Hi Wen

I am not too keen on these sorts of properties, but…

That is a fairly high rental return. Since Steve’s book came out (and for other reasons) there have been a lot more people looking for these properties. A lot of people from Sydney and other cities are buying properties without seeing them based on rental yields. Since the area only had 3% growth last year, that could mean that town hasn’t been discovered yet and may boom, catching up to other areas. Or maybe you could buy for $55,000 and on sell for $70,000 -which would still give a yield of over 8% at current rent.

Terryw
Discover Home Loans
North Sydney
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I agree with Clithero on this. Imagine how a car loan would hurt your serviceability for getting more property loans. I really want a newish car too, but am trying really hard to resit the urge!

Terryw
Discover Home Loans
North Sydney
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Mel

Good point! cheap, simple and easy.

Terryw
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North Sydney
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I think bankruptcy stays on your CRAA credit file for 8 years. other things are 5 years. But you could check you file by getting a copy from Baycorp. http://www.baycorp.com.au

Terryw
Discover Home Loans
North Sydney
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It is a good idea, but the tax deductibility of the interest is in question. it is currently legal to claim the interest, however the tax office is currently fighting this in the courts with the hearing set down for Nov 7th. If they lose I assume the laws will just be changed to make it illegal.

Terryw
Discover Home Loans
North Sydney
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C2

Maybe. It depends if you are going to rent it out and then buy another PPOR. eg if your home is almost paid off and you are going to move out and rent it, and need a loan to buy the new PPOR. You don’t want to be paying tax on the rent while paying undeductible interest on your new home loan.

Terryw
Discover Home Loans
North Sydney
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Why sell? You would have CGT and agents fees and then you would only buy something else with the money again, so more stamp duty etc and you would miss out on any future capital growth. I would probably keep them, increase borrowings every 6 months or so for more investing.

Terryw
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North Sydney
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If you are going to be serious about investing, then do it sooner rather than later. It may not be worth transferring existing assets becuase of CGT and stamp duty etc, but any future assets could be held in the trust. Go and talk to a good accountant. It would only cost you about $200 for some advice.

Terryw
Discover Home Loans
North Sydney
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Steven

I still can’t get what you are saying and your link provides no clues either. I agree that Trusts are an excellent tool and hold all of my properties in a trust structure. I know that trusts help save tax and so help serviceability in that regard, but I do not beleive having a trust increases your borrowing power because of the guarrantees required.

Are you of a different opinion?

Terryw
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North Sydney
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Banks often use the old ‘too rent reliant’ line. The trouble is, it is hard to define when you actually reach this level. Different lenders have different polices, and they don’t really make these policies known.

It basically means the proportion of you income comming from rent is too high compared to other income. The lenders may deem you to be too sensitive to the property market, so any sligh rise in interest rates could get you in trouble. Having positive cashflow property may help to a certain degree, but they can (and do) say you are too rent reliant if all your properties are cashflow +ve.

There are ways around it, such as using several banks, low doc loans, bigger deposits (lower LVRs) etc. But most people will run into this problem sooner or later.

I suggest you have a look at Stuarts article from API magazine for some ideas on finance. It is available from his website if you don’t subscribe.

Terryw
Discover Home Loans
North Sydney
[email protected]