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Robbie B
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May 18, 2005 - 6:39 am
I am with you Luci.. no ‘pros’ here.
You know what they say about Queensland holiday property…
“Beutiful one day, vacant the next!”
To be honest, I just made that up. It represents my view on any holiday letting area.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 6:36 am
I read an article a while back about the problems Australia faces regarding bore water. Apparently, it’s high salinity level, caused by many years of poor farming techniques resulting in high levels of erosion and destruction of the top soil, has rendered it useless and more damaging in most areas of Australia.
I do not recall where the article was so I cannot reference to it. Sorry.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 6:19 am
Originally posted by Dazzling:
In 1970 (I think he was 40 then) he decided to sell the lot and cash in his chips – think he cleared $ 300K, and subsequently lived like a king.
This guys must be an absolute moron. If he honestly believed he could live like a “king” on $300,000, even in the 70’s, from age 40 until he died, he was on drugs. Then again, it was the 70’s!!!
He should have at least allowed for inflation and taxation and invested accordingly.
I still see no support or practical use for living off equity other than short-term to get out of trouble!
Does anyone have something solid????
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 6:13 am
Who is building it? Is it your own project, are you teaming up with someone or is a company selling it to you?
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 5:18 am
Thanks for the overview Luci. I am familiar with draw-downs as it is the most common way.
My point regarding paying upfront or building ‘PART” of a building was in reference to the Strata Title requirement which usually applies to units.
Paying upfront for a single unit in a development is something I have never seen and would strongly advise against to any of my clients.
The paying for ‘PART’ of a building comment is in relation to paying for a unit which may, for example, represent 1/20th of the overall ‘building’ which would then be Strata Titled to define the actual unit.
ANZ should be fully aware that Strata Title can not be forthcoming on a building that has not been built so I do think this request was made in error.
This may be different if it is a complex style free-standing Strata Unit development but I have also never seen anyone paying upfront for these. The reason for this is that the ‘final inspection’ usually finalises the contract of sale as it ensures the property is as advised in the contract of sale.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 4:10 am
The bank valuation cannot be relied on by any other party besides the bank it was ordered by. It is a valuation for mortgage purposes only.
It would be safer getting your own valuation. This should not be more than $300 – $400 for a standard property.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 4:02 am
Apart from my time being used up, I had no problem with the audits whatsoever. It was extremely pleasant. They were a great group of people and I have contacted one of them since for assistance and he even offered to visit me again.
Apparently, they are moving heavily towards mobile assessment and audit. It is a good idea.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 3:57 am
Resi, let me know when you are going (if in Sydney). I will come with you.
Has anyone ever seen anyone thrown out of a seminar???
Robert Bou-Hamdan
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Robbie B
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May 18, 2005 - 3:35 am
Terry, wasn’t all that outlined very clearly in the post above?
I don’t think anyone suggested borrowing any more than the deposit and fees against the family home.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 3:32 am
Nice summation Surrey!!!
Originally posted by Terryw:
I agree that living on equity will not be for everybody and will be a dangerous strategy for some people.
It is dangerous for everyone who would actually need to use such a ‘strategy’.
On No doc loans there is not need to list an income. These are basically asset lends, where the lender is mainly concerned with the security, rather than the borrower.
LVR restrictions are low and maximum exposure levels are low. You would need to have a debt-free portfolio for it to be of any use. This is highly unlikely.
A person with a large portfoli may be getting a lot of money in rent, but they may still be paying a lot in interest and have not much left over. Plenty of people are asset rich and income poor.
So in this situation, you assume they have debt remaining on their portfolio. If paying the interest is a problem, low doc and no doc loans will not help. Remember the lower LVR and exposure restrictions. You can’t have it both ways. Either have a debt-free or low debt portfolio where you won’t need to live off equity or have a high debt portfolio where you need it but cannot access it unless you can service the increased borrowings through full doc loans – HIGHLY UNLIKELY.
What about someone on the pension with a $1mil home fully paid off. Surely drawing a small amount each year to improve lifestyle would not be such a bad thing if it is done correctly and the property is growing, on average, at a faster rate than consumption.
This would reduce their pension and possibly worsen their cash-flow position. Also, how does a pensioner show serviceability for any loan without lying? Pension payments go into the bank account remember? A broker signing off on such a loan is assisting and committing fraud even if they register an ABN!
I am still yet to here a single valid argument in support of living off equity besides when you are in trouble and use it as a SHORT-TERM ‘strategy’ – ie: This ‘living off equity’ idea is NOT a strategy but a ‘hope for the best’ get out of trouble plan!!!
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 3:03 am
You usually only need two payslips as well. Savings history is only required when mortgage insurance is involved above 80% LVR as Simon mentioned.
Robert Bou-Hamdan
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Robbie B
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May 18, 2005 - 2:58 am
Originally posted by JasonBourne:
It won’t affect my investment decisions as I see negative gearing as a tax reduction strategy, which for me is always secondary to my investment strategy (ie, make sure you’re buying a good investment first; you will never get rich off tax deductions).
This is the most sensible ‘strategy’ I have ever heard in this forum and I wish everyone would listen to it and implement it!!!
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 18, 2005 - 2:32 am
It is really nothing. The reason I copped it three times is because I had three different businesses operating at the same time and they would not audit all three at once. I ended up with three different auditors on three different days over a period of a couple of weeks.
I asked them why I was being audited and two said routine checks and the third said you should watch out who you annoy. It was probably my ‘best mate’ from this forum just trying to cause some trouble for me!!!
Anyway, regarding the actual audit, each assessor contacted me by phone and made an appointment suitable to me. They suggested I have my Accountant present if I was concerned by the audit and also told me to have any receipts, computer records and other related documents handy.
They were very punctual, professional and extremely courteous when they attended the appointment. They show up with a mobile office (large case) containing their computer and lots of additional info.
They asked to see how I record everything which I showed on my laptop. They looked through the information for a few minutes and then singled out an entry and asked for the corresponding receipt. I provided it promptly and they did this process again 1 or 2 more times.
It seems that because I promptly showed the receipts for each enquiry, the audit was over. It seemed very simple. I asked “Is that it?” at the first appointment and the assessor said if you couldn’t show the receipts, we keep looking deeper and deeper. They also said they were happy with how I recorded things which made it easier for me.
They then asked if they could help me with anything so we dicussed a few different aspects of the accounting process. They provided me with a lot of great booklets and guides and gave me their card if I ever needed to contact them for further assistance.
I guess if you are fairly organised and operate honestly (mistakes are not a major concern), an ATO audit is a breeze!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 5:44 pm
Number of posts mean nothing. My high number just represents I have no life or I am a computer junkie!!!
This is certainly nothing to be proud of and nothing to strive for.
As for the bullying, I copped it big time when I started out in this forum. It passes and things get better. I think I wore most of them down. You might even end up with a ‘reputation’ like mine (don’t know what that is exactly).
Anyway, stick around. There will always be some fun discussions about wrapping!!!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 5:37 pm
Very hard to borrow against these properties. You will need a large deposit. I would look for something else if I did not have much cash.
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 5:33 pm
Hi Rebecca,
Welcome to the forum. Your questions are not “dumb” at all.
Assuming you can service (repay) a larger debt, you could borrow more than 80% on a property purchase assuming the security property is suitable to the lender. Going over 80% would result in mortgage insurance which is a waste of money if you can avoid it. Luckily, you can avoid it.
In your example, the purchase price of your investment is $330,000. To settle this property would total about $345,000. Assuming you only take the 80% from your lender, that will give you $264,000. You would need $81,000 to settle the property.
If you have the cash you need, this is a good thing. You do not need to use it though. Some people like to have a lot of cash on hand just in case something pops up.
Should you want to keep your cash, you will need to borrow the 20% plus the settlement costs (about 4%) against your family home. That would mean a loan of about $81,000. It is a very small loan secured by an expensive property leaving you a lot of equity. The whole debt will also be deductible (if you need deductions) as the purpose of the funds is for investment.
Regarding your risk questions, YES it will put the home at risk. The risk is that if you can not repay your debt, they will sell your home to recover the funds. This is highly unlikely in your situation seeing you have so much equity available on your family home.
Also, should things go really bad and you had to sell your investment property for 10% less than what you paid, you would still only owe about $48,000 secured against your family home which should be fairly easy to pay off. Proper insurance will cover you in the event of loss of income or death of income earner or even loss of rental income in any case.
In other words, assuming you have a healthy income now, your risk of losing your family home would be very minimal at this low level of borrowing against it.
As for the deeds, they will take a mortgage over the property (not a caveat) and hold the deeds. This is not a bad thing as they will be stored safely. It is not really an issue who holds the deeds anyway as long as you make your payments.
Some extra tips…
* Do not cross-collateralise your homes (ie: tie them together). Make sure the loans stand alone.
* If you have the cash, use an offset account or unlimited free draw loan and deposit the cash into this account straight after settlement if you do not need the tax deductions.
Proper structuring is very important and will depend on your individual requirements. Sitting down with a good mortgage adviser / broker will be invaluable. You may even end up buying a few more investment properties instead of just one.
Good luck with it all and let us know what you decide to do.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 2:06 pm
Yeah, they are fast becoming the ‘Clayton’s’ investors bank!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 2:02 pm
When I am unsure of something, I kind of like going straight to the source…
http://www.ato.gov.au/individuals/content.asp?doc=/content/20427.htm&pc=001/002/026/003&mnu=5060&mfp=001&st=&cy=1
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 1:03 pm
This may be old ground for you and I but it is new for some posters and many readers. The only off topic comments in this thread are one of yours and my response. I have deleted my response so the thread is back on topic.
If you get involved with something that is controversial, you have to be able to deal with the opinions. Believe me, I know all too well – remember Derivex?
Robert Bou-Hamdan
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http://www.mortgagepackaging.com.au

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Robbie B
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May 17, 2005 - 12:56 pm
Originally posted by dmichie:
No worse than the “Equity Lending is a disgrace !!” thread I would have thought
I agree. That should be in the finance section.
Robert Bou-Hamdan
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