Forum Replies Created
Howdy,
As a broker I genuinely don’t see the interest rates on low doc loans streaking ahead of the pack primarily because there is so much competition between low doc products. [
][^] That and the fact that yes they are getting a premium payment already to cover the higher than expected default levels.I think that if rates go up over about 9% in the next 1-2 years and/or property values drop significantly then all loans will be affected fairly equally. Low doc loans account for about 20% of the market, and that’s PPOR as well as IP’s. IP’s on the other hand currently make up about 40% of the lending market and 35% of the whole property market. Will we see more defaults in low doc lending than in the rest of the loan market – hard to say!
Regarding property values – personally I don’t see a few dozen towers of ‘concrete boxes in the sky’ (Steve’s term) in inner city Melbourne and Sydney as the only barometers of the market and somewhat tire of the hype. However, if prices in outlying established suburbs start to drop significantly along with steep rate rises then Lender Mortgage Insurers will be forced to increase premiums, which may lead some banks to increase interest rates higher than the RBA increases or on-charge LMI below the 80% LVR threshold. Again I believe competition will dictate which sectors of the market this change will affect most and all lenders will react differently, giving borrowers choices.
Some economists believe this downturn will happen next year, others think it’ll start in 2006/07 after three more years of boom, and still others say steady as she goes … who knows?!!
As Steve suggested at the course, in addition to always doing your sums for a ‘when to buy’ strategy, also set yourself up with a ‘when to sell’ strategy too for every purchase!
I’ll stop prattling on, but as I often recommend – get a good broker onside to help you stay informed and to explain all your options!
Happy investing.
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Mel
[email protected]Hi,
Given how active you have been the short answer is happily yes, you have lots of options. As a broker I would present you as a ‘self-employed’ investor who used to have a second job and by providing two years of tax returns and investing in the types of properties where cashflow covers repayments we should be able to get you a low i% full doc loan or if need a slightly higher (0.5%) low doc loan without offering too much of your portfolio as security or none at all if you would rather draw a deposit from equity funds available eg through a LOC or redraw option than use your savings.
Drop me a line if you’d like more info.
Happy investing! Follow your dreams.
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Mel
[email protected]Hi,
Assuming the value of your house has gone up more in the last few years than it will in the next few years, pay to have a valuation done just prior to moving out then you will be able to claim the portion of gain prior to moving as CGT-free should you decide to sell down the track.
Yep the rent is income but as kkowalsk says it’s able to be offset against all borrowing and rates/body corp costs, depreciation if you’re interested (remember this is deferring tax, not eliminating it) plus maintenance done AFTER tenants move in.
Good luck!
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Mel
[email protected]Hi Damian,
PPOR = principal place of residence. Also known as O/O = owner occupied.
You sound like you have options, just not a huge amount of time. I am a broker in Brisbane and may be able to help either personally or by pointing you to someone else in your region and I think getting more info from you offline may be best.
There are lots of loan options for this type of proposal depending on your circumstances so don’t stop trying!
Cheers,
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Mel
[email protected]I’ve read about that Tulip mania – weird stuff, maddening crowds at their best, at least houses have more than a 6 day lifespan, I hope!
Steve’s seminar in Brisbane on Sunday was fab as expected, inspiring stuff when it’s not shrouded in the gloss and rah-rah NII-style, just facts and strategies. One of the things he recommended was to read Frank Lowy’s autobiography as it appears we are replicating the 60’s ‘bubble’ process in Australian property, looking forward to reading it!
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Mel
[email protected]Grandma Huey you appear to have a nice predicament in that really you have a lot of good options.
Why not go half and half between shares and property. For the property side of your investments personally I’d seek out some one-on-one mentoring from an active and experienced advisor like our very own BillFromOz for help in finding properties that suit your yield and possibly location requirements. For the shares side again the likes of crashy or waynel seem really helpful and honest in how they invest and profit from shares.
I agree I think you are doing the right thing too, rather than poking it into a low interest rate bank account and hoping the government support doesn’t dry up, good for you!
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Mel
[email protected]Hi,
My folks hail from a 4000 people mining town in the NT which has been going for about 32 years and where up to two years ago you could buy a small house for $100K and rent for $220 per week with literally a waiting list of renters. People cottoned onto the benefits of owning these houses about two years ago and while the rent’s gone up to $250pw the price has gone up to $200K. They had opted for a neg geared unit in Brisbane instead, and have been kicking themselves ever since!
If the mine’s not going anywhere fast and the building is sound, go for it!! See a WA broker about the best lending options too – you’ll be suprised how much the lenders vary and you should be able to get at least an 80% lend no problem.
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Mel
[email protected]Hi,
At this stage our brokering firm is still of the opinion that the ATO may make new rulings which could retrospectively disallow this type of claim resulting in v large tax bills for investors, so we are not recommending it to clients.
That said if clients understand the risk they are undertaking and still wish to proceed then of course we’ll assist them. Just don’t count the ATO out yet … the sting is often in the tail and they are not happy about the amount of money being dished out for property investment at the moment. I’d be interested to know what other brokers on the forum think …. [?]
A ‘fact’ from a quantity surveyor last week, hence possibly true possibly not, was that for end of 2002 financial year there was about $1B extra claimed as expenses by property investors over and above income … this makes the ATO and the government a bit cranky [}
] despite the money they rake in from all the other property taxes they are on a mission to clamp down on I/P claimable expenses.[
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Mel
[email protected]Hi BlackJack,
Given you seem to have some equity available there are several ways to get you into a better position financially, and I’d be more than happy to help. [
]It is very important to keep your credit rating intact and not to default on any bills or payments. Short-term reducing the interest rates you are paying on your debts can definitely ease the strain on income but it’s always good to do this in conjunction with a budget or spending check just to make sure it doesn’t transfer the problem from small repayment issues to big ones! [
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Mel
[email protected]Howdy,
As a broker I always try to make sure that people have had proper tax advice as well as hearing the loan options for this type of scenario. I personally believe trust funds are the way to go for both maximising returns and asset protection long term.
From a lending perspective borrowing in individual names can help couples to acquire a lot more negatively geared or neutrally geared investment property as they are not jointly liable for the other partners debt plus refinancing and reorganising loans can be a lot easier. With positively geared property serviceability is not such a big issue. Lenders will lend to borrowers who are not on the certificate of title provided they can see that they intend to receive a benefit, eg part of the rental income. Independent legal and financial advice may also be a requirement with lenders in certain scenarios, and is a good idea in any case.
As I said, you have to weigh up the pros and cons from both the accountants advice re tax saving techniques and the broker’s options for loan structures and availability to work out the best opiton for your investing plans.
Hope that helps.
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Mel
[email protected]Great tips still_in_school! (the legal ones [
]!)There are some lenders who in this type of situation will only require a ‘kerbside’ valuation and a broker should be able to look these up for you BUT remember these guys spend their lives driving around and if they’ve noticed any renovation activity at your house over the last few months OR you are basing an estimated increase in value upon improvements you’ve made to the property, then they’ll want to look inside.
Personally I’d get it looking as respectable as possible in amongst the renovations, get the val done, then when applying for the loan say that part of the extra funds are for completion of the renovations – banks logically like to see people increasing the value of the assets they have security over!
Good luck!
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Mel
[email protected]Hi,
Richard is about as experienced as they get! Another great option that about 90% of the experienced ‘wealth coaches’ at a Peter Flannagan seminar I went to used was JV’s, linking cash-poor with time-poor people, particularly in short term projects like renovations or constructions.
Good luck!
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Mel
[email protected]Hi Kerreni,
From the finance side most brokers will be able to help you with a 100% lend as there are a few products available now with lenders like St George, although their criteria is fairly strict and it’s not the cheapest loan around – ie other options may work out to be more cost effective for you. [
]I’d be happy to help and I’m based in Brisbane.
As for the ‘where to look’ side – keep researching and on the gold coast be wary of the marketing sharks …! [
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Mel
[email protected]I’ll be there – can’t wait![
]Have been forum-absent for about 3 weeks tripping around the country and being v busy, but as Freddie says ….I’m baaaaaaccckkk!
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Mel
[email protected]Hi,
I’ve also seen parents set up formal loans with their newly working adult children who just lack a deposit where they have a contract with the child. The child is the borrower and just needs to show enough income (or not in low doc situation) to service both the bank loan and the parents loan to pass. Quite a few lenders will lend to 90% in this case full doc or 80% low doc (90% low doc but high rate).
There are other products which allow the parents and children to all invest together where the parents income services the children’s debt, but the child’s name is on the title and they are still eligible to get FHOG etc. Handy the first time, but can be restrictive long term as all parties are jointly and severally liable for the full debt making investing outside this group loan structure difficult.
Basically there are lots of options, and often extend to include companies, trusts etc as well. As for what portion of the market it is, very hard to tell. I see monetary gifts of some fashion in about 30% of young home buyer purchases.
Hi Pousti,
Good start!! I think reading a bit about the pros and cons of different options (much of which is discussed here on the forum) and getting a team of accountants, brokers etc together for advice is probably a good direction to head because having an investing strategy that fits your circumstances will be much more effective than trying to imitate ‘the crowd’. Steve’s book is excellent and a very good argument for positive cash flow. Others like Dolf de Roos come highly recommended as well.
Best of luck! [^]
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Mel
[email protected]My nicknames were ‘sMellie or Bogues – don’t ask – so I think Melbear is probably the pick of the bunch! [
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Mel (1)
[email protected]Hi Diane,
From the info you’ve given, I’d buy it in a heartbeat too, and as Mel says do the cleanup myself to get the extra ‘value’. Sounds like a good find, well done! [
]Most lenders won’t reassess a new purchase’s value within 6 months unless there is a major renovation done, but some lenders will – this may help you draw out the equity gain by cleaning it up and adding a carport and by the sounds the rent will still cover the increased loan plus you’ll have cash back in your pocket to keep investing – brokers come in handy to organise this sort of thing!
Let me know if you’d like any assistance.
I think I’ll have to start calling myself Mel2 [:0)]
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Mel
[email protected]Hi Mitzu,
Home Loan Connexion have a very experienced broker team in Sydney who I can highly recommend. They have been around and there’s not much they can’t help people with.
Try Mike Mabey via email on [email protected] or phone 0412 484 288.
Good luck and keep pressing on, I think seeing a broker is definitely the right approach for education if nothing else.
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Mel
[email protected]Hi,
Yes I have found even inner city valuations a bit on the conservative side at the moment. The valuers do have to be careful as the Lender Mortgage Insurers can actually sue them if a borrower defaults and the property cannot be sold for the valuation price within 3 months (not 30 days) which naturally makes valuers cautious especially if they see auction clearance rate slow and no. of sales slow.
Presentation plays a big part as well, even though they tell you it doesn’t, starting with a nice green yard, and minimal DIY reno’s in progress inside, again because of the ‘sell within 3 months’ policy they work to – and yes it is definitely the new lenders valuers that you need to use, although as Simon says you appear to have a few loan options to consider first.
Good luck!
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Mel
[email protected]
][^] That and the fact that yes they are getting a premium payment already to cover the higher than expected default levels.
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