Forum Replies Created
Terry, I actually hate arguing. However, I love a good debate or discussion about a topic. Just because I do not agree with things you say or advice you give does not mean I am trying to argue with you. I am merely trying to put my point of view across supported with examples (and whatever other information I can find) so readers can make an informed decision. If you find it rude because someone disagrees with your comments, I apologise.
I look forward to your example.
DD, I think you missed the point that Terry was advising us to borrow against equity BECAUSE the rent or other income could not service the loans. In your example, if you keep borrowing and using the funds to the maximum of rental income, what do you do if one or two tenants move out of your properties?
Also, regarding your paint job comments, I don’t think a fresh coat of paint is going to do much to the property value. If you ran out of money and were looking to paint the house to increase equity to borrow against to fund your lifestyle, how would you pay for the paint anyway?
Robert Bou-Hamdan
Mortgage AdviserThat does not explain why you are selling your home especially if you believe the market will still decrease over the next 12 months.
Robert Bou-Hamdan
Mortgage Adviserhttp://www.mortgagepackaging.com.au/index_files/hot_links.htm
Everyone does different things.
Robert Bou-Hamdan
Mortgage AdviserMy suggestion is to sack your accountant who advised you to purchase 1/8 of your properties in your super fund. Other than that, I can be of no real assistance on this one.
Robert Bou-Hamdan
Mortgage AdviserMarc,
I don’t think my mind is biased. I think for myself as is clearly evident in my ‘never hold back’ attitude. I am a very passionate person about something I believe in and I am definately not guided by others or easily influenced.
I never said he did not have a brilliant mind. I merely stated he did not play by the rules.
I must ask…
Were you a Rivkin Report subscriber?
Robert Bou-Hamdan
Mortgage AdviserSome websites that may help are located at…
http://www.mortgagepackaging.com.au/index_files/hot_links.htm
Depending on where and how you search on the internet will determine your success.
Robert Bou-Hamdan
Mortgage AdviserSimon (Mortgage Hunter) who is a moderator on this forum seems to know a lot about low cost accommodation. Maybe he could help you a lot.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Terryw:Neither Navra nor the IC advocate buying property when you cannot afford to.
If you need to borrow for living expenses, then you cannot afford to buy more property.
They merely advocate getting yourself into a position, while you are working, of purchasing good quality high growth property. During years of growth, part of this growth can be borrowed to live on or to supplement living.And how do you know for certain that there will be high growth for 7 years or rental demand highly consistent in any area?
Of course interest will accrue, and this would generally not be deductible (but could be with planning). However there would be no tax payable on borrowed funds.Terry, if the money is for living expenses or lifestyle, it is NOT DEDUCTIBLE. The only planning available to make it deductible is commonly referred to as TAX EVASION. Of course there would be no tax payable on borrowed funds – this is increasing your liability.
By borrowing against a property instead of selling to access the funds, you can also save costs and still have access to future growth.You also get access to paying more interest on current rates, potential increases in rates, possible negative equity and, most notably, bankruptcy if you need to keep borrowing to pay your bills. You will eventually run out of equity if things go a little bad as we have seen in the last 2 years.
Have a look at their websites for some more information, and you may be pleasantly surprised.I don’t think I need to. Your summary of their ideas is enough for me to stick them in the recycle bin (for immediate deletion).
Robert Bou-Hamdan
Mortgage AdviserYou can often pick up these houses for free as not many people want them. Do a Google search for relocatable home and you will find a heap of information.
Robert Bou-Hamdan
Mortgage AdviserWOW!!!!
That is hilarious you telling me to be careful about advising about offset accounts. Although I am allowed to do so, I never tell a client what to do. I explain the positives and negatives of various options and the client chooses what they want. As a result, I rarely find myself organising a Line Of Credit. <corrected a typo>
Terry, if I was you, I would watch myself when advising about capitalising interest, taking a low doc or no doc when the client clearly can’t afford to and using equity to meet repayments the client clearly cannot afford to make. I would be most worried about advising a client to take a LOC with a much higher interest rate than a standard loan that does everything they want to do when they are driven by rates and you filled out the FBC acknowledging this.
Thanks for your concern though but I think I am ok.
Robert Bou-Hamdan
Mortgage AdviserYour savings should be offsetting your home loan preferably in an offset account while you decide.
You have plenty of equity available to utilise for investing when you find something suitable while still leaving your non-deductible interest expense at a very low level until you decide to get rid of it.
Robert Bou-Hamdan
Mortgage AdviserMark, I used Al Capone as an example of someone who was convicted of a far lesser crime than that of which they were guilty seeing you think it is ok to be a criminal if the dollar amount is relatively small when you actually get caught. I was not comparing Rivkin to Capone in any other way.
Robert Bou-Hamdan
Mortgage AdviserI don’t think it has anything to do with the lender’s decision. I think it is based around the over-supply of units from builders like Meriton, etc. This is the main reason lenders (and mortgage insurers) reacted the way they did. They made a common-sense decision as far as I am concerned.
Most people do not know that they will have trouble getting a loan on these properties when they sign a contract at a hard-sell seminar two years prior to completion. They only find out in the three months leading up to settlement.
Robert Bou-Hamdan
Mortgage AdviserTerry,
I said the following…
“It related to capitalising interest on investments to reduce non-deductible debt (amongst other matters).”
This meant that it addressed the issue of capitalising interest AS WELL AS many other issues.
You said…
“On the other hand, a finding that there was no other purpose of incurring a loss or outgoing than obtaining a tax deduction would.â€
This clearly supports the point I am trying to make. Capitalising interest to increase deductions so you could pay off non-deductible debt sooner is an example of a deduction that is precluded.
All my comments relate to when the strategy is used for paying down non-deductible debt and I have qualified this by excluding cash flow or not being able to afford repayments at the time the interest is capitalised.
Just regarding cash-flow, I do not see this as a medium to long-term benefit anyway as you are exponentially growing your non-deductible debt (the capitalised interest) and have to eventually pay it all back.
Regarding the links you provided, I have made it clear that non-deductible and deductible debts are to be kept seperate using OFFSET accounts and NOT redraw. If you want me to go through it all again, I am happy to do so but I think it is very clear already if you read all the posts and the 3 page downloadable file I wrote.
http://www.mortgagepackaging.com.au/LOC_v_LWOA.doc
I don’t recall ever advising anyone to mix up their debt like often occurs with a LOC.
Robert Bou-Hamdan
Mortgage AdviserTerry, do you not think it is important to only borrow what you can service comfortably?
Unless you are always taking the more expensive asset lends (that do not require an income declaration and are usually restricted to 60% LVR) which would not be enough to live on the equity if you never pay down the debt, then you are doing 80% LVR low docs which require an income declaration.
If you don’t declare an income that can service the debt, you cannot get the loan. If you make the declaration because you need the equity to fund your lifestyle or make your repayments, then you are committing fraud.
What if tenants move out?
If Steve Navra and The Investor’s Club advocate buying property when you cannot afford to by eating up your equity, then I have just become an opponent to these two entities.
I almost forgot, if there is no growth and you do not borrow, as you stated, how do you live? You were borrowing to pay your bills remember? The plan was to pay bills from equity.
There is not point having seven houses when you own less of them each year or risk losing the lot!
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Nehal:you guys are right,
look i am 15 years old, and i dont know how i got into investing..
thank you
Nehal Rajan Singh
Robert Bou-Hamdan
Mortgage AdviserThe wording of the information you provided could result in 7 days to settle if you do not exchange until the 21st day. 6 weeks (42 days) is standard from exchange until settlement. Whatever you negotiate is up to you.
I am interested in the “conditional accepted offer”. Regarding real estate in Australia, nothing is official until exchange so it provides you with absolutely no protection to be the succesful purchaser of the property if you don’t exchange. What you have been given is completely favouring the seller.
Robert Bou-Hamdan
Mortgage AdviserA financial adviser cannot give advise on anything they are not qualified to give advise on. To give ‘PROFESSIONAL’ advice requires adhering to regulatory requirements and is very different to providing ‘GENERAL’ advice in a forum like this. Anyone can give general advice but people go to planners and advisers for professional advice.
I have never seen an adviser legally advise a client on which property to buy or sell or when to do so.
Robert Bou-Hamdan
Mortgage AdviserTerry, they cannot service that level of debt mate.
Robert Bou-Hamdan
Mortgage AdviserIn defence of agents, properties prices and demand are flat. My understanding of exclusive agency agreements does not prevent you from selling the property yourself. If you feel you could do a better job as you stated, go for it. As long as it is not someone introduced to the property by the agent, I believe they have no recourse. Check your agency agreement’s fine print.
Robert Bou-Hamdan
Mortgage Adviser
