take the plunge. The book really opened my eyes, and taught me how to view financial matters in a different, yet simpler, way. It changed my way of thinking. I firmly believe that RK is right in his views on cashflow and assets vs liabilities. In my job, I work with ASX 100 companies, and on deals sometimes worth 100’s of millions, if not billions of dollars. And the thing most of these companies and their CEO’s/CFO’s/MD’s most focus upon is cashflow. Those who don’t inevitable suffer – look at HIH and Ansett. Not enough cashflow. In fact, the legal definition of insolvency in Australia is when a company is unable to pay its debts as and when they are due. Cashflow!

I did find that RK’s books were sadly missing on the “how to do aspect” of things. They focused on the “how to think” aspect. I pored over every page to try to glean some clues on “how to”, but couldn’t piece anything concrete together. But isn’t this how it all needs to begin? If you’re not thinking the right way, how can you have the confidence to go out there and do it? Let me illustrate it another way – if you were going to play tennis against a really good player, and didn’t think that you would win any games, would you even bother to try?

How many stories have you read of people who should have died from injuries or disease beating the doctors’ predictions and making a recovery, because of their will to live, their fighting spirit?

It’s the same issue with investing. Believing you can do it is the biggest part of the battle. You need to “know you can”, like Thomas the Tank Engine. If you don’t believe you can, I can guarantee that you won’t make it. Unless you stumble into it (eg lotto win or inheritance). I challenge anyone to give me an example that disproves this claim.

Friends, forgive my long spiel. The point I wanted to make at the end of the day is that I don’t care whether RK’s Rich Dad is a fictional character. What matters is that he has inspired me and many others to look at our finances in a simple, yet effective way, and encourages us to believe that each of us can be successful. Of course, it’s hard work to get there. Nothing worth achieving is ever easy. That’s why we need to believe that we can achieve it, to keep us going.

Cheeers
M

Sorry guys – it was late and I was in a hurry to meet some people for dinner (lame excuses I know).

I’ve checked the Act and my book again. I was wrong.

Caz is right.

Apologies for posting the wrong stuff in haste.

[xx(]

To redeem myself, here’s a tidbit – there doesn’t seem to be a time limit on when you have to claim the grant. So even if you buy an investment property, and move into it within 12 months after ssettlement as your PPOR, you may still be able to claim the FHOG on it! I’m not sure if a 3 year settlement period changes things, but I’ll look into it more and post my results. However, I believe that some State Revenue Depts have had some difficulty working out how to treat OTP purchases under the Act.

way to go westan! I’ve still got some way to go.

I think that one of the main reasons banks are reluctant to lend on retirement village units is because it’s not your “normal” property. Banks are by nature risk averse and conservative. They lend on normal properties because that’s been happening for umpteen years. Retirement village units are not that common, and also have fairly tight restrictions on how who can live in them. This, in the bank’s eyes, increases risk, because it’s non-conforming. Kind of in a similar way that a bank will treat a non-conforming borrower. I agree that retirement villages are going to be big business as each year goes by. But the bank doesn’t want to have to evaluate the business potential for property. It’s only interested in collateral and serviceability. (those experts out there – correct me if I’m wrong)

I know of a property developer who developed holiday resorts. Each unit in the resort was offered for sale to investors, who would receive a share of the profits from the operation of the resort. The properties were really well spec’d out, in nice country locations. But would-be investors found it hard to borrow money from banks. The developer had to work hard with all the major banks for quite some time, to convince them that the properties were bankable. Once the big 4 were happy to lend, the other banks slowly fell into line. Now they’ve got about 4 or 5 major resorts all around WA, with units selling like hotcakes.

the moral of the story is – you’ll find that as time goes by and more and more retirement villages spring up, banks will slowly loosen up and be more willing to lend. In my personal (and uneducated) view, this may lead to an increase in the demand for, affordability of and therefore prices of retirement properties. May be a short wait, may be a long wait. Only time will tell.

Cheers
M

Hi dennis,

I’m in WA, and there are others who are in Vic & NSW too. But I have to admit that I haven’t come across anyone on this site who seems to be from SA (I could be wrong).

Hopefully, there’s someone out there who can help you.

Cheers
M

Hi guys,
I’m in the process of writing a DIY book on conveyancing for WA.

In my experience, you’re probably right, Harold. But I disagree – it’s actually quite easy if you approach it with the right frame of mind.

You need to accept that these people you deal with are mostly civil servants, and deal with them accordingly – courteously and persistently. It gets results, I tell you. It’s frustrating, yeah, when someone doesn’t bother to return your calls for a whole week, but when you expect that kind of behaviour from them, it’s not so bad.

Anyway, all I’m saying is that my experience shows that it can be done, and it’s not a bad experience.

Cheers
M