Forum Replies Created
Hi Milo,
Are your girlfriend and her Mum both going on the certificate of title as joint borrowers or tenants in common?
It’s easier if the answer is no. Your girlfriends Mum will need to provide a statutory declaration saying she is gifting the $100K towards the purchase, then providing your girlfriends record is clean she will have heaps of options for lending as an investment property (without getting FHOG unfortunately) and at only 50% LVR it shouldn’t matter whether you tell the banks the indicative full rent expected or the half-rent that the girlfriend would receive.
If the answer is yes then it’ll probably be better to go as tenants in common and see a broker because there aren’t too many lenders who’ll regard this loan as standard hence giving them the best possible loan rate and features.
Good luck!
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Mel
[email protected]The US banks also have a nifty little system whereby if someone is silly enough to default on their repayments owing say $50,000 on a $300,000 property guess what the banks asking price is – $50,000!! And there’s nothing the owner can do about it, crazy.
Their defense is that if the owner was silly enough not to try to sell the property for more than the outstanding debt before the bank repossess it, tough cheese and I suppose the owners are a bit culpable, but you can see how it would catch out the very uneducated and/or emotionally attached elderly etc. I hear also that there’s a lot of cheap deals picked up under this scenario in towns like Las Vegas where gamblers go belly up fast and lose everything fairly regularly. The delusion of gambling gains has a lot to answer for in this country too – the Aussie banks view problem gambling debts as an untouchable problem, a zillion times worse than bankruptcy for obvious reasons.
Do your homework and invest with your eyes wide open for some weird opportunities appears the key.
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Mel
[email protected]I wish for the mighty lions to get Vossie back and kick more Collingwood butt … [}
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Mel
[email protected]Hi,
I have a similar scenario so I’ll give this a go but really you need an accountant to verify this. I think it depends more on the trust structure – is it a unit trust, in which case don’t do it, or is it a discretionary trust with several beneficiaries in which case it may be okay, because at the end of the day the bank trying to get money back would not be able to specify which beneficiary owned which asset. Having said that if you as sole director of the trustee company have given a directors guarantee to a property loan and to a business loan this may negate the multiple beneficiary benefits and leave you open to losing everything. I run my business (debt free, litigation fairy staying away from me) and purchase property, education material etc under this structure.
Sorry I can’t give you a straight answer, but I’ll be interested to see what an accountant or trust guru has to offer on this one.
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Mel
[email protected]Know some people who’ve done it and they said excellent for beginners, probably a bit self-evident for experienced investors but you always learn something.
Hope that helps.
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Mel
[email protected]26/ Have your finances in place before you sign the dotted line
and
27/ Never have all your property tied up with one lender, shop around or better yet have a broker shop around for you
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Mel
[email protected]I’d always believed that the Chinese lucky numbers were 2,6 & 8 with 2 representing you, 6 representing road and 8 representing prosperity, hence the combination representing your road to prosperity. I am part chinese but learnt this off an avid English horse race enthusiast who’d spent time in Hong Kong ….
Four is actually very good at the start of the no. eg 40 High Street, but not at the end, plus as per Pisces example it depends on the ‘history’ and hence energy of the place. Clear as muck [
]Happy investing!
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Mel
[email protected]Hi,
CBA only use 70% of rental income towards your servicing model, whereas many other lenders like Macquarie will take 80% of the rental income they have security over PLUS 100% of any other rental income you have from other IP’s and are often better for investors. Having said that CBA are quite generous in the portion of the net pay which they will assume is available to service debt so this is possibly not far off your current limit. ING would be another bank I would try, but get a broker to do this running around for you.
A broker will help to estimate the costs of all your scenarios mentioned above and give you an idea which of them are within your current affordability and which aren’t from a lender’s perspective. Armed with this info an accountant is also a vital link in this chain.
If you do need to sell before you buy, get your property listed asap while doing this other research because you don’t want to caught out seeking expensive short term finance if it can be avoided.
Good luck with it all – you have lots of good options to consider.
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Mel
[email protected]Hi,
One question – was the CBA max amount including any additional rental income to service the new debt, and if so how much?
Being a broker and knowing how many options there are to structure finances in cases like yours I cannot stress how important I think it would be for you to see both your accountant and your mortgage broker before anything else to make sure you have the best long-term set up possible.
Happy investing!
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Mel
[email protected]Many RE Agents appear primarily concerned with covering their commission fees, which is around 3% of the purchase price, so I’ve found offering at least that much when the contract goes unconditional satisfies most agents. The RE Agent holds the deposit in a trust fund which the vendor can’t touch and takes out their commission portion on settlement before handing the rest over to the vendor, so generally the vendor doesn’t give a hoot about the deposit component but the RE Agents HATE chasing the vendors after settlement for their commission fees.
Not as good as $1000 in most cases, but much better than 10%.
Happy investing!
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Mel
[email protected]I think you’re right Terry, I heard that if you intend to complete construction of an investment property within two years you are able to claim all of the loan interest in the meantime. If you don’t complete construction though you do have to pay it all back.
Again – accountant check needed.
Good luck!
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Mel
[email protected]Hi,
Yes you can proceed with Tennants in Common but as a broker I don’t know any lender who would accept 25% of one duplex as security towards any other investing, and because it doesn’t appear that you’ll be receiving any income benefits from it in the form of rent, your serviceability for other loans is not improved either.
I really believe this is a question for an accountant because Julia makes some good points re CGT plus you may have claimed GST input credits which you may need to pay back if you have an ongoing stake in the residence etc.
Good luck!
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Mel
[email protected]One in 80 individuals sounds about right – about 5 years ago it was 1% of all Australian households had a net worth of over $1M and given the growth in property values since then this sounds right. If only I’d had the sense to buy property back then I’d be closer to being on that side of the line.
I thought that Mr Gates was only giving his children $2M each because he thought that was more than enough for anyone – so maybe the new benchmark should be a Bi-Millionaire?[:o)]
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Mel
[email protected]Hi,
I think Elves is on the right track – you have 16% equity in the property already and if the rental income can cover the debt on the remaining $250K then you can probably do it.
First thing I’d do is go to local real estate agents and ask them what kind of rent you could expect to receive pre & post a cosmetic makeover, and then get a broker to shop around for a lender who’d look favourably on your servicing – eg Macquarie who’ll take 80% of the rent on the property you are offering as security and 100% of any other rental income received towards servicing.
Ultimately you have to be happy that you’d be able to manage the new debt level too and cope with any unexpected circumstances. Note you could possibly increase the loan amount to 90% of the house’s value, covering costs and maybe even putting some protection cash back in your wallet to cover reno’s and vacancy periods too.
Good luck with it all during a sad time.
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Mel
[email protected]Love a good themepark but with the other two popping in and out of receivership over the last 10+ years can’t really see it …. although I’d be the first one through the gate if it did!
I have family living in Yatala and they bought several land parcels between there and the Gold Coast in 1985 and have watched it’s value go through the roof. Shame they stopped buying because I think it’ll see huge growth over the next 10+ years, I just hope the new estates don’t devalue the older estates too much, although that certainly hasn’t happened so far.
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Mel
[email protected]Hi Tony,
Equity is very powerful because it is classed as ‘genuine savings’ therefore gives you access to the best and cheapest loans around.
Be aware though that constantly pulling out equity to fund ‘lifestyle’ expenses eg holidays and expensive toys is a bit of a mugs game as you’ll pay a lot more back in interest over the long term, and affect your ability to service debts on income producing assets like investment properties, shares etc. Plus if you have an unexpected change in circumstance or your unit devalues it can be sticky if you have used all the funds up and having nothing to show for it.
There is a lot of refinancing activity happening at the moment with the rise in property values and it’s helping a lot of people to fund accelerated wealth growth, just be sure that it’s done wisely and with full knowledge of any taxation/legal ramifications.
Happy investing!
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Mel
[email protected]Hi Alex,
Try Remax at Annerley – Melinda Burns is their property manager, contactable on 3373 0023. They are a very professional outfit and have a long term and growing alliance with our company and they’ve been great to work with.
Tell them I sent you!
Cheers,
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Mel
[email protected]Hi Dr Frank,
As I understand, the risks are basically the same as most other lenders in that if the borrowers cannot repay the loan then the bank can repossess the property and sell it within three months at whatever the market is willing to pay. This tends to bite on the high end of the residential and commercial property markets where the no. of buyers is much less.
From a personal strain perspective the risks of these syndicates are that if one or more people want to get out and the others cannot afford to pay them out at that time, also that if there are any major issues with the property – eg tennants trash it and insurance leaves a gap of a few thousand dollars – how do you split the bill? Contracts between the parties can overcome some of these issues.
From a lenders perspective you will each be jointly and severally liable for the whole debt, ie if you own 25% of a $500,000 debt on IP1 and you personally want go to a different lender for another loan on IP2, then lender 2 will class you as being responsible for the full %500,000 debt on IP1. This one cannot be avoided except by basically lying which is never a good strategy.
There are more complex strategies around like buying through companies etc and properly established syndicates are very successful particularly for short term debt eg to develop and sell an apartment block. They are basically dreadful for long term personal ownership for the reasons above.
Hope I haven’t put you off – good luck!
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Mel
[email protected]Hi,
I always like Simon Macks suggestions, but I think this one is particularly good for a number of reasons:
a) the apartment isn’t a cash cow but seems to be located in the right spot for you, and more importantly
b) any funds you draw against your IP loan for the purpose of buying a PPOR cannot be classed as part of your investment loan, hence you cannot claim the interest component as an expense. This can be very costly.
Would be interested to hear whether your solicitor believes you can get the FHOG if you move in, I believe you should be able to. Also ask your solicitor whether you can get a rebate on the stamp duty that you paid at the time of taking out the loan too, as it is discounted for FHO’s.
Happy investing!
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Mel
[email protected]Hi Daniel,
Yes you probably can by either:
a) refinancing your current place, drawing out the equity and using that to establish a new mortgage over a investment property, or
b) cross-securitising against your mortgage.Option (b) is probably cheaper short term, but more inflexible and possibly not cheaper long term but it is the way that many people start getting into IP’s. Option (a) gives you the freedom of choosing the best and cheapest loan product on the day and making changes to either mortgage without affecting the other. The other advantage of option (a) is that if anything unexpected happens and you do have to default on a loan, the one bank does not have security over both properties hence the ability to dictate which one gets sold.
Before you get your house revalued make sure it’s in top condition as that can help with the valuation. Valuers are picking an estimate of what they think the property could be sold for in under 3 months if required, so the less renovation/repair projects on the go at time of valuation the better.
Happy investing!
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Mel
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