Hi,

I understand that Greg Levett is sourcing a lot of wrap loans through GE under a full disclosure basis… but I welcome both Darren’s and Greg’s confirmation of this.

Regards,

Steve McKnight

Hi,

A possible contact to try is Charles Gluck (mortgage broker)on (03) 9852 9188.

Regards,

Steve McKnight

Felicity,

What did your ad say?

Replicate it here using headlines, bold etc. and I’ll read it and provide some feedback if possible.

Bye

Steve McKnight

Hi Andrew,

As I pointed out in the Wrap Library, I think that the best way to manage the risk with your client is to complete a very thorough qualification of their ability to repay.

Follow the advice I outline in the ‘Vendor Finance All Wrapped Up Module’ and also on the PATTERN Templates (Tenant Application).

You can help yourself in overcoming the fear by listing out what it is that you think you are afraid of as a reply to this post and I’ll help you to identify the worst case scenario.

That’s what I did at the beginning to overcome the fear I had with investing.

Andrew – I know you have worked hard to get to this point. Well done on your perseverance and remember that I’m here to help as a mentor when you need it.

Keep going and working through the issues.

Regards,

Steve McKnight

Hi Stuart,

Some time ago I researched the foreclosure market here in Australia to see if I could apply the information contained in some of John Burley’s product, such as his ‘Fortunes In Foreclosures’ and also his book.

What I found is that privacy laws here in Oz are a lot more strict than in the US, which makes some of the ideas somewhat unworkable.

However the general thrust of buying cheap properties due to default is not an uncommon situation here too. Such sales are generally know as ‘distressed sales’ (use this term when dealing with valuers).

Mortgage laws and fiduciary duties generally restrict a bank or financier from selling out under clients and in all cases I have come across the financier will go to auction (to go to the general market) rather than sell privately (and risk perceived conflicts of interest and alternative agendas – at least in the first instance).

Australia does not have tax liens as such.

The closest that I have come across is ‘sheriff sales’, where people who owe money and have court rulings against them have property seized and sold by the Sheriff to clear the debt.

My research revealed that Sheriff sales are usually advertised in the general notices section of the paper and you can sometimes pick up a bargain (buyer beware though!).

However, any real estate seemed to be sold with mortgages attached and the first thing that needed to be cleared was the existing mortgage.

Bottom line… ‘Foreclosures’ do happen in Oz but lenders, while trying to cover their backsides, seem to go to auction rather than offer a private sale. The closest I came to picking up a cheap foreclosure was to buy it privately below reserve after no one showed up at the auction (this was sheer luck!).

Outside a mortgagee-mortgagor relationship, there are Sheriff sales / auctions, where property seized under court orders is sold – sometimes at a big discount.

But be wary of what debt is attached to the property and understand that it will need to be cleared before you gain clear title. This might mean you have to ‘cash out’ and at least refinance the property – I can’t see how you could assume the debt easily given credit laws in Australia.

Regards,

Steve McKnight

Hi,

Just be careful not to become confused between investing and lifestyle decisions.

If your goal in financial independence is to own your own home, then owning rather than renting might be appropriate.

In my case, Julie and I chose to rent because we wanted to accelerate our investing success and weren’t planning to live in the CBD in our dream home anyway.

I think Robert Kiyosaki is now the expert when it comes to acknowledging a source for clarifying whether or not your home is an asset.

However, if you want a home and don’t think of it as an asset, rather as a lifestyle decision that is well in your means to afford and you have a structured financial plan, then what’s wrong with that?

Ultimately I believe you need to distinguish between investing and lifestyle decisions and hope to strike a happy medium somewhere in the middle.

Becoming financially independent is about solving money problems and achieving this balance – well, I think so anyway.

Happy investing,

Steve McKnight

Hi Corey,

Lots of questions here – what I plan to do is address them in the next newsletter that I write.

However, for the time being I can say that there is a pre-GST lease in place until 2004.

I have purchased the property in a trust / company structure, which is registered for GST.

Loan is with the NAB based on either 70% or 80%LVR (still negotiating).

I have gone into commercial real estate as it seems like the next logical progression for David and I in our investing pursuits. Yields are good and the competition for residential properties is making it harder and harder to find great deals.

Regards,

Steve McKnight

Hi,

I understand the nature of this uncertainty and cannot provide any hard and fast rules, except to say:

1. There is no tax law that specifically deals with wraps, and as such the information available is subject to opinion based on other the nearest legislation and case law.

2. In tax you need to establish a reasonably arguable position.

As far as wraps are concerned, the key is to appreciate the uncertainty and create a reasonably arguable position.

To this end I think it is important to:

A. Bring to account the realised profit each year split, as Euge points out, between interest and principal.

B. Apply your method of reasoning on a consistent basis. Swapping to get the best tax advantage won’t appear too good if you are audited.

I know wrappers in Qld who have been audited by the ATO and passed with flying colours based on points A & B above.

As an accountant, I regularly disagree with other people’s opinions. This is why it is important for investors to establish and consider the difference between fact and opinion.

Regards,

Steve McKnight