Forum Replies Created
I thought if you had a trust you went guarantor and there was no problem getting finance (not that I have tried myself yet, havent even got the trust set up!).
Just wondering if you used a broker?
This is actually a great post – why? Because it shows the excitement of property investing through the Dynamic Duo having taken that step toward success (EXCELLENT – I love it!) and also the underlying ‘just keep going, persistence’ that is also required often as Wilandel mention.
Good on both of you and keep going!
Tas [
]A spell checker?
Just kidding ha ha [
]Everyone is different as to what their objectives/goals are, but as this forum is a poitive cashflow property forum and as your name is Captain Positive, I suspect we probably have similar goals in that we both want positive CF (passive income). As long as each property I buy pays for itself and then some (to reduce debt over time), and the capital value keeps pace with inflation I am happy – any capital growth is a bonus.
Tas [
]Andrew, I’m not sure I understand your post as the selling agent is YOUR agent and therefore must act in the interests of you the seller, as you are the one paying the commission! Conversely, when buying a property you should not expect the agent to be too helpful as they are working for the vendor.
I dont see any problem with using the same agent for purchase and sale… They have previously marketed the property, why not do it again and leverage off their experience?
Don’t just do it on that basis though, choose whoever you think is the best person for the job, or who you have a working relationship with that will appreciate the listing and perhaps later return the favour by telling you about a property coming onto the market and you might get first shot at it…
I have just listed a property with the same agent I purchased from a year ago, for the sole reason that she has just sold another property exactly the same as mine for a good price (same complex of villas) and I want to leverage off this.
Hope this helps,
Tas [
]My pleasure Kimkath. Yes, start with one IP – just keep asking questions until you know wether to save first or use equity. If you are starting with one, I would not see any problem with using equity provided you don’t just rush out and buy the first thing you come across. One of Rich Dads advisors Dolf De Roos uses the 100:10:3:1 approach, which says that you check out 100 properties in order to make ‘wholesale’ offers (i.e. low to fair price) on 10 of which 3 are accepted and you buy 1. On the other hand, you could just do what I did and buy the very first property you ever look at and then discover later on that it is positive cashflow (and hey this concept really DOES work, and boy was I lucky!) [
]Don’t worry about 5 in 5 years being small stuff. We each have our own circumstances and goals. Anyway, once you buy 1 you may find that its a lot easier than you expected and choose to revise the targets. I love your idea of giving away every 10th home. You’ve got me thinking now.
Some areas in Tas are still very cheap (rural areas), and some are going ballistic (city areas). I have put my buying on hold for the moment and am actually selling a couple. But don’t be confused by this – I live in Sydney and am not ‘on the ground’ to find the good deals in Tassie, I’m not saying that there aren’t any! Be cautious with a flying visit – by all means check it out, but do your homework first. I would personally buy closer to home for my first IP so that I can physically go and look at it whenever I want!
Bye now,
Tas [
]Hey Westan, you know me far too well [
]When I got to Dymocks in Pitt St they were sold out, and I have to wait another 10 days for new stock!
Steve – looks like the combo of today tonight and a winning book itself (and your legion of followers) will prove an awesome result!
I’ll have to keep my eyes peeled for a copy today.
Tas [
]Hey Crashy, I think you need one critical piece of info – in that the reason people would be interested in a wrap is because they lack either a) the deposit required to obtain traditional finance or b) the income required to obtain traditional finance (eg they may be self employed and hence in the eyes of a bank, cannot sufficiently ‘prove’ their income) – there are ways around ‘b’ (eg lo doc loans) but apparently around 20% of the population is in this situation (thats what I heard somewhere anyway).
A wrap purchaser may buy on a wrap with a deposit of say $3,000 (typically with the FHOG) – so $10,000 all up. This could mean that they are able to buy their first home and get out of the rent rut. Very appealing for many people. I have a tenant in one of my IPs renting at $180pw and she could buy for $240pw with a deposit of $10,000. By the time she has paid off the house, it will be worth far more than the purchase price and an extra margin on the purchase price of $25K ($1K per year over 25 years) may be quite reasonable.
In answer to your specific queries (and these are very quick basic answers so I encourage you to keep looking around the site for more info – especially in the wraps specific discussion area):
1. Advertise in papers, ask existing tenants (thats what I did), then qualify them re income etc – are they able to afford the home under a wrap? under a normal loan?
2. However you are comfortable putting it forward to them – but best to be as open as you can with the purchaser so that there is no confusion.
3. If they default then technically they lose the house (same as if you didnt pay the bank mortgage payments, they would sell the house). Better to have a person rather than a bank asking you to pay up in this situation – a person (like me) will look for a solution, not just say ‘you’re out’.
4. not worth answering, sorry. Who said wraps were easy?
Anyway, keep looking – you’ll get there.
Tas [
]Hey – i have the same stars as you ! what gives?
Tas [
]Top stuff Westan, well done.
Especially as you’ve posted so many helpful replies for people. Its not like you’ve simply asked 100 questions in here!
How long have you been posting for?
Tas [
]Dymocks, in Pitt St Sydney eh? Thanks Crouchingbadger!
I’m going past there on my way home very soon!
(bet that’s thrown some of you who haven’t met me yet!)
Tas [
]Hi, welcome to the forum and congratulations on paying off your mortgage!
Sounds like you have quite a few options so let me briefly outline a few and make some suggestions and then you can maybe let us know what your preferences are.
1. Your home is worth $230,000 and no debt – so the most aggressive option would be to borrow against your home to fund deposits for IPs. You should be able to borrow 80% comfortably (and no LMI to pay) – giving you say $180,000 to spend on property. If you target $100,000 properties (paying 20% deposit + purchase costs of say $5,000 = $25,000 per property) you would be able to buy around 7 IPs in a fairly short space of time, assuming they are all pos. cashflow and your lending capacity isnt exceeded due to lack of rental income. But I would not suggest this to you straight away, better that you start with 1 and go from there [
] Also, you may not be comfortable borrowing against your own home to invest without some more experience – whilst its a low risk, should things go bad its your home on the line. I use $100,000 homes as an example – prices sound higher in your area – what is the median price for 2 or 3 bed brick homes??2. The other option, then, is to save your $1,520 per month until you have saved the deposit for your first IP. Based on the above requirement of $25,000 this would take about 16 months – yes, a long time. You could start off with a lower deposit and borrow more for the first couple of properties. A 90% lend will only take you 8 months (half the time) to save the deposit.
3. Whatever you do, my tip is to firstly decide what to do with the $1,520 per month you can save (presumably this is what you have been paying off your mortgage up to now) as this tends to disappear without a specific plan! Start putting it into a separate account that will be for your property deposits, eg an ING Direct account.
4. I would suggest you start with a single property purchase! You will learn most from practical experience, and you have a place here that can answer any questions that come up. If fear starts to creep in, always ask yourself – what is the worst that can happen realistically? If you can’t get past that, then put another post here for us to help you through it.
You don’t need to understand wraps, flips, lease options etc. but before you invest make sure you understand positive cashflow property (sounds like you do) and ONLY buy an IP that meets this criteria. If you follow this one rule, then at least it will pay for itself and give you a buffer against interest rate rises etc…
Good luck
Tas [
]Thanks everyone, yes the property is in Tas [
] and is on the market in the mid to high 100K range. It is tenanted by a good tenant at present, and I offered it to the tenant first, not interested. I then considered selling myself (I have a dig. camera, could email photos easily to anyone, arrange inspections as Geoff suggests, how hard could it be?)Actually though, that was the argument the agent used to convince me to go with them… i.e. if I listed and sold it for $X (on the basis that I am expecting to sell quickly and easily in the current market) but they are able to actively market it and negotiate the best offer possible I may get $X + $15K, so after their commission I am in front. Yes that made sense, as I control the sale then I keep the agent working until they get that higher price for me, and in that sense they earn their commission. Fair enough, on the basis that you have to spend money to make money… i suppose.
I think the mistake i made was going straight to the agent I have some rapport with, and who I preferred to list the property – rather than doing some pre-negotiating with other agents first. I just assumed that I could negotiate a good deal on the spot.
Next time I will shop around first.
Tas [
]Here’s an idea I came across at one time in the past that kept me focussed on achieving a goal…
Say you have a goal with a reward at the end of it, eg. help one person on the forum every day for one month (I just made that up [
] – can you tell?) and your reward when u achieve the goal will be to go out and buy Steve’s new book ($30 worth).The twist is that if you don’t achieve your goal, you have to send the $30 to your worst enemy, or your boss perhaps (send them a cheque). Costs the same… which would you prefer happens?
errr… try adding an ‘s’ to backissue (there is more than one of them!)
http://www.propertyinvesting.com/backissues should do the trick.
Should keep you entertained for the night i think!
Tas [
]I thought that you just had a JV agreement between two entities (could be an individual, a trust, whatever). At the last Property Investing Masters weekend in Melbourne, there was a sample JV agreement provided – its on the website somewhere. From memory you could take it to your solicitor for review (dont just use it as is!) and insert the names of the parties involved, the money partner and the time partner.
Am I mistaken, this sounds far simpler than setting up new structures for every deal or JV![
]Hi archizen,
An offset account achieves the same as a LOC but it is actually 2 linked accounts.
A LOC is an ‘all in one’ solution where you can draw on and repay the loan however you like – as long as the interest is paid! So if you make a deposit or a withdrawal, your account balance changes and the interest charge will also reflect this. It is a very flexible option.
An offset account is a separate account linked to your investment loan account. The bank ‘offsets’ the balance in your offset account against the loan, so you only pay interest on the loan amount less the offset. It becomes slightly more confusing than a LOC as there is physically 2 accounts, but as Stuart says they can be a cheaper option (if you have a basic standard loan linked to the offset account). LOC loans are generally bundled with all the bells and whistles so you pay a higher rate in the first place.
You may even use a loan without a redraw facility, as you can draw from the offset account instead. You can use the offset account to manage your loan payments/balance – just like a LOC.
Lo doc loans are loans where you dont need to physically prove (document) your income to get the loan (by actually providing payslips etc). You still have to sign off that the income you say you have is correct. They are useful for self employed people, or those who have other issues getting finance. The interest rate is generally higher for these types of loans, and the LVR may be restricted in some cases. I wouldnt think you need to consider a lo doc loan unless you have any problems with getting finance. Even then, I would suggest you talk to a mortgage broker first and see if they can help. In fact from your post it sounds like you plan to approach the banks yourself to negotiate – just talk to a mortgage broker first. They will get you the best offer they can regardless, with no negotiation. Have you ever tried to negotiate with a bank? they just say ‘the computer wont let us do that’ (unless you have a contact higher up in the bank that can help you out)
If you go for a LOC or similar, you can probably get the application fee waived and a reduction in interest rate if you pay for a professional package with the bank (maybe $300 p.a.) – a broker can also explain this to you.
Cheers,
Tas [
]Make sure you stay in control of the purchase process. Don’t just let it happen, thinking that everyone involved knows what to do and when.
eg. chase up your solicitor re the conveyancing – don’t just assume they are doing it (your file may be under some other files) – keep them moving!
And the same with finance – depending on your lender, or if you are using a broker – make sure you keep ‘pushing’ it through. Don’t just sit back and wait expecting it all to be ok.
Hopefully there shouldnt be any problems, but better to be on top of it all yourself where you can be. Good luck! [
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