Hi,

For those who don’t know, debentures are debt security (ie. loans) of various time lengths issued by businesses, usually listed companies.

As the risk is higher than a bank term deposit, so too is the return offered.

Kavita’s point about looking at the independent assessed risk rating (such as S&P) is well made. No doubt there were some people who held Parmalat debentures that have just kissed their cash goodbye.

One thing to be especially mindful of is the liquidity of the investment… that is, how easily can you access your cash (sell the debenture) if you need to – and what are the costs involved.

Hope this has helped.

Bye,

Steve McKnight

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Hi,

I’ll have a stab at some of the answers although I recommend seeing an appropriately qualified and experienced professional re: tax matters.

Finance

I’ve looked into this and most major Australian lenders will lend on OS property, but they want Australian property as security.

This makes it tricky, so to get around this I have just jumped through the finance application hopes in the OS areas where I invest (don’t ask).

Such borrowers have lent 70% LVR, but I know of people who have secured 80% LVR. It all depends on the risk profile of the applicant.

CGT

I don’t know the answer to this one, but I would have thought that CGT only applies to Australian assets (ie. Australian source).

What is more likely is that there will be a double-tax treaty with Aust. and the overseas country that will outline how profits are taxed.

Bottom line: you’ll have to pay tax, but you shouldn’t be taxed twice.

Inspections and tax

If you have Australian income then expenses associated with earning that income are deductible. It’s a matter of the timing of the expense and whether or not you’re showing (or are likely to show) a profit from the investment on your Australian tax return.

If not (or in addition to?) Australia, then you should be able to claim the expense against any tax in the country where you are investing.

FHOG

I think so… but check this out. My understanding is the grant is only applicable to and in relation to properties in Australia. I’d imagine that you would have to be an Australian citizen though, in addition to all the other qualifying criteria.

Stomach Churning…

[] Fear is always present, but is overcome by isolating what can go wrong and having contingency plans in place and readt to roll out should things turn sour.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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*sigh*

Post moved as requested, and locked as discussion seems to have moved on. Let’s relegate this to the archives.

I see the point being made, but agree that a private e-mail would have been the appropriate first point of contact.

Cheers,

Steve McKnight

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Hi,

It’s a time value of money calculation whereby at the end of 25 years of principal and interest repayments, the amount of the loan outstanding is $0.

Use these variables in the Excel PMT function and you should come to an answer of $62.82

N= 1300 (25 years * 52 repayments per aunnum)
PV= 35,200
R/i = 0.15481% (8.05% / 52)
First payment at beginning

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hey Richmond!!!

Congrats mate. I didn’t know you were getting married… welcome to the club.

No – I’m not melbear – just me.

As for 10 year loans… it’s not that hard to find out, you just need to dig further than the surface.

The infochoice website has it nicely packaged for you – just call the people who offer 5 year fixed terms to see if they also offer 10 year terms. I bet some do (wink, wink) but they just don’t advertise it.

Website (doesn’t seem to be running that quick):

http://www.infochoice.com.au/banking/homeloans/compare/tables/fixed/I/VIC.asp

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Mel,

That’s why Dave and I continued with the accounting business and set up other businesses too.

Banks don’t want low-risk, they want no-risk. Strange isn’t it that they had crazy lending practices in the high rise market, yet didn’t budge much with traditional investing.

If worst comes to worse, do low-doc loans where they just ask for an income declaration and the source doesn’t matter.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

There is no magic formula really…

1. We worked as accountants to save up the capital to start investing.

2. Since we borrowed 80%, we needed to find 20% deposits.

3. We began with B&H, but soon realised that it would eat a lot of our capital, so we switched to the wrap strategy where we only needed bewteen $5k and $10k.

4. We sold some of our B&H property that had appreciated to access profits to buy more wraps. Later our wraps cashed us out and we used the profits to buy back into to B&H property.

5. All the while Dave worked as an accountant. I ‘sold’ information (forst) at wealthtipsonline and here at propertyinvesting.com. All the money we made went to buying property.

6. In the meantime I lived off $400 a month my wife gave me from her salary and Dave did likewise.

…oh, plus we both won lotto… []

Have a great day,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

Well… that’s one way to look at it.

Yet I asked Brian, Andrew and Bruce to contribute as I thought it was necessary to show that my results were not isolated and that others were also achieving good success.

If you read their words they actually contain a lot of information about the struggles they grappled with, which while different, are still common themed.

Ideally, and without any disrespect, what I wanted to leave the reader felling was… if Steve and these other guys (from a broad background) can do it, surely I can too.

Sorry if this spoiled the read for you, but have another read and see if you can’t glean any insights.

Cheers,

Steve McKnight

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[]

A private plot to take over the world

<<sinister laugh>>

[:0)]

Nearly bed time for this fella…

Hey, nice sentiment with the saving idea (another post somewhere), but just watch out for the impact of inflation.

Steve McKnight

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Hi,

Hmmmm… intersting, yet slightly strange post.

I agree that buying a -vely geared property would be a mistake to you as you wouldn’t be able to offset the tax loss against other substantial income, so unless you could (1) afford the loss and (2) buy in a time of considerable capital gains – then I think you’d find it a struggle.

My advice, if you are solid in your commitment to begin investing is to consider finding a way to buy the property you are currently in from the government. I understand they offer good deals to tenants who buy them out – so that may be your point of best advantge.

Then, if you can make some money on that deal, you could use your profits to pay the rent elsewhere while you also bought a second investment property.

It’s a medium-to-long shot, but perhaps it’s got legs?!?

Regards,

Steve McKnight

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