Forum Replies Created
No deposit or other upfront funds would be required if you use your existing equity.
As for repayments…
$440,000 existing loan = about $2,845 per month P&I
$250,000 new loan = about $1,617 per month P&I
$250,000 new loan = about $1,400 per month Interest OnlyAssuming a low rental return of $150 per week ($650 per month) which does not allow for ongoing property expenses, insurance, tax deductibility etc, you would be in a negative position. If you want a positive position, you will need to find a positively geared investment property (or more than one if you buy cheaper properties and diversify the risk of vacancy).
Robert Bou-Hamdan
Mortgage AdviserI should clarify that capitalising interest to pay off non-deductible debt is not illegal in itself. Trying to deduct the capitalised portion is.
http://www.smh.com.au/articles/2004/05/28/1085641713197.html?from=storylhs&oneclick=true
Robert Bou-Hamdan
Mortgage AdviserI have you down for around the $200,000 mark without additional rental income assuming no credit card, a worst case scenario with high living expenses and not allowing for the tax break coming very soon.
This goes up to around the $250,000 assuming only a minimal rental income of $150 per week from purchasing an investment property.
Robert Bou-Hamdan
Mortgage AdviserMichael, I think that comes down to extreme censorship and strict moderation. Somsersoft is reknown for it!
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Terryw:A person has a home with a loan and a bit of equity.
They also own an investment property with an IO loan.
They set up a LOC securred on either property.You know I am not a fan of using a LOC unless operating and using it for a cash flow business.
They then use the LOC to pay for all investment property related expenses such as rates, insurances etc. The money that would have been used to pay for these expenses could then be used to pay down the home loan. The interest on this money withdrawn from the LOC could then be deductible.Other than not using a LOC, I have no issue with this. This is good loan management if the loan you are using is at the same interest rate as the other loans.
To take this one step further, what if you were to use the LOC to pay for the interest on the investment property loan. ie you are borrowing to pay for interest expenses? You could then pay the interest on the LOC each month.This is different to what you have previously outlined. Normally you suggest letting the interest capitalise which is illegal.
In this case, you are paying the interest each month on the loan you obtained to pay interest on your investment loan. If the interest rates are the same, which is usually not the case using a more expensive LOC, what is the point?
Why not just pay the interest on the investment loan each month instead of the second loan which will cost you more in fees and charges using a LOC?
Robert Bou-Hamdan
Mortgage AdviserGreat idea… see you there!
Robert Bou-Hamdan
Mortgage AdviserThey also tend to lean towards Listed Property Trusts etc. where they get a commission instead of buying actual property where they don’t as jewel outlined.
Robert Bou-Hamdan
Mortgage AdviserI would find out what the highest offer at the auction was and offer just below that amount. Agents must keep a register of all bids made at auction and there is no privacy issues disclosing these amounts. The reason I say offer less than the highest bid is because it could have been the vendor’s bid.
Robert Bou-Hamdan
Mortgage AdviserDid they not give you a reason for the decline?
Maybe it was too many enquiries or a default you don’t know about. Credit Card assessment uses a scoring system that does not discriminate for any a reason. It is just a checklist type assessment.
I would ask their reasons for the decline.
Robert Bou-Hamdan
Mortgage AdviserNo worries mate. Thanks for pointing out that I should open my eyes.
What does CRIN stand for?????
Robert Bou-Hamdan
Mortgage AdviserBy the way Derek, maybe you should update some information and add comparison rates. It is against the law to advertise incorrect interest rates and information and not provide comparison rates.
https://www.theinvestorsclub.com.au/MortgageClub/Products.htm
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Derek:And finally to Rob, I wonder if your ‘bagging’ has anything to do with the rejection you got from The Club when you expressed a wish to become one of our recognised brokers and the subsequent rejection I sent you in an email around the end of Feb/early March of 2005.
Derek, not at all. I don’t even remember making an application to become a “recognised broker” with anyone. However, I do regularly send out link exchange requests to various websites to promote my own. I would be interested in seeing this request and subsequent “rejection” you speak of. You obviously have my email address.
As for ‘bagging’, I am just seeking information about the organisation like anyone else. I appreciate being singled out though.
Robert Bou-Hamdan
Mortgage AdviserYes we have. I thought it was settled that property was the far better investment.
What does CRIN stand for???
Robert Bou-Hamdan
Mortgage AdviserOk gf, you seem to be a little all over the place. I will try and clarify one last time…
I don’t know why big companies don’t take you on right now. Maybe they do not consider you as any real threat. As for me starting up, I was merely trying to point out that ‘ANYONE’ could do what you are doing. It is not a specialised field and it is certainly one that I am not interested in.
That is your choice as to not changing your plan. If you want the money though, you will need to change it.
Yes mate. I don’t understand anything. You said you had no warranty issues. If you were suggesting that your goods are of better quality than all other retail stores and respected brands, then I think you are kidding yourself. I think you missed my point that price is not always the most important factor.
If you think this is arguing, then I feel sorry for you. I thought we were discussing the reasons why the banks were being tough on you and other matters relating to your business.
To be honest, I don’t think Mr Harvey would give you a second thought. He is one of the smartest and most respected business persons I know. He is an extremely intelligent man. As for floating the dollar, it would make a huge difference in costs of materials and stock and their competitiveness. I think you should look at the impact of this in your ‘business plan’.
As for ease of going onto the internet, it would take them about 2 days with a good team. Registering an offshoot business and building a website is all that is required.
I don’t think there is any right or wrong here. There are just differences of opinion. Also, I do not lend money to anyone. I am not a bank or other lender. I don’t know why you are getting so upset.
As for why I think you don’t have a business plan, I think the following quote answers that…
“Well I cannot get finance.Maybe because I am of the opinion that my figures speak for themselves.I certainly will not draw up a business plan .”
Regarding staff, it is a common business practice to put staff on when the business outgrows you. No-one can grow without limit unless they put on staff to assist.
Regarding staff requiring an ABN, I think you will find yourself in breach of various taxation laws. For example, a secretary that only works for you cannot be classified as a sub-contractor. You will be required by law to pay wages, holiday pay, sick pay, superannuation, etc… That is, unless you want to take the chance of operating outside the law.
I also never assumed you needed a ‘store’ for your goods. What I did imply was that you will need to pay storage for your goods at some point and unless your home is massive, you will need to pay rent for an office or ‘store’ some time in the future.
The information I have been providing you was an attempt to try and help you. I have a lot of experience with small businesses and I also have some importing experience. Also, I am very experienced with finance.
The only way you can get away with not paying storage or rent is if you only order a container after you have received the orders to sell the stock. I don’t see many customers waiting this long for delivery. You will also need to have the container emptied and distributed within a few days or there are costs of leaving the stock in storage.
I wish you all the best with your business and hope you find the finance you seek soon so you can grow at a much faster rate.
Good luck.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by upandcoming:I think you miss the point and I dont think you understand to be honest.I wasnt offered factoring.I was offered it if I comply with their demands.
I don’t think I missed the point at all. You were offered finance that you were unhappy with. You did not make a distinction between factoring and getting a different loan as far as I read. Maybe it is the hour.
You just stated again that you were offered “it” if you complied with their demands. I don’t know if you know this, but everyone who gets a loan regardless of their situation must comply with the demands of the lender to obtain approval. Why shouldn’t you?
As for starting a business and undecutting me then why dont you try.Because I don’t want to.
I will survive and I guarantee that in a few years the ones the banks are helping,ie traditional businesses will go under.You seem to offer a lot of guarantees. How can you be certain of competitors going under? What is to stop them from commencing a new division to compete with your business just like the major supermarkets did with online shopping?
They certainly have the buying power, contacts and skill to do so very quickly should they feel threatened. I am certain they have business plans that identify any threat from online vendors and their tactics to stem this threat. That is where business plans are invaluable.
I just bought a container of chairs that sell for $1200 in the stores and sold the lot for $250 each and made a good margin.What is to stop others from doing this?
…I dont have many warranty issues.I consider this a weakness which a business plan would have identified. I would prefer paying a little more for something to receive a warranty backed by an established organisation.
…the ultimate loser is the competitor who employs staff and pays rent.You can’t do everything yourself. You will grow to a point where you need staff or stop growing. You also need to store stock so rent will also be required. Again, a business plan would have identified this.
Basically, I am trying to convince you to either do a business plan or pay for one to be done for you and you may be pleasantly surprised of the result.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by upandcoming:Well I cannot get finance.Maybe because I am of the opinion that my figures speak for themselves.I certainly will not draw up a business plan .So i suppose it is a battle of wills.I could pay 20% and survive.
You told us you were already offered 36% finance. That means you can get it if you want to pay that much. Regarding your refusal to do a business plan, there is a very old saying… “Business do not plan to fail, they fail to plan!?
Seeing you need them to help you and they do not need you, I think you should be a little flexible in meeting their requests to approve your application.
RISK?That is why they are charging 36%.The problem is they want to minimise risk and still get 36%.If it was that risky why are there so many factoring companies?No, they are charging 36% because you are even riskier than others who have not been bankrupt. There are a lot of factoring companies because they can charge people 36%. They make good money but have a higher default rate than standard lending.
So it isnt unsecured.You have not outlined any real property that is being offered as security. A guarantee is NOT real property.
Using the internet to sell household goods is a bit different.
I sell stuff for $800 that harvey norman sells for $2800 and I can make 40% clear .Who do you think will sell out of stock first?Why is it different? What is stopping me from starting up tonight and selling things at 30% clear therefore under-cutting your business? A price war looms and the winner is the one who has done the best business plan and knows how to attract the most business to their website.
I just cannot understand the attitude of the banks or other finance people.They just want to protect their investment and their shareholders. There are rules and policies they must adhere to.
But i wont budge either.I did it hard and now as far as I am concerned I may as well go it alone.If you want external help, you must be ready to budge. It is their money, their rules. Stubborness will not help your business grow quicker.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by upandcoming:I was bankrupt (just ending)18 months ago
What is to stop you going bankrupt again? The bank might be concerned that if you do, they lose everything. I am amazed that they made any offer at all for unsecured credit. This type of credit is usually the hardest to get (excluding credit cards).
At present I have no debt and cash in the bank.Yet do you think I can get finance?Yes I know you can get finance. It comes down to how much you are willing to pay and its purpose whether you take it or not.
I wanted to invoice factor but the dinosaurs want 36%p.a AND have a speread of debtors to minimise risk.The hide of them!!!They would be taking on substantial risk. The interest rate is reflective of the risk and your credit history.
The banks want guarantees yet call it an “unsecured loan”and want 11% for it.EXCUSE me dinosaurs,but how is an unsecured loan UNSECURED if it is guaranteed and if it is guaranteed then how the hell do you get off charging unsecured rates.A guarantee is just someone stating they are willing to pay that the bank can chase. It is not something they can take and sell to recover their money. Secured credit requires taking a charge over a tangible item. A Director’s guarantee is only taken to enable the bank to chase the individual if they close down the company.
Companies are in trouble because of the internet.I pay no rents,employ no staff,have no debt.I can sell what the others sell for a lot lot less.Hence turnover is increasing yet the dinosaurs cannot see that I am worthy of a loan or an overdraft.I disagree. The internet is an invaluable tool for many companies. I believe companies that get into trouble do so mainly because of inadequate planning. Regarding your internet business, these are a dime a dozen and can disappear just as quick as they start up.
This all being said, congratulations on coming back from bankruptcy and setting up a successful company. Be patient and the rates will move in your favour.
Good luck.
Robert Bou-Hamdan
Mortgage AdviserFirstly, the financial adviser should receive a very healthy upfront commission and good trail commission from getting you to invest in a property trust. This is also a great long term investment for the adviser. The accountant will also usually receive a kick-back. All this should be disclosed in the documentation provided to you.
Disregarding the tax free income from the investment, what is the impact of the interest on the borrowed funds? Do you need the additional negative gearing? I don’t see many property trusts guaranteeing to pay more than the going interest rate on loans.
I guess the adviser would be making recommendations based on your risk profile which should have been determined prior to any advice being given. This is a low-risk investment strategy.
I think some proper loan and account structuring, if not done already, would help pay your non-deductible debt off quicker as well.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Terryw:Rob, Why do you feel borrowing to pay investment expenses would be illegal?
I don’t think it is illegal. I think “borrowing to pay interest on your investment loans so that you can pay all available cash into your home loan or 100% offset account linked to your home loan” so “this will increase your deductions” is illegal.
There is no problem doing what you said but interest on the additional borrowed funds are NOT deductible.
By making statements like this you could scare people away from getting proper advice which could lead to thousands of dollars in savings.Let them sue me if I am wrong. I know this interest expense is NOT deductible so this does not concern me.
Are you an accountant or lawyer?No.
If not, have you had advice on this matter? How do you know you are correct?I have not had personal advice but I have extensively read legal advice to lenders who ‘had’ products to support this structure.
BTW, keep it friendly!Just because I disagree with something you said does not mean I am trying to fight with you.
If you are suggesting that obtaining another loan (loan 3) to pay interest on deductible debt (Loan 2) to pay non-deductible debt off quicker (Loan 1) and then deducting the interest on Loan 3 is legal, then I take issue with this.
The structure you suggest is no different to capitalising interest on investment debt to pay non-deductible debt off quicker which is clearly illegal (Hart’s Case).
Why would you get a loan at 6.75% to pay off a loan at 6.75% to help pay off non-deductible debt UNLESS you were capitalising interest on one of the loans?
I thought we went through all this very recently.
Robert Bou-Hamdan
Mortgage AdviserDavid, we are going in circles.
I think I have explained enough.
I am happy to discuss another topic with you.
Until then, ciao.
Robert Bou-Hamdan
Mortgage Adviser
