Forum Replies Created
Asking the Vendor to leave money on the table isnt that difficult and i guess if it is going to be attractive this market is ideal.
Couple of things you need to bear in mind:
1) If the Vendor is having to wait for a period of time to receive the full amount of his asking price then your power to negotiate is diminished. There is nothing that gets a Vendor hungry than a clean cash contract or one with limited conditions.
2) Whilst, the Vendor maybe happy to leave some money in the deal his financial situation may not allow it. If the Bank hold the property as security (and you may wish to do a title search to find out in advance) then he maybe required to repay all of the indebtedness prior to being given clear title.The ideal situation is to make it attractive for him in slow market. You will probably need to offer him a commerical rate of interest and allow him to register a second charge or caveat aginst the property to protect his interest. You will normally be liable for his stamp duty, mortgage registration etc and legals.
Assume the property was for sale for $100,000 you might say to him would he be happy to accept $90K on settlement and a further $10K repayable in 24 months (ideally longer the better). You agree to repay to him interest at say 7% with the principal repayable at the end of 24 months.
If he were to receive the money he would merely get circa 5% in a money market account but if he needs the funds to support his next mortgage his required rate of interest will be higher.
On the savings front you will certainly benefit with a reduction in mortgage insurance being charged by the lender even if you do have a second set of legal costs.
The other thing to bear in mind is if you were to borrow the full 100% would you be able to obtain a considerably better price for the property with a subject to finance clause only.
The other thing to bear in mind is that whilst there lenders that accept a 90/10 application where the 10% deposit can come from any source this is not the case with every institution.
Make sure you get good advise from a independant mortgage broker someone who has done many deals like this before.
If you want to take this post offline feel free to email me and i can give you some ideas as well as suggested contract wording.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Loanwolf
What State is the property in?
Cheers Richard
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Hi Jordan
Another Victorian who has seen the light and decided to invest in Qld good for you.
Slightly unsure as to the laws relating to contracts in Victoria but the Qld system is simple.
The Standard Real Estate Agents of Qld Contract contains between 2-4 pages of property and personal information 9dependant on whether it is a House or Unit) and then upto 13 pages of explanation and defination.
At the front of the Standard Contract comes a Contract Warning explanating to you certain rights that you have under the Contract.
Most Contracts are signed subject to finance and a building & pest inspection although again these are indivual decisions and may not proove attractive when trying to negotiate the best price from the Vendor.
In addition, all REIQ contracts now come with a 5 days cooling off period. This can be waived by obtaining a statement from you Solicitor that he has given you advise explaining the consequences of waiving this right. It is to be completed on a prescribed Form 32A.
Should you elect to terminate the Contract during the 5 day cooling off period and using the Cooling Off notice as the reason for doing so then you will forfit 0.25% of the purchase to the vendor deducted by the agent from your deposit.
Should however you terminate the contract because either
1) You were unable to obtain finance to your satifaction or
2) The building / pest inspection did not come upto your expectationsthen a full refund of your deposit is obtainable.
The Standard Contract passes the Insurance Liability onto the purchaser who is responsible for insuring the building from the date of signing the contract. This should be effect by a temporary Cover Note.
Should you require a Qld lawyer who specialises in conveyancing please feel free to email me and i would be happy to give you their contact details.
Remember with any IP purchase ensure that your loan is established correctly to maximise Tax benefits as well as reducing interest payments.
Feel free to email me should you need assistance in this regard.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Mallowe
What is it you are trying to achieve.
We have used Put / Call Options a lot in Brisbane for our development style projects and admit however good my Accountand is i would never let him write the Deed up.
I beleive you will need a few more than 2 / 3 pages but should be able to get a Solicitor to condense it into around 5 pages.Remember, dependant on what you are trying to achieve you will also need to show the full REIQ Contract which will be exercised if the Call Option is taken up. That in its own is 17 pages long.
Cheers Richard
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Brizza
Very true the lenders seem to frown on this type of lending.
I would say however that from the deals i have done for owner builders you should be able to achieve 75% LVR at standard variable rates.
This percentage is taken on the land purchase price and the complete costs of the kit home.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
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WB
Your scenario is simple in ideals but has also forgotten a couple of important issues concerend with property investing:
1) Building Allowance Write Off’s
2) DepreciationBoth these are non cash items but will dramatically effect your Taxation position.
Secondly 10% PA is not that great in the markets when most achieved more than this year. As an ex derivatives trader from way back i can assure you that those returns can be made in a day but also lost in the same time period.
Property is considered by many as something they can see and touch in the way of an investment. Prices were not effected in Brisbane after Sept 11 although World markets were and can be a lot more volatile.
Over time property has certainly proved to be a good long term investment. The entry and exit costs maybe be higher than the markets and the on going service costs i.e land tax, rates etc maybe reduce the net returns but over time the capital growth makes up for this.
Correct loan structure and set up can reduce the interest burden on your IP and put you in a better position to launch into the next investment whatever that maybe.
A mix across the board is surely a wiser option that putting all of your eggs in the one basket.
Cheers Richard
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Yobab
Try someone like Pro rentals in Brissie i beleive they are a lot lower than than.
Must admit for the buy / hold properties i own over Qld i would never pay that sort of rate.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
JS
The problem i see and you and I have discussed the deal off line is that:
1) If i was wrapping it i would want 20-25% mark up on the property which defeats the object of your exercise.
2) I wouldnt take a wrappee who couldn’t proove his income.All in all 95% lodoc doesnt sound that bad at all.
Cheers Richard
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devil
Steven and I use the same lender i am sure and i believe that 8.99% is a good rate for someone who cannot prove any form of income through the traditional channels.
On wrap deals i charge 9.25% and never take on a client that can’t prove his income and that rate is charge don 125% of the purchase price.
All in all at 8.99% thats say 2% above the variable rate of interest for 3 years i don’t think you can complain. The alternative is to do you books upto date and then declare your income.
Cheers Richard
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You might also like to try Mic at Househunters as they are excellent in locating properties for clients.
Their number is 02-49432864 but they cover the whole of Oz.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
PT
Don’t feel that age is ever an issue in being successful.
As for building up a team to assist you:
1) Your Bank Manager will be off and looking for promotion when the opportunity arises and will not think of staying put becasue you are his customer. His lending policies will change as his Banks criteria alters over time.
2) Believe it or not myself alongside a lot of the brokers on this forum are not only in finance for the money. I enjoy helping people and spend a lot time with clients answering questions on wrapping or generally building up the IP portfolio. If they ask me to assist them with their finance then sure I earn a commission.There are some brokers out there that will suggest you refinance each year or so merely for the upfront commission. The broker on the forum are ethical and do not suggest that. In fact we work together and i often receive referals from other brokers and refer to them clients as well.
3) Accountants – Well certainly you may go through a few before you find a good one and someone you can relate to and work with. Yes they have to make a living but not all firms charge ever time you pick the phone and ask a question.
4) Agents – well they are merely looking for a sale and in my opinion don’t seem to work hard for the Vendor only themselves. i have some great relationships with a few Agents here in Brisbane but others ring you when they have a property for sale and have tried all there existing client base.
Developing these types of relationships will take time.Start slowly, structure correctly and you will build up your portfolio.
Cheers Richard
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our specialityRichard Taylor | Australia's leading private lender
Dev
Sorry i think we were all under the impression that you had zero Bank funding.
60% is low dependant on the Franchise you should be able to get more than that.
To be honest unless you are going to allow the investor to be active in the business so he can see where his or her funds are going i think you are going to struggle.
Cheers Richard
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Hi Devilcv8
Yes like Terry i must admit i was suprised you havent decided to get a lender to fund a portion of the investment.
Depending on whether the franchise is recognised by the lender i have done deals upto 70/75% of the value. Admitedly they need to be an acceptable name.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Hi Beegee
I agree with a lot of the posts already put forward. Dont wait until you have paid of your home loan before you start investing.
With net income around the $10K a month mark you should ensure that you loans are set up to maximise the interest savings.
By all means utilise the available equity in your PPOR to start investing but also remember that your home loan imterest in not tax deductible and needs to be repaid as quickly as possible.
Start by consulting a good independant mortgage broker to work out the best way forward.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
I think you would find no shortage of tenants and a list as long as your arm to rent.
Whilst, you certainly dont want any particular damage to the property i beleive that the housing commission if they are fronting the bond will look after minor repairs like a broken window after then tenants move on.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Hi Mum
Sorry are you authorised to offer this investment advice?
Just curious.Cheers Richard
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HI GG
Whilst population and post code has a bearing on lending areas this usually only applies when mortgage insurance is required.
With the majority of traditional lenders there is no boundary albeit property size i.e large acreage and remote locations might put them off.
With securitised lenders who mortgage insurer every loan then their are post code restictions.
If you have an area you would like me to check for you please feel free to give me the suburb and postcode.
If you want to take if offline as it may involve personal information please feel free to do so.
Cheers Richard
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Hi IV
Neo is right any interest you receive in a high interest bearing account is taxable and thefore the value is dimished.
Why don’t you establish a 100% offset account alongside the PPOR home loan and deposit every cent into this. This includes your salary, rents from the IP and any other form of income.
This way you will receive the same rate of interest as you are repaying on your home loan but it will be Tax Free.
You can always transfer lump sums over to the mortgage account periodically if it makes you feel better and you want to see the actual principal amount reducing.
Cheers Richard
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Jacob
Same story. This link might help answer any further questions
http://www.firb.gov.au/content/default.aspCheers Richard
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Hi Vanessa
Welcome first to a fellow Pom to the forum.
The question has a split answer:
1) Whether you can actually invest in Australia in the first place.
2) Whether you can obtain a loan from a Australian lender.In summary:
Answer 1) Foreign persons temporarily resident in Australia for a period exceeding 12 months from the time of application for approval are eligible under foreign investment policy to acquire residential real estate. If the property being purchased is an established dwelling, that is, one that has been previously occupied or sold, foreign investment approval is still available provided that the dwelling is to be used as the person’s principal place of residence, not for rental purposes and the property must be sold when their visa expires or they cease to reside in Australia.
2) Many Australian Financial Institutions accept application from foreign citizens however normally reduce the LTV limit or insist that the security is self funding without havinbg to rely on their foreign income.
As always there is exceptions but hope this helps.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
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