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L.A Aussie
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August 14, 2007 - 4:30 pm
crashy wrote:
"If you a buy a standard, well positioned, good quality average family house in an average established suburb, make sure it is properly insured, using a standard P&I, fixed rate or I.O loan, you will never wake up in the morning and find out it is worth zero." unless the government has plans for a freeway through your back yard. if you buy a good quality share you will never wake up in the morning and find out it is worth zero. Again, I use the HIH's the Enrons etc. There have been a gazillion more specualtive and blue chip shares and companies that have diasppeared forever. I used those two because they are some of the more recent and spectacular examples.
My best friend lost $150k in shares 3 years ago. Totally gone. Admittedly, he was the operator error factor to a degree, but if he had put $75k into the share, and $75k into the property, he would still have the property at least. Ask him about risk.
"These sorts of houses, if bought at fair market value and held for the immediate to long term, always go up in value. Of course; they may not go up value very quickly, but they always have and all ways will."
and shares dont? That's not the issue; stick to the topic. The topic is RISK. Besides; the key word in my sentence is ALWAYS. Shares do not always go up in value. If they did, then no-one would need to have a portfolio of several different shares to minimise the risk.
"There are many horror stories of people who have lost money in property, but this is usually bad decisions by the owner – they buy too high, over-extend themselves financially, maybe have to sell for some unexpected reason and now they have to sell at a loss."
gee, people who buy shares never do any of that right? Of course they do, but they can still do all thr right things and lose the lot. Obviously it's a slim chance, but it has happened and can happen again.
"With shares, there is no scope to insure against loss, you can't add value, you can't increase the dividends"
all false statements. ok, if they're false, then explain to me and all the other less knowlegable readers how to do it. Being a smart-arse and simply flipping us off doesn't help anyone. Be constructive; remember, people read this forum to get help and advice. I give advice and help based on my experience, albeit limited, and don't attack people with less knowledge when they say something out of ignorance. You should try do to the same and then more people might put some weight on your statements.

"there is very little you can do to protect your share from disappearing to zero overnight. I know there are many who will say "oh, but that is unlikely to happen".
Well, the reality is it could happen, and has happened. Think Emron, WorldCom etc. These were supposedly "blue chip" companies."
wow. you found 2 companies that went bust out of the 70 million companies on the planet. firstly, they didnt go bust overnight. second, its ENRON, not emron. a little knowledge is dangerous. thirdly, ok, sometimes companies go bust. You just contradicted your own argument. I haven't seen a property go bust in my lifetime. I've seen people lose money on them, but the houses are still there, going up steadily.

But, how many houses triple in value overnight? this often happens with shares and easily offsets your argument. We all know they can. That's one of the reasons why there are 10 times as many people in the stock market as there are in property. It's also more liquid than property, no tenant or maintenance dramas, etc. There is no doubt; shares have a lot of attractive features. But, again, the topic is the RISK between shares and property.

"If you have bought shares directly, and the market tanks over-night, you may not have a buyer to save you before the share reaches zero value." what rubbish. ok, so if it's rubbish; explain why. Dismissing my comment with a flippant statement like that helps no-one. My best friend would like to know the answers I'm sure.

" With property, no matter what the market is like, you can still sell it for something."
really? So all the houses listed 3-4 months with no offers are a figment of our imaginations? they are simply over-priced for the current market. They still have value, just not what the Vendor thinks and the agents tells them it's worth. How often have you sat watching a house waiting for the price to drop? in the end, you still paid some money for it. The Vendor still found a buyer. The property didn't go bankrupt un-announced and disappear forever.

Now just because I have blown LA's argument to bits doesnt mean I think shares are better. I think they have the same risk when ALL factors are considered by EDUCATED investors who walk the walk instead of regurgitating the talk.
Crashy, I like our debates, but please make them constructive with valid reasons to back up your comments. Not for my benefit; for everyone else who are reading the posts. They, as I, would like to learn from your knowledge in these areas.
L.A Aussie
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August 14, 2007 - 3:43 pm
elkam wrote:
Mortgage Hunter wrote:
You can even get capital protected 100% loans to buy shares. At the end of the period if the shares are worth less you can just give them to the lender and walk away.
I just can't help myself Simon. I have to ask.
What sort of interest rate are we talking about for such a loan.
Just curious at this point.
Elka
Yeah, more detail on the good stuff; less detail on calling people fools.
L.A Aussie
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August 14, 2007 - 3:41 pm
Qlds007 wrote:
You can protect shares with options or make extra income through writing options.Theres a lot of different strats
There certainly is. From last recall i think over 20 different protective ways to trade from a simple Call to a Iron Condor.
It is just finding the strategy you are confortable with.
Another breakthrough! now we have some strategies, all we need are some details.
L.A Aussie
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August 14, 2007 - 3:39 pm
MasterREL wrote:
You can protect shares with options or make extra income through writing options.Theres a lot of different strats.

O.K, now we're getting somewhere; how about some detail on a few of them.
I get plenty of detail about what a fool I am for mentioning yes, there is risk when someone asks, but it seems no-one want s to back up the pot-shot with some constructive advice about how to avoid that risk.
L.A Aussie
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August 14, 2007 - 3:28 pm
just out of interest, if there is someone out there who has done a lot of wraps; more than 20, can you tell us how many (a percentage) of them go to full-term, and how many default and lose the house?
I think this is the crux of the issue with Neil. He has an issue with how many people don't get through to the other end, and that the downside is the ones who don't get hurt.
L.A Aussie
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August 14, 2007 - 6:04 am
Mortgage Hunter wrote:
You know it wasn't aimed at you specifically. Was more a knee jerk reaction I have to everyone who believes shares are inherently dangerous. An atitude that is usually fostered by a well meaning parent who knew someone who speculated once out of greed and got burnt. It is an attitude that gets reinforced daily in forums like this. I would never say that shares are better than property or vice versa. Only that they are a perfectly valid avenue in themselves. If anyone believes they are "risky" and akin to "gambling" then they should reasses where that belief comes from and be honest with themselves.
When I fist started borrowing to buy shares my peers thought I was insane. They knew what borrowing was for – it was for buying cars and going on holidays. Even whitegoods etc. But not to blow on a share that might go down in value. What if I lost money they asked?
I must admit that when I first read your comment that I fail to help people I thought it lacked a bit of recognition to the effort I put into this forum and I felt bad. I reckon I give advice within my area of expertise and qualifications quite a bit. Possibly more so by email. Helps a disabled fellow like myself to feel useful and passes the time
But I reckon you weren't referring to that stuff I do – rather that I can be relied upon to comment whenever anyone trots out the old chestnut that shares are risky.   I get your point that I don't offer any examples so here is one.
In 1994 I bought my first shares in the Woolworths float. I bought $2000 worth which was a lot of money to me then and I don't mind admitting it caused some marital friction. Now a decent house could have been had in Melbourne (where I lived at the time) for $100K. Had I the guts to buy $100K worth of Woolworths now where would I be?
Would now be worth $1.1M. it would be paying me a annual dividend worth $27K pa. This dividend would be fully franked as the company has paid 30% tax on it already. So I get that tax credit. Compared to my initial price I am earning 27% on my outlay with tax credits and that grows every year!
If I had elected to join a Dividend Reinvestment Program (DRP) where I can take additional shares instead of cash then it would be worth quite a multiple of that. I don't know how to calculate it. I am guessing as least three times as much? Quite likely more.
What has it cost me? well an interest bill of $8550 pa assuming I had never paid any principal.
Not a single cent extra. No land rates, insurances, repairs, land tax, nothing. I can read an annual report if I choose but that is the full extent of it.
Now I guess you are thinking that I chose an example to prove my point. Do the sums with any of the banks. CBA would have been a good float to get in on… CSL – wow that was something special. Doesn't even need to be a float. I bought NAB for $10K and sold a few days later for $14K. A 40% profit and I thought myself pretty clever but do you think I wish I had kept them today? Not just the price but the growing dividend yield! In fact I suggest that a growing dividend is of as much importanceto the buy and hold investor as capital growth.
I am sorry I cannot make a suggestion as to a share that has the potential to do that today.   This is a property forum. We are not licensed to discuss specific shares etc. I am not a financial advisor and am neither licensed nor insured to give such advice. As a Moderator I would delete such a post and you would be right to suspect the motives of anyone who does ramp up a specific share publicly.
But if you wish to discuss generalised investment strategies I am happy to do so. Perhaps a better place to do so is another forum? Here is a thread where I contributed as a fellow investor and I would welcome your input there on any of the threads. Some of you might even find it as useful a site as this one and I hope I am not breaking any unwritten rules by suggesting another website .
I hope you understand my position.
Do I think shares are better than property?
Nope. They complement each other well and with the different boom cycles it allows you considerably more rising market opportunities.
Good luck to you all.
Thankyou for that Simon.
I wasn't actually asking you to suggest a share or shares – just some strategies and mindsets; things like that.
An example; once you said that you can insure shares against loss; how? As far as I know, there is no actual policy you can buy for this, so does it involve a strategy?
L.A Aussie
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August 14, 2007 - 5:51 am
Tysonboss1 wrote:
G'day Marc,
Yes in a down turn your property would still be worth something but your investment wont, The piont I was trying to get at is that when you invest in property,… say you use $20,000 of your own money or equity for a $200,000 house ,… after two years of neg cash flow, stamp duty on purchase if your property is still only worth $200,000, your investment of the $20,000 deposit may have been eroded to nothing, You asked about investment risk, now you're talking about investment return. There is only bad return if you sell. The investment still has value and will never be worth nothing. If I purchase a property with the right criteria, it is never necessary to sell it. With a share, you can do all the due diligence in the world, purchase at the right time, the management seems solid etc, and the business can still go bankrupt overnight. I realise that this is mostly unlikely, but it can happen and has/does.
For example I found a house that I was looking at buying a few months ago, The person bought it in 2003 for $212,000,… for them to break even on the deal they would mave to sell it for over $250,000 to make back the interest they have paid, stamp duty, maintance, neg cash flow  during that time and the 3% sales commission, and the amount that they have to sell it at to break even is growing every day as they incurr cash flow losses, this property is only valued at $230,000 at the most so their investment of the $30,000 deposit has decreased by over $20,000 thats a negative 66% return. Why are they selling? They bought at the top of the boom, and are selling in a supposed slump, and they bought a neg geared property – operator error. Having said that, I bought 3 properties in 2003-04 and all have gone up in value by an avergae of 62%, based on current selling prices of similar properties in the respective areas. Not bragging; just staing a fact. The good news is that in spite of making a bad investment decision, they still have an investment; the properties are still worth something; you're talking about returns again.

L.A you keep mentioning that you will always be able to sell your property for somthing so you will never lose money,. but that is untrue you have to work out your profit and loss on the total amount returned minus the total amount you put in, Ok; since 2003 total input of cash – nil. Pos cashflow and 62% cap growth. R.O.I; infinity. All houses burn down tonight (god forbid) rebuild with insurance. You keep mentioning neg gearing and loss. I haven't had loss, but that's not the point – they won't disappear to zero.
Capital gains are not happening at a steady rate they come and go, so your property investment could have been sold for $200k last week, this week $210K next month $195K, you won't know offcoarse because your property values aren't listed in the paper, Again; returns, and selling to realise the loss/profit. I only ever talked about the risk of the investment disappearing to zero. Also, I never sell; just use equity to keep buying.

you also said that you don't buy unless all your capital growth factors are covered, Impossible you can not garantee that a property will have capital growth from day one, If you make an investment and their is no capital growth for 12 months then you have made a loss, simply as that, you might say that you havn't sold it so you havn't lost anything but that is flawed thinking, you have incurred a loss year, just as I explained share investors accept the risk of 1 loss year in 5.
Tyson;
we are getting off the track of what my post was about. My post was about the risk of property reducing to zero in the event of a crash, as shares can. This has never happened in property (maybe areas like Pompeii, New Orleans (Katrina), San Francisco (earthquake of '94 – but don't buy there if there is risk of flood etc)).
I did say that property can lose value; but that's all you lose – some value; not all value. A property can lose value, but if it is pos cashflowed from day one, and you never sell, you are still receiving a return on your investment.
I know that there are cycles of cap growth, but the loss if you sell after 1 year of no growth (minus holding and selling/buying costs) only occurs if you sell. I can't guarantee cap growth, but if I do some extensive research on the area, I can all but eliminate the likelihood of none occurring.
My whole point, which was to answer the whole risk question, is the likelihood of the worst property or share market crash in the history of the universe, waking up with nothing, or an investment that is still standing.
there
L.A Aussie
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August 14, 2007 - 5:02 am
I saw on groundforce once (or one of those annoying heart-string pulling shows – have you ever seen anyone so "up" as those dudes? I want some of their drugs) that had a pool which they covered over with a really great deck. The pool was still underneath and could be converted back at any time. Can't remember the cost, but it may be an option.
L.A Aussie
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August 14, 2007 - 4:57 am
Short term solicitor's loan?
Interest rates will be awful, but if the deal is worth it and it gets you over the line, then refinance at some point in the near future (or qick sale and pay out the loan) – not with Suncorp I'm guessing.
By the way; "BANK" is a latin word meaning "pack of a*se-holes".
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August 14, 2007 - 1:01 am
Hi Tyson,
I think I covered the scenarios that can affect the performance of the standard property in my first post.
You're assuming I would buy a $200k property in an area that is likely to go down in value, and has a neg cashflow. I don't do that.
If I buy a $200k property, I am buying it with cap growth factors covered, the ability to add value in cap growth and rent return, and pos cashflow (including 4 weeks vacancy per year). See my 1st post on the thread: "What's your Criteria?"
The key factor is to identify areas that have strong cap growth factors, rent demand, buyer demand (purchase price in relation to the median and the average wages for that area), and buy there so that a decrease in price is unlikely.
Based on that criteria, there is never a reason to sell, and the Landlord's insurance covers any protracted vacancy period over my 4 week allowance in the holding costs.
I agree, a murder will affect it's sale price, but it will still sell. It is not worth nothing, and even if there was a murder, there is not necessarily a reason to sell the property.There was a case in Sydney a couple of years ago where this occurred. The house was sold eventually. It still had value, albeit much less. The worst case scenario for that property would be to bulldoze the house and rebuild from scratch. Then you get rid of the stigma and have a lovely Depreciation "on-paper" deduction to boot.
The govt did abolish neg gearing benefits in the '80's and it caused an enormous exodus from the market (by neg geared investors). This triggered a huge shortage of I.P's, so rents skyrocketed. For those investors who were pos cashflowed and didn't need to sell this was a lovely time. But the properties were still worth something. The govt re-instated the neg gearing benefits soon after, I don't think they will make that same mistake again. Of course; they might, but if all the bases are covered and the properties are pos cashflowed then there is no problem.
Council planning, interest rates, govt and tax rulings are controllable factors in-as-much as they are part of the due diligence. For example; I wouldn't buy a property on a street that has any likelihood (or future planning) for a freeway extension, or a road widening, or a commercial zoning. I wouldn'y buy a property for subdivision plans without making sure that the zoning definitely allowed for that to occur. I admit there could be changes by the ATO on tax deductions, but I believe these would have to go thru legislation, and as I mentioned, the govt are loath to fiddle with the incentives for investors too much now after the '80's, and a pos cashflow property will hedge against these problems to a large degree. In any event; the average property in the average area will still be worth a lot (probably no drop in price at all) as it will be in an area of high demand by renters and buyers. Part of the criteria.
Hey Simon,
I don't know if your post was directed at me? No drama if it was; I'm a big boy, but I am not ignorant to the sharemarket. I do have a few shares, but it is not my passion or "strong suit". I agree with you; you can make lots of money from the share market. That was not the question that Tyson asked, and I did not "write it off". I do have an open mind to shares, and I reckon most investors do, otherwise they wouldn't be investors. The only people who have a closed mind are people who do nothing.
The question Tyson asked was the relative risk of shares to property. I identified what I believe are the risks, based on past history, compared to the risks in property. Anyone who chooses to ignore that history is less open minded than someone who identifies the risks and plans accordingly.
Two quotes from Warren Buffet which are a good mindset for the stock market:
"I buy my straw hats in the winter".
"I made a fortune out of buying too late and selling too early".
Simon, one last thing; I come on this forum and share in detail how to invest in property with very little risk and maximum return, based on my experience. It's what I know best (I don't know it all). I do it for free and am happy to impart my (limited) knowledge to help others. I have no agenda, other than to help others learn and learn myself.
I identify what I believe the risks are in shares (and property) because people ask, and I believe it is my responsibility to make people aware of the pitfalls of investing. But I don't offer tips on how to do invest in shares successfully because I am not that knowledgeable about it.
You, on the other hand, are very knowledgeable about shares, but never put forward some ideas and tips for the readers on how to be successful at it and minimise risk. You only put forward opinions about shares when someone makes a contrary opinion to yours. That is not doing the readers on this forum any good.
So come on, do the readers a service and be proactive about the topic. Don't just sit there and take pot-shots and tell people to "go and learn" – tell them a few "hows". I for one would certainly love to know more. If the share market is not as risky as you say, tell us how this is so and how to avoid the risks. I know this is a property forum, but shares is discussed very regularly, and people would like to know how to do it.
Who knows; you may even drum up a few more customers for your business by throwing a few tid-bits our way.
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August 13, 2007 - 11:49 pm
Interst rates will always rise and fall. If you factor rate rises into your number crunching, and the deal still stands up, then there is no need to worry too much.
The problem with rate rises comes when you are in a property or properties that are quite neg cashflowed. Try to avoid that and still buy for cap growth as well and you will cover a lot of the dangers.
You can always lock in rates as well, but there are trade-offs with this in flexibility, so the benefit may not always be that great.
Don't forget that the interest is tax deductible, so the effect of each rate rise is quite often small on your bottom line.
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August 13, 2007 - 9:59 pm
"I am not trying to knock Property Investors as I hold property investments myself, but alot of your posts here knock the share market saying it is to risky, while making out property is solid as a rock."
If you a buy a standard, well positioned, good quality average family house in an average established suburb, make sure it is properly insured, using a standard P&I, fixed rate or I.O loan, you will never wake up in the morning and find out it is worth zero.
You will always find a tenant, you can always repair any damage, you can always add value. These sorts of houses, if bought at fair market value and held for the immediate to long term, always go up in value. Of course; they may not go up value very quickly, but they always have and all ways will.
There are many horror stories of people who have lost money in property, but this is usually bad decisions by the owner – they buy too high, over-extend themselves financially, maybe have to sell for some unexpected reason and now they have to sell at a loss. Or maybe they got caught in a two-tier marketing scam. It is still their fault; they should have researched the local values properly, checked the cashflows to make sure they could addord the repayments if a prolonged vacancy occured, or maybe they didn't insure the property and it burnt down, or the tenants trashed it.
With shares, there is no scope to insure against loss, you can't add value, you can't increase the dividends (as you can with rent, you can't be in the board room looking over the financial reports with the company execs trying to decide which direction to take the company. You have no control. I know there are numerous strategies to buy shares – puts, call, warrants etc, which can protect the investor (if they are knowledgeable enough) from a downturn.

But if we are talking about a straight-out purchase as in the case with buying a standard 3 x 2 suburban house, then there is very little you can do to protect your share from disappearing to zero overnight. I know there are many who will say "oh, but that is unlikely to happen".
Well, the reality is it could happen, and has happened. Think Emron, WorldCom etc. These were supposedly "blue chip" companies.
If you have bought shares directly, and the market tanks over-night, you may not have a buyer to save you before the share reaches zero value. With property, no matter what the market is like, you can still sell it for something. So, if we are talking about only risk, and no other mitigating factor, then property is the winner.
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August 12, 2007 - 3:40 pm
APerry wrote:
If you don't know anything about Destiny or Margaret, or haven't read her books, then please keep your opinions to yourself until you know some facts"
I assume this was aimed at me. I know enough to express an opinion and the person who started this thread was asking for opinions. You, I and plenty of others have stated differing opinions, so I think it has been a good exercise. Also, you can say what you want about how great you loan structure is but, from what you have posted, it is costing you money for no particular reason.
No, it isnt costing us money;
total bank fees for the two sub-accounts; $28 per month, or $200 per year up front (half is tax deductible).
The new LoDoc loan for the Land purchase is $14 per month (no mortgage insurance – how many thousands of people waste money paying that?). We would have put the Land purchase thru the L.O.C as well and saved the extra $14, but as we are living in the USA and working as contractors now, we had no other real option.
The above quote was aimed at all people slagging Margaret without knowing the full facts. You said you've seen her speak, but not read the books. What else do you know about her and her company? Have you ever talked to some clients?
Well, I've seen her speak, read ALL her books, use the website, use the brilliant software her husband Ruben developed, met her, been to the focus groups, am a client – she is GREAT. Go to her website and look at the client testimonies as well.
I never said my loan structure was great; I'm sure there are others better. I explained how mine works well, in light of all the negative comments that are posted on this forum about this type of structure.
It's like someone saying wrapping is bad, having never done one but read a few stories about it. But it works well for several investors.
And as I said; cross-coll is dangerous (as others have posted) but only if you are over-exposed with debt. This is the thing that doesn't get mentioned when cross-coll is mentioned by some. They say it is hard to release securities, but that is not my experience, and as long as I keep a healthy LVR then I'm sure it never will be dangerous.
If you wish to be an investor with LVR's of 90,or 95% then I agree; cross-coll is VERY dangerous. But in my opinion, being near that LVR with the best loan structure in the world is still dangerous anyway, and the mortgage insurance is a killer.
Life happens, so I always want a position where if, for some reason, I needed to sell a property tomorrow and take whatever I could get, then I could do it and still have more equity that debt.
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August 12, 2007 - 3:31 pm
First steps;
education about property investing, finance and loan structuring. On-going.
Your own finances seem to be in good shape, so keep it up.
Decide on a strategy; buy and hold, flips, wraps, renos, subdivs etc.
Then start looking at markets to find one that suits your chosen strategy or strategies.
Find a good mortgage broker who knows property investment.
Same for finding an accountant.
Ask us more questions.
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August 12, 2007 - 3:24 pm
This latest rate rise will slow down the average family house buyer. Another rate rise next review will really slow it down for them.
But the higher end doesn't seem to have the finance restraints. I think it will also depend on the lending policies of the banks. If that gets tighter (as it has over here) then the slow down will increase.
Over here many banks are introducing 30% deposits, traditonal P&I loans only in most cases. Only the financially solid will be buying in months to come.
They are even introducing servicability restrictions over here to "make sure the buyers can afford the loan" (ABC News last night) shock!, horror!
I'm sure this climate will hit Aus sooner than later. Don't we always follow in this crazy country's footsteps?
I have to disagree with Steve about the lower-end of the market. With affordability so bad right now, the demand on cheaper housing must continue, as people still want to buy, but are forced out of the expensive areas due to this lack of affordability.
I think the areas where the housing near cities (within 1 hour commute) is under $200k will be a feeding frenzy. The rate rises will need to be another full point for this end to get stopped. Even at 8%, the cost of finance is still reasonably cheap.
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August 12, 2007 - 4:50 am
If you don't know anything about Destiny or Margaret, or haven't read her books, then please keep your opinions to yourself until you know some facts, kids.
Yes, she is a good self-promoter, but she backs it up, and won Business Woman of the Year last year. Not bad for a dud.
Oh; did I mention she has written 5 books, and has franchises in virtually every State in the country, and has 5 kids, and…. someone stop me.
I have defended Margaret a few times on this site now. Her strategies are not gung-ho Gordon Gecko stuff. This makes her the sort of Finacial Planner that most mum and Dad investors need. If you follow Margaret's philosphy, you will never go broke. You may not get rich in 2 years, but to do that requires more risky manouvres than she recommends. Margaret's path is more the Noel Whittaker approach; slower and steadier, and he is very respected.
Having said that, we have done a more risky one, and Michael's (Sloan) knowledge and objective advice were invaluable. I take my deals to him, we evaluate them together, and I decide the next step. He plays devil's advocate when the need arises and we make good decisions because of our collective brains and discussions.
We have a L.O.C at 7.47% with St.G. (thru Destiny). No problem releasing any properties from the loan; just re-set the available equity if you sell and don't replace the property, or substitute the title with one property for another if you sell then buy. Mortgage stamp duty is also adjusted based on whether you are adding or decreasing, and loan amount is adjusted accordingly. Obviously servicability is a factor as well. We only buy "cfp after tax" properties (as per Margaret's philosphy), so no probs there.
Who cares about cross-collateralisation.
All our properties under this loan; with 2 sub-accounts. One is day-to-day, the other is investment only. Current LVR of 58%, no mortgage insurance and investment loan balance of just under $600k lots of useable equity, and haven't done a re-value in 3 years. I'm tipping it's another $250k more by now.
No neg balance on the day-to-day sub-account, but have $80k usable equity in that one for emergencies.
The "Property Track" software (if you are a client) allows you to split the investment loan sub-account by percentage between all the individual properties for tax time. It is fantastic. In fact, this year, with the latest upgrade, all you need to do is upload the profit/loss and financial statement reports straight to your accountant.
Been with Destiny for nearly 4 years; Fitzroy branch Melb. Michael Sloan and his staff – especially Lucy Ramunno (20 years in Banking) are THE BEST.
They just did a Lo Doc 60% (we are classed as non-residents, and had to use our contractor's income from the USA) lend for our recent Land settlement in Aus with St.G at 7.37%, Interest only 5 years, then P&I after that. $14 per month Bank fees (pr*cks)Probably not the cheapest loan going around, but the job was done easily. The rest of the purchase was out of our usable equity. We transferred the funds needed from the investment loan equity over to the day-to-day account for the settlement as the Land is not an investment purchase – future PPoR.
All the staff at their (Fitzroy) office have I.P's, they walk the walk, talk the talk, their focus group network is excellent, their service is excellent, nothing is too hard. The Destiny website, the newsletters and the links are excellent. Worth every cent they charge to join, but no obligation to do so if you don't want to.
25North; you are quite right in your post.
I think cross-coll is not for the over-leveraged, but then over-leveraging is a no-no anyway in my opinion.
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August 12, 2007 - 3:24 am
There have been several posts recently by people asking where the properties are that fit the 11 sec rule.
They are in Kansas and Dorothy owns all of them except one; Toto owns that one.
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August 11, 2007 - 4:36 pm
Hi gaga,
"== CONS ==
– It's far and It's in the west (seems a lot ppl don't fancy west and they do have fair reasons)
– Value growth and rental return might not as good as inner suburbs (I can get one of those, but it pushes the limits too hard)
– If the richer get richer in the near future, It might been even longer and harder for me to grow my portfolio.
Thanks you all so much just for reading this far, really do appreciate if you can give some advice and share some knowledge.
Johnny:)"
you sort of anwered you own question in part; my concern is all of the above, AND you are going for a 100% finance deal. This is a very dangerous level of exposure for your first deal.
One of the big dangers with "off the plan" purchases is buying at the right price in relation to the market. All new projects have a profit margin built into the purchase price for the developer, and quite often these sorts of projects are bought up by investors. The problem here is if they get into trouble, or there is a shortage of tenants, or both, they have to either sell, or drastically reduce the rent to get a tenant, and if you are also an owner in the complex then it directly affects the value of your unit and your rent returns should you need to sell or find another tenant. At 100% finance this is very dangerous.
This scenario happened in Melb with the inner-city apartments around 2003-04. Many were re-sold at big losses because there was an over-supply, no tenants to be found, so the rents dropped, many investors couldn't fund the extra neg cashflow and had to sell.
The SECOND buyers were the ones who did well.
Don't go into this deal purely for the tax advantages. They are the icing on the cake. The deal should stand on it's own before you apply the tax benefits.
What is the rent return? Is it at least the same as current loan interest rates? Check the actuals against other existing newer complexes in the area.
What are the comparable prices of a 5 year old complex (or younger- but not brand new) in the immediate area? This is the true value of a unit in the area. Brand new ones are invariably over-inflated, and if you have to sell, your unit is second hand and only worth what the existing units are worth in the area.
Lots of Depreciation and tax benefits are nice, and what I look for, but they only soften the blow of a loss; they won't always cut out the (cashflow) loss.
If you have a poor rent return (less than current loan interest) and are planning to buy and hold, have a 100% finance, and there is limited cap growth, you are going to be out of pocket (even after the tax benefits) for a long time to make no money. Not my idea of investing.
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August 11, 2007 - 6:33 am
The rate rise will affect the prices the same way it always done; slow down. Of course; this is an average across the board statement; there will no doubt be areas that defy gravity, and at the top end there are no concerns with affordability – only supply.
The majority of people buying houses are Mr. and Mrs.Thong, on an average income, trying to buy the best house they can afford to impress their family and friends. They want to trade up.
Their finances are running tight all the time – no matter what they earn, so any sort of upward movement in payments on the loan is going to stop these people from trading up.
Then there are the renters and first home buyers; the would-be buyers. The goal-posts just got moved 10 yards further away again; they'll have to save for another 6 months.
Bottom line; most people are out of the game due to higher repayments, so the demand stops, prices stop.
The good news; The bottom end has the biggest pool of renters and buyers, so look out for the bottom end housing to go up as the marginalised scramble for something, anything, affordable.
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August 11, 2007 - 5:41 am
Some people invested in Macquarie Bank for low risk. And…
" Australia's Macquarie Bank (MQBKY, news, msgs) said investors in one of its mutual funds would lose up to 25% of their money thanks to losses in the subprime sector." (Jim Jubak, msn money).
The problem with these sorts of investments is, when they start to fall; there is no bottom. There is no low risk in that.