I personally would never touch anything like this. 8.5% is a fairly low yield for the high risk. It is hard to get finance and hard to resell. Often the management fees in these sorts of place are also high. It is still possible to find houses returning much more than this, with much better prospects.

Terryw
Discover Home Loans
North Sydney
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Not all low doc loans are mortgage insured. Some that aren’t:
Suncorp 80% LVR
ING 76% LVR
Adelaide Bank 76%
ANZ 60%
St George 65%
But there are various limits on these too. Want do you want to get around- an individual loan limit or overall limit?

And then there is Bluestone where you can go high on a low doc loan, but the rates are also higher.

Terryw
Discover Home Loans
North Sydney
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I beleive that Steve uses various Trusts with corporate trustees to hold his property.

I guess there is no real way to avoid land tax, it si just another expense.

Terryw
Discover Home Loans
North Sydney
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Shaun

I don’t understand what you mean by having to pay mortgage insurance for 2 years. I think you have mixed something up, mortgage insurance is only a one off fee upfront. Maybe you are on a low doc loan that reduces after 2 years (of repaying on time)?

Terryw
Discover Home Loans
North Sydney
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Forward

Not is Australia!

Terryw
Discover Home Loans
North Sydney
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Yeah. I wouldn’t sell-I actually did that and regret it now.

Just keep on using the equity. Approach your exisiting lender first and ask for an increase and use that money as a deposit for the next. If they don’t come to the party, refinance.

Terryw
Discover Home Loans
North Sydney
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Without much deposit it would be hard for you (I mean Fred) to buy one. Fred would have to use a 95% loan, so would need 5% deposit and 5% for costs – about $9000 on a $90,000 property.

It could help greatly if Fred was good at buying under market value and the values were growing rapidly.

Maybe Fred could also
-borrow the deposits,
-get the vendors to finance his deposit,
-get the vendors to pay his closing costs as part of the deal
-renovate to add value
-get some loans as a wrappee and then rent out or lease option (won’t be positive geared tho)
-save like mad.

Terryw
Discover Home Loans
North Sydney
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Guys, they were good stories. thanks for that.

I have only had one problem which seems minro now, tenant stopped paying rent and I went soft and let them, they then skipped out owing about $1800 in back rent. Nothing major as the capital growth going going mad at teh time.

Terryw
Discover Home Loans
North Sydney
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Wraps are often better deals for the wrappee than they could get with a bank. Think of a credit impaired person with only a low deposit. They are not going to get finance from a bank or a financier. If they had at least 10% deposit plus costs, they could get a loan with one of the non conforming lenders and pay interest rates of around 10.56%. They may be able to refinance into a cheaper loan in a few years time, but the exit fees could be 4% of the original loan amount. If they wrapped off someone, they may have to pay a premium of 20% on the price, but they could get interest rates around 8% to 9%, plus they deposit needed would be much less, little or no application or exit fees. I think there is nothing wrong with this.

However, wrappees could get themselves into trouble if the market drops 20% and rates go through the roof. But is this likely to happen? thats what the wrapees have to asses.

Terryw
Discover Home Loans
North Sydney
[email protected]