Hello Terry,

Personal money? Probably not. BUT, I don’t have shareholders to appease[]

So, the question to be asked is, why this product at all – is it that the banks HAVE to offer it? No, I would think not – except I would expect it is being supported by the Fed Gov as a way of easing the Social Security burden – and we all know how much Uncle Gov likes to look after everyone []

So, if the banks are in the business of making profits from lending, (amongst other businesses), what is the upside vs the downside? Well, at a MEASLY 15-20% LVR they have protected ABSOLUTELY their downside – let’s face it “Fire Sale” at 20% LVR is a lot easier to achieve than 80%LVR.

So why offer it in the first place? Perhaps so that the institutions can claim a balance sheet profit (ie. unrealised) to their shareholders of whatever nominal rate of interest they are expecting to recoup at the end…what is the interest rate, anyway? Is it standard variable or is there a “risk margin” attached?

All round, I would *seriously* wonder about taking out one of these loans, at 20% OR EVEN 80% for the credit risk alone.

What about fire/catastrophic failure risk? If the house burns down after 5-10 years, the insurance pays out, the bank gets paid its interest + principle and what then…the owner has to find new accomodation which they now have to afford with a LOT less in their pocket than they had before.

And, again, what happens in the case of the last surviving title holder becoming legally incompetent and requiring care in an instituation? Does the bank then have licence to have the property sold at “whatever” price they can get to divest the risk?

Overall, I think if this product becomes very well utilised in the market place, it will be great for opportunistic property investors for the above reasons – but I have to wonder about the banks…they have a chequered history as far as full disclosure of risk upfront, esp in new product lines.

And I have to say, if I was going to take a risk like this to borrow a measly 20%, I much rather take it for 60%! []

Kindest Regards
Jason S
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Wow…the banks suck even more than I thought!! 15%-20% LVR!!!

There you go! ;o)

Kindest Regards
Jason S
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Hi Ireland,

Presumably, if one is interested in getting to the level where one accumulates $1m + properties, one has to start somewhere more…modest?

Are you saying that $30k houses are too modest? If so, where would you recommend one starts?

Kindest Regards
Jason S
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Leigh,

Thank you for that – it would seem that the fruit of your enquiries is: “Attitude is Everything”! []

Kindest Regards
Jason S
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Hi Karen,

The formula is simple…

Take your weekly rental, divide by 2, times 1000

So, for example, if I was looking at a prospective property that rented for $150 per week, and they were asking $90,000 for it, I could quickly check to see if they were in the ballpark of what I needed to buy it for to be +vely geared (cashflow) –

Here the formula would give me an answer of $75,000 would be around the max I would pay to investigate it further. If they want 90k and are not “motivated” to sell (ie. possibly willing to come down in price), then I wouldn’t waste my time on persuing the deal, as it doesn’t fit my parameters.

Note, it is ONLY a guide and there can be many variables in the deal which would make the 90k house attractive to you as an investor, depending on your investment niche…11 sec solution is just a way of sorting the wheat from the chaff quicky, esp when looking at many deals…

Hope that helps…

Kindest Regards
Jason S
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Hey Marcus,

I hope that you didn’t find my posting about Mr Burley offensive…certainly no offence was intended.

I was merely ruminating on an idea – that MANY people who enter investments based on the reputation and/or personality of the teacher/investor/offerer rather than closely examining the real merits and/or downsides of the issue tend to get burnt.

I certainly felt that in this case, perhaps, an element of “get in quickly before its all gone” was present, not giving adequate time to consider the merits, putting huge faith & responsibility on Mr Burley’s shoulders…and if things (heavens forbid) should go wrong…who’ll get the blame?

My personal (and expensive) experience suggests that when people make investment decisions (as I am guilty of in the past) based on such ‘subjective’ criteria rather than ‘objective’ criteria (or at least a good mix of both), the losing party (if there is one) tends to forget their own responsibility in the decision…

In short, relying on the personality and reputation of the offerer without clear due diligence of our own can, eventually, get us into trouble. It is purely based in laziness and/or a lack of self-responsibility.

Here endeth the sermon! ;o)

Kindest Regards
Jason

WOW! Awesome! This and the 11-Sec solution are great tools…I love this kind of ‘Rule of Thumb’ analysis – saves HOURS! ;o)

Happy New Year!

Jason S

Earpeace,

Please do a ‘search’ on the forum for more info…there have been several posts on this subject.

Jason S

Hi Dan,

As MI is a closed shop (ie only 3-4 out there) and any 1 bank will only be using 1-2 of them, it look pretty grim for you. The only suggestion I have is GE Financial not only is a lender but one of the few mortgage insurers. You may find that sourcing your loan through them may lead to a better deal on the MI…but no guarantees! Also, it is worth noting, that they will also lend 85%LVR without incurring MI against your account! A good mortgage broker should be able to plead your case for you, as well!

Best of Luck,
Jason

Hi Michael,

Yes, I have WB’s course on video – very good, but very much a cap growth/reno strategy focussed on getting cashflow +ve results by doing so. I would suggest you may find the choice really between him and what the ‘Reno Kings’ Geoff Doidge and Paul Eslick are doing – similar, but I think the ‘kings’ give better “practical” advice re actually doing the renos..hope that helps?

jassep