Forum Replies Created
Hi Andrew
Get a copy of the June-July API magazine. It has a very good article about this (you can buy back issues on API’s website (www.apimagazine.com.au).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Caz
I understand that you emailed Josie and she told you about Liberty (and set out your other options). I can tell you that Liberty is not on our panel (I’ve been meaning to set up a meeting with them) however we still took the time to fully investigate your options.
1. I think brokers should always consider the best lender for the client. There will be times when that lender is not on their panel.
2. I think the client has to take responsibility for the broker they choose to deal with. There are good and bad brokers out there. I don’t think it is that hard to tell them apart. If you choose a bad one and it all goes wrong then, in some part, you are to blame.
Some clients go around in circles. One brokers says “A” and another says “B”. I would strongly recommend people consider the strength of the person giving advice in the first instance. Then secondly (if your happy with the person giving advice) listen to the advice.
Do the same due diligence on all your advisors (or your “team”) as you would on a new property because one back team member can cost you a lot of money. Look at Caz’s situation. The Pepper loan would have cost her thousands.
I think this is very important and I will post as a separate topic.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Crashy
I’m not trying to tell you how to suck eggs but I can offer some advice (after working in the finance industry for a number of years – super, corporate finance, chartered accounting, SIA, etc.).
It’s all about relationships. An employer is taking a big risk by employing someone with no experience. There is more than just technical knowledge. Can you manage client relationships, supervise staff, sell (important), work under pressure, apply the theory, etc., etc.
What you need is a relationship. A way in. You need an introduction. That way if someone is willing to say, “have a chat with Crashy (insert real name – I hope that’s not your real name). He’s a good smart guy.”
Without an intro it will be very hard. Perhaps start as a parra-planner and work up.
Best of luck. Well done for trying.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auWe calculate the total cost of the loan over 3, 5 and 10 years for every client. This calculation includes all fees (including any early repayment fees) and the interest rate. This calculation means that everything is weighed up equally and it would have identified that Liberty was the best. In your situation I would have calculated the cost over 1 year.
Not many brokers do their own calculations like this. If they don’t then you should. In my opinion it is the ONLY way to compare loan products.
By the way, I don’t rely on the “comparison rate” that is required by law because that is calculated over 25 or 30 years and doesn’t include early repayment fees.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auI can’t think of any unusual tax implications if you are paying market value (as it is an arms length transaction).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Tryst
Your borrowing capacity is approx:
Serviceability
a) $650,000 – $780,000
b) $630,000 – $730,000Security?
Depends on how much your mortgages are.As you can see borrowing capacity is unlikely to be an issue.
I would just focus on the assets (as Crashy alludes too).
What is future cash flow like? As Crashy calculated… not that great.
What is capital growth going to be like?In my opinion, I would sell them if I thought there was not going to be much capital growth in the medium term (becuase you should want the capital growth to make up for the lack of cash flow). You are better off to buy better quality assets.
Yes, no CGT so the profit is straight in your pockets.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Del
By selling in 6 months you will save 25% tax which equates to about $6,000 (rough calcs). If you purchased now do you thing you could make this up?
For example, if you purchased and did a reno I’m sure you could create $6k of capital growth.
If you are not entirely happy with the asset then I would opt for selling and buying something better so long as:
1. You were pretty sure you could make the $6k (e.g. by reno or buying well); and
2. The market where you are investing in has opportunities (no good selling if there aren’t any good properties to buy).Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Melanie
I am certainly not going to disagree with WB.
Isn’t “three narrowly defined investment/income producing methods” diversification? I think it is.
I agree in part – don’t spead yourself too thinly. However, I strong disagree with pinning your hopes on one stratgy. In my view that is not prudent.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auI have an article in the recent issue of API about commercial finance (see http://www.prosolution.com.au/ps_docs/prosolution_doc081903_180049.pdf).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auI respect both views and both people (Steve & Monique).
So why choose? Investors can have a combination of positive cash flow and capital growth properties.
“Everything in Moderation”
I have never found an exception to this rule. One sided investment strategies (i.e. totally positive cash flow) are a lot weaker than a diversified investment strategies (in my opinion). Why put bet all your resources into one strategy? Steve doesn’t! He earns business income (books, website, etc.) and property income.
My plan is to have a combination of:
– business income.
– Positive cash flow.
– Capital growth properties.
– Commercial properties.Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auRenting a spouse would obviously relieve us (the males) of the problems associated with ownership (e.g. maintenance, remembering anniversaries etc.).
Yes, I like the idea of renting.
(I hope my wife doesn’t read this post!)
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auWow Richo – good topic.
For the most part people around me have been very supportive. But I wouldn’t listen too them anyway.
I don’t ask my dentist for help if I have car problems. So why would I ask a poor person (for lack of a better word) for their opinion about my wealth strategy. Their opinion is not much chop because they haven’t achieved financial freedom.
Yes, it is nice to get the support of loved ones and the people we respect. But for me it is only just that – “nice”. I don’t need “side line critics” to agree with my strategy.
However, if some savvy investors (Steve, AD, etc.) disagreed with me then I would sit up and take notice. I would listen to their concerns very intently.
Again, just my 2 cents.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Fullout
You have to establish a loan against the property with a lender. The lender will probably want you to both be applicants to the loan (no real difference if he is an applicant or guarantor).
This will impact on his borrowing capacity.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auYour total borrowings are probably going to be in the region of $480,000 if you could purchase this property ($115k + $350k + costs).
Your gross income is $550 p/week which is $23,400 after tax p.a. Rental income might be $24,000 p.a. (based on 8% yield). So perhaps that might be $20,000 after costs (at best). Therefore, total income of $43,400.
Your repayments will be at least $28,800 (based on 6% interest only). Or $33,600 if interest rates increase to 7%.
This leaves you with $9,800 to $14,600 p.a. to live.
Why do you think you can afford a loan of this size? Based on my assessment you can’t.
I would suggest not borrowing beyond your means otherwise it might come back to bite you.
Why not buy something smaller? What about partnering up with someone?
Just my 2 cents.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auP.S. Sorry, not trying to be negative but just playing the devils advocate.
Hi Huey
He can get a no loc loan (essentially the loan is based solely on the asset base and they don’t ask any questions about income).
HOWEVER, his interest only repayments are going to be a little less than his rental (repayments = $300, rental $340). What happens if the property is vacant? What happens if interest rates increase? He needs to consider these factors. Does he have a second source of income to supplement investment income (besides his pension which he needs to live off)?
In my opinion, this is perhaps a too risky strategy for a pensioner.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auI think it would be deductible as the property is earning assessable income and your expense (i.e. interest) is incurred as a result of earning assessable income.
Not many people know the answer? This is an easy one. You are asking the wrong people. Speak with an accountant.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Kristine
It must be worth refinancing.
1. Most people are not better off to refinance unless they can save at least 0.50% (as a rule of thumb).
2. In my opinion, you should be better off in the first year. That is, the costs associated with refinancing must be offset by the interest rate savings in the first 12 months.
3. It normally costs $600 – $1,000 to refinance.If you are happy and you cannot see a reason to refinance them don’t be bullied into doing so.
Ask the broker why he/she suggests refinancing. If they say you will be better off then ask for the numbers. They have an ethical obligation to make sure you will be better off.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
