Forum Replies Created
One teeny tiny problem I found with a hybrid trust recently – no banks would lend against it. Apparently the banks are very nervous about hybrid trusts because the ATO has come out with some complex rulings about such trusts recently. In the end I had to go with a non bank lender who have outrageous rates and early exit fees.
This might have changed in the last few months – my loan was in September, but worth checking out before you set up the trust.
Cheers
K
Hi Julie
In reality, councils generally don't force the removal of unapproved alterations unless they are a flagrant and very obvious departure from regulations. I have only heard of this happening once and in that situation the building was completely different to that approved by Council. Even that is still ongoing and the owner has not yet been forced to change the building.
I think it is a case of buyer beware. You know that the extension has not been approved and you assume the risk (albeit very small) that the Council will force you to remove it.
You could use the fact that the extension has not been approved to negotiate the price down. If, for example, the extra room adds another $60,000 to the property, then try to bargain the price down by that much. That way, in the unlikely event that the Council does force you to remove the extension, then you haven't lost anything.
Cheers
K
Hi again Ben
I have been having a think about your situation. In a nutshell, there is nothing you can do.
A contract is between two parties. The only people who can bring that contract to an end are the two parties. The only real exception to this is statutory authorities. For example, if the contract is for an illegal purpose, the police can step in and end the contract. But I digress.
This means that the only people who can end the contract to buy the house that you wanted to buy are the vendor and/or the purchaser. The fact that you weren't given a 'multiple offer" form to sign is irrelevant to the contract on foot. Your scenario has absolutely no bearing on the agreement between the vendor and the purchaser.
As to whether you have a complaint against the REA for not letting you know that there were multiple offers, you would have to speak to your relevant RE Institute. But, no matter what, your situation will not affect the outcome of the contract.
Cheers
K
I have a discretionary family trust for trading shares and I also put my buy and holds in the trust. My reasoning for this is that my buy and holds are largely negatively geared and I can offset any (theoretical) earnings from sharetrading against the negative gearing of the properties.
In reality, I haven't made any money sharetrading so it hasn't worked. But any "income earning" ventures will be in my discretionary trust to offset the on paper losses of the properties.
Cheers
K
At 5%? Hell yes!!
My rule of thumb has always been to fix if the rate was less than 7%. I wouldn't fix now at 7% though because of the economic climate and the fact that interest rates are likely to come down. But at 5% – I'd fix every last loan I had.
K
I think that Ben is asking whether the contract between the vendor and the other purchaser (the one who came in the last minute) can be voided. My understanding of Ben's situation is that he did not get the property and now wants to know whether there is a way that he can argue that the contract with the successful purchaser is invalid. Correct me if I am wrong Ben.
I have had a bit of a look at the requirements and, from what I have read, it is not a legislative or contractual requirement to be notified that there are multiple offers. That means that the other contract is valid and you are out of luck. However, I agree with Terry that this is a question for your lawyer who will know more about this than I do.
Cheers
K
Hi Dan42
You have misread my post. My comments about the high exit fees were in direct response to Jaffasoft's post. They were completely separate to the VCAT case.
In my final paragraph, where I commented on the VCAT case, I applauded the woman for taking issue with what the bank had done because, based on my limited reading, I thought that the lender may have acted unfairly by upping the rates when the RBA rates were coming down.
Cheers
K
H …..
The development projects must have a much higher return than 15% for them to borrow money at this rate and still make a profit. They get as much as they can from the banks and then use private lending for any shortfall.
I used a private finance company about 12 months ago and paid them 11% when all the banks were about 7 – 8%. Private finance was the only finance I could get at the time. Was it worth it? Absolutely. I bought a reasonably large subdividable block of land for $375,000 and refinanced it six months later with a bank who valued it at $485,000 without us doing any subdivision. Once subdivided the land will be worth about $1M. Sure I paid a higher interest rate but at the time it was the only funding I could get. Better a slightly less profit than not buying it and making no profit at all.
Cheers
K
I know several property investors/developers who are always looking to borrow money and will pay around 15%.
PM me if you need more information.
Cheers
K
Hi Jaffasoft
But the early exit fees are interest fees. Early exit fees are just the difference between what they would have made had the client kept their loan with them and what they will actually get. The decision of whether to have fixed or variable rates is a decision where the risks need to be weighed up. One of those risks in fixing rates is that the rates will go down and the borrower will be paying more than if they had variable rates. The borrow can't just get out of the loan and get into another loan with a lower interest rate without having to pay the bank what they would have paid if they had continued the first loan. A mortgage is a legally binding contract.
I'm a bit tired of reading about people crying foul about high exit fees are now that rates have come down. They wouldn't be complaining if rates had gone up and they had saved $12,000 by fixing their rates. People trying switch banks now (and complaining about it) are just trying to avoid taking responsibility for making a decision that hasn't worked in their favour.
And I have no problem with termination fees either. It costs banks money to set up loans. If there were no termination fees then clients (us) would be just be able to switch between banks every couple of months or whenever we see a better rate at another bank. It would cost the banks money if they went to all that effort to set up a loan (get doc drawn up, valuations done etc) for a loan that was only going to be in place for a couple of months.
I do think that the case mentioned by Richard is very interesting and, based on what Richard has said, may just have some merit. The issue is not the high exit fees, but the fact that the high exit fees are tied to interest rates that have risen despite the RBA interest rates coming down. That is most definitely not competitive and quite possibly misleading or deceptive. Had the bank's interest rates come down with the RBA rates then the exit fees would be nowhere near as high and the woman wouldn't be looking around for a different bank. Good on her for taking the bank on, I say!
Cheers
K
I bought a unit in Darwin a three years ago for $95,000, rented it out immediately for $300pw and sold it 2 years later for $200,000. I did a $2000 reno on it when we bought it.
Cheers
K
If the rebate is clearly shown in the contract and the whole contract is given to the bank, then there really is no fraud being committed. The rebate doesn't need to be highlighted in pink pen. As long as it appears in the contract then the bank can't claim to have been deceived.
Just my thoughts, which are no substitute for good, independent legal advice etc etc.
C2
I know you have said that you think we have covered the legalities enough here but while you continue to throw up fraudulent propositions I am going to continue to let the rest of the forum know that they are fraudulent. ( I am not suggesting at all that you have engaged in these activities or that you are in any way fraudulent, but I think it should be pointed out that some of your suggestions would not be considered legal).
If you have loaned money from the bank to paint your IP but then decide to refurnish it, then you have failed to disclose the change in plan to the bank and, technically committed fraud. The bank has loaned you money to renovate/improve the value of the building. Refurnishing the property is not renovating. I imagine that the bank would be quite unhappy about money loaned for renovation being used for purchasing furniture.
I expect that before a bank lends money for renovation, they want a detailed feasibility about what will be done and how much it will cost. Any variance from that should be disclosed to the bank. I can't imagine that the bank would need to know if you decided to change the colour paint from cream to beige, but common sense should reign. The bank thinks that the renovation is going to increase the property's value by $xxx. If your "amended" renovation plans will not increase the value of the property by $xxx, then the bank should be told.
So to answer your question about how far do we need to take disclosure – the answer is that disclosure is a legal obligation. Disclosure should be taken as far as the 50 page loan agreement requires you to. Sure, you don't HAVE to disclose to the bank any change in plans, just like you don't have to obey the law: you can steal, assault, murder etc, but if you get caught, then there will be consequences.
As to the issue of tax deductibility, Yossarian summed it up very nicely: it must be used for an income producing purpose. Paying off your PPOR is not an income producing purpose. This is no grey area with the ATO.
Cheers
K
Even if it is the formal contract that you have signed, you will still have cooling off rights. You could simply "cool off" on the contract and then re-enter an identical contract with the new name.
The practical way to go about this is just to ask the vendor to allow a name change. If they are OK with this, then the first contract should be cancelled and a second contract prepared. This will eliminate the (remote but still real) possibility that Stamp Duties will find out and will want double stamp duty.
Cheers
K
C2
If you borrow from the bank with the intent to renovate and later on decide not to, the onus is then on you to let the bank know that you will not be using the money for renovating. There is a continual duty of disclosure. This means that if you change your mind at any time, then the you must disclose. The duy of disclosure does not end once you have signed the paperwork.
This means that at the time you decide not to use the money for renovation, if you do not tell the bank, you have formed the intent to commit fraud.
Further, in relation to your post, the eligibility of the tax deduction is not based on your intent for the money at the time you borrowed it. What if I borrowed $30K with the intent to renovate an IP but later on decided to blow it all on the pokies? Obviously that is not tax deductible. What makes borrowings tax deductible is what you actualy do with the money. In your example you have postulated borrowing 30K but then only using $5k for renovations and putting the other $25K in your PPOR. The tax office would have a good argument that NONE of the interest is tax deductible (not even the 5K) because the WHOLE amount needs to be used for investment purposes. There have recently been some decisions on this. Most accountants tell you that even if you use the whole 30K for investment, but if you leave the money in your personal account for a couple of weeks until you pay for the renos, then you lose the deductibility of the whole lot. You cannot derive ANY PERSONAL benefit from the money (not even a 1c reduction on a personal loan)
CHeers
K
Hi Boshy
I am a bargain hunter in whatever I buy. I see no point in going out and paying full price for clothes when I can wait until the store has a 20% off. Yet so many of my friends see something they like and just pay full price for it.
It is EXACTLY the same thing with property. Some people look for bargains and some people just pay whatever is going. When it comes to selling, some people maximise their profits and others don't even turn their minds to how to get the most for their property.
You get the bargains by looking past the ugly colours and the quirks the vendors. Lots of people can't look past the colours or the disgusting carpets. But that's where the money is. Look into the mould though!
If you want to PM me I can give you some figures to support my above scenario.
Cheers
K
Removing a name from the title won't necessarily protect him from being sued if a business deal goes wrong.
Courts these days can look into things like removal of names from title, transfer of assets and other sudden liquidation of assets prior to starting a business. If it is decided that such transfer of assets were for the purpose of avoiding litigation, then the assets can still be deemed to belong to the person being sued.
Even discretionary trusts aren't safe these days. If a court decides that the trustees effectively have sole control over the trust, then the assets of the trust are deemed to be the assets of the trustees.
I would be getting good legal advice before spending money on removing names from the title.
Cheers
K
Why does your husband not want his name on the title any more?
K
With $150k I would buy two houses on sudividable blocks. I am in SA so could quite easily find two houses around the $250k mark each. I would then subdivide the house, do a basic $10k reno on the house, sell the house and then sell the vacant lot. If I was able to get a construction loan based on end value I would build a house on the vacant lot.
My criteria when doing this is to only buy properties where the house, once renovated, could sell on the smaller, subdivided block for the same price that I have paid for the entire block. Based on the above criteria, I would be able to turn the $150k into $300k within 12 months. If you are able to do this then basically you get the vacant block for free, minus subdivision costs.
Having said that, you have to know what you are doing because there are plenty of things that can go wrong, eg, reno costs going over, not being able to subdivide the block, paying too much for the property in the first place. But if you know what you are doing, it is a pretty healthy return on your investment.
My advice for avoiding things going wrong? Research, research, reseach. Know your market. Know your market. Know your market.
Cheers
K
Hi fishngym
I think the wording of the contract is very ambiguous. It says that you (the purchaser) have the risk but that if the vendor occupies the property ("occupation" would include a tenant") the vendor has to continue to have insurance. It doesn't say that the risk passes back to the vendor.
I think that the reason for this wording would be because if there is an insurance claim the two insurance companies would look to sort out how the damage for which insurance is sought was caused. For example, if the tenant left a candle on and burned the house down then obviously the vendor's insurance would be the one to cover it. There is no way your insurance company would pay for a tenant's damage. However, if the damage was caused by a flood or something over which the vendor (or tenant) had no control, then I expect that the purchaser's insurance would be the one to foot the bill.
Once you have signed the contract you have an insurable interest in the property, as per the contract. Your insurer can't just take your money when you take out insurance prior to settlement and then claim that you don't have an insurable interest. It is in the insurer's interest to try to deny your claim. I think your insurance company is just trying it on.
I suggest that you lodge a claim with your insurance company and let them chase the vendor if they have an issue with it.
As to the issue of the new tenant in, who instructed the property manager to advertise and get a new tenant? If it was the vendor then I expect that the vendor would be liable for the whole letting fee and would receive all rent until settlement. If, on the other hand, you got your own PM to find a tenant (with the consent of the vendor) then you would be responsible for the whole of the letting fee. The vendor would still be entitled to rent received prior to settlement. However, your conveyancer should make these adjustments in the settlement statement.
