What the hell’s going on ?

The last time I recall my brother being any where near inebriated was at his 21st. That’s a very long time ago by the way girls. I was about 5 at the time, but pissed as a newt, relaxing under the Orange tree wondering why it was spinning around, after my unsupervised attempt at emptying the dregs from longnecks.

Do tell of this recent misunderstanding which has led to a recent cutting of the air with a knife syndrome inflicted upon you kind and knowledgable ladies.

Kind regards, Phil

Hi Paul, how the hell are ya?

Good post mate.

Thoughts:

1/ Cash attracts no interest charge .. cash is pure 100% .. look at opportunity costs and the cash-on-cash return
2/ But, as no cost deductible ..
3/ Pay it off the PPOR, then reborrow
4/ Determined usage cost of redraw might then be claimed against IP’s or other choice of punting
5/ If a perceived downturn in house values is generalised across Aus .. then diversify funds in the mean time .. or look at NZ
6/ Consider .. will this leverage your position now, for when those other opportunities arise?

or ….

7/ Buy lottery tickets

or

8/ Do all 5 points in the precise order you listed. Reduce the PPOR, borrow again, select your own mix of diversification and property, VIC, QLD and/or NZ.

Like you said, just thoughts .. and akin to Bill’s idea .. Brainstorming.

The answer will come from the simplest point least expected.

Kind regards, Phil

ps .. then buy 77 Bus Shelters .. sit back and contemplate Squatter’s Rights !!

Thanks Westan,

Excellent. It’s a combination .. rates local and O/S, inflation, dollar value and unemployment.

JH may be correct with his Trifecta. I am broadly anti-union. My union imposed, of whom I am not a member, has been quiet for a long time. Now I can see that union activity/vocality might be a good litmus test of the national economy. About time they pulled their horns in and let the government govern.

In thought, Phil

The lenders I am familiar with do not require a Statutory Declaration, just a statement by oneself as to income and that one is aware of one’s obligations and is capable of servicing the loan.

I would think that everyone concerned is well aware that a Low Doc is in essence an asset loan even if the lenders do not appear to state so outright.

So I don’t think anyone really cares all that much how much one declares as income as long as it isn’t obvious that the statement is a fabrication. (for example by stating a high income whilst having accumulated very little in assets).

It looks to me as if the main aim of a Low Doc lender is that in the event of a courtcase he can say : ‘ The borrower stated ample income to service the loan, and the loan is an unregulated loan as it was for investment purposes.’

Thus the lender cannot be blamed for lending whilst being aware that the borrower couldn’t service the loan.

Correction : I stated earlier that I didn’t know even of one such lender who would be prepared to lend 80% on a $ 1M property.

I was wrong of course as a Low Doc Latinum loan can be obtained on a 80% LVR against a $ 1 M security. []

Cheers,

Pisces133

There are a few obstacles however Alwayslearning.

Firstly in order to borrow a total of say $ 4 M one needs an income of probably $ 400 K or even more (including rents).

One cannot hide from the latest lender that one has some $ 3 M or so in loans from other lenders as a Low Doc loan means that one normally would be required to provide a statement of assets and liabilities.

This statement would therefore show these loans and your commitments to pay the interest.

If one omits these details the information could nevertheless still be picked up from other sources !!

Also, do you think you can state you have an income of say $ 400 K p.a. with a straight face ?
[]

Furthermore some lenders have a rule which doesn’t allow you to have (for example) more than a total of $ 3 M in total loans (both theirs as well loans from other lenders).

Secondly, there will not be too many lenders in this country (I don’t know even of one such lender) who would be prepared to lend 80% on a
$ 1M property.

The moment your loan exceeds (depending on the lender say $ 700 K the LVR dives from 80% to a much lower one (like perhaps as little as 50% !!

So you would therefore need larger deposits than you envisage at this moment.

Thirdly, what would happen if one (or, heaven forbid, two) of the properties isn’t tenanted ? You would have to find the shortfall out of your own pocket !!

Fourthly, you may not be able to sleep with such kind of money owing []

Pisces133

Even if double stampduty can be avoided (as I believe is actually possible under certain circumstances) the transaction between you and the end buyer is likely to become complicated by the resentment rising up in the endbuyer about you making a large profit out of him/her !!

So better to pay the stampduty and have no hassles and problems.

Pisces133

C’mon PropertyGuru .. have a go at the questions. I would like to read your response. I know it will be good.

Phil

Hi again Bronny,

A LOC is the second best thing to sliced bread. If you have 20% by way of equity or cash, go for it. The third best thing is a product I am using, described to me by my broker as a “Quasi-LOC”. It’s a mortgage reduced by 0.5% of the market rate, with an off-set account and a 55 day interest free credit card attached. Annual fees of $295 secure the 0.5% discount.

Your LOC is even better than this, as it is based on the valuation of your property, as opposed to purchase price.

You will quickly learn that you become your own bank with a LOC. The only negatives that I hear about are the possibilities of higher fees and perhaps interest rates also.

I’m sure you will, but if you don’t hear from MelBear, Billfromoz or Simon Macks on your question, please ensure that you persue both of them for an overview. They will be able to explain the pros and cons in far more educated hands-on detail.

Just make sure your broker or branch mananger is wearing a suit at the time of consultation!!

Kind regards, Phil

Leigh my post was in response to how I interpreted Rubbachook’s post when he/she (?) said :

>>In the business world, there’s plenty of money around for opportunities >$10MM right now. This is where the main game is at. Just make the numbers stack up.<<

The above paragraph gave me the impression that
some people appear to think that it is only a case of the numbers stacking up.

It isn’t.

Clearly a lot of things can go wrong with a project.

Some examples ? I know of a builder who did a project in Bellevue Hill (NSW) and who was blamed for the foundations of a neighbour’s house being washed away in a torrential rainfall.

The outcome of his neglect was that that builder is now bankrupt.

What do you think will happen if other building problems pop up ? If one has no practical experience one wouldn’t know how to solve and handle such problems.

I know of someone else whose building was stopped by council because he hadn’t applied for a working zone in front of the development site.

That incurred him unanticipated additional holding charges running at $ 16 K per week !!.

Would one be of a sound mind if one were to put one’s money into funding a deal with an inexperienced developer as partner ?

I have seen many posts by people (not necessarily in this particular thread) who are in an euphoric mood and think everything is plain sailing. It isn’t. There ARE many pittfalls one can encounter along the way.

Pisces133

Let me expand a little bit further on what I said earlier :

Someone who has knowledge charging for passing on his knowledge in seminars or courses etc is fine.

Even if that person were to charge (what many people would consider) an excessive price for his or her seminars one cannot really object as no-one is forcing anyone to pay too much for a service.

There is even a case to be made that it is O.K. for a teacher, who hasn’t him or herself practiced what he/she preaches, to charge a fee
for that teaching.

What is unconscionable is when

(a) the promotion is done in such a way as to suck people in with lies and bulls..t

and/or

(b) the teacher puts out a lot of hype without also passing on the pitfalls to the pupils causing such unsuspecting pupils to dive in and, the moment the picture changes (i.e. the economic climate – or rather, the population’s perception of the economy) the s..t will hit the fan and many people will get cleaned out either because conditions have changed on them or because they dived in without having sufficient knowledge to see through the proposed proposition.

This is what I think has been happening to many people attending Henry Kay type seminars and also with the two tier sales.

I personally know one young man who 2 years ago bought a $ 450 K unit in Melbourne off the plan (using a deposit bond) and who now is facing disaster because he is unable to resell nor able to obtain finance.

I also know of someone else who bought a $ 2 M unit in Sydney off the plan (also using a deposit bond) and who, despite being a high income earner, is looking at a $ 400 K or more loss (which he cannot fund) because he too is unable to offload the property nor able to obtain finance to purchase the property.

Pisces133