Someone asked me for an explanation of the abbreviations in my post. I’ve emailed back teh answer, but I thought I might put them here as well just in case..

LVR means Loan to Value Ratio (eg $100,000 property with a $90,000 loan = 90% lvr)

LMI means Lenders Mortgage Insurance. Banks generally only lend to 80% LVR so if you want a higher LVR, they will request you pay LMI and so teh LMI company has to approve you loan as well as teh bank. There are only 2 LMI companies which makes it hard sometimes.

PMI is the name of one of the mortgage companies. GE is the other.

Terryw
[email protected]

Did the bank manager include the potenital rent from the property you will be purchasing? From what I have seen of bank managers, probably not.

You could get a LOC setup to access some of that equity. You could then take the deposit for your new property from this LOC and go to a different lender for the main low. Some people use low doc loans when they can’t service anymore, they go to a different lender and jsut declare their income. No confirmationis done by the low doc lender.

Terryw
[email protected]

Just found this on the ATO site, regarding Superfunds lending:

“Loans/financial assistance to members or a member’s relative
Trustees are prohibited from lending money or providing financial assistance from the fund to a member or a member’s relative. The use of a fund asset by a member or a member’s relative for no cost or as a guarantee to secure a personal loan for example would be in contravention of this investment restriction.”

http://ato.gov.au/super/content.asp?doc=/content/17585.htm&page=8

Terryw
[email protected]

I agree with Melanie and would like to add there are considerable tax benefits to a trust as well. There is a good book written by an accountant called ‘Trust Magic’, available at:
http://www.gatherumgoss.com/

Terryw
[email protected]

There are various products such low doc loans where you have to state your income and no doc or asset lend loans where it is not even asked. You generallly have to be self employed for around 2 years for low docs (get an ABN now!).

Asset lends can be done on the value of the property alone. I know of one product at 85% lvr with a rate of 9.5% (+ hefty upfront fees). Another at 65% at around 7.45%.

There are also private lenders that lend based on valuation only. Rates are higher, but if you can find cheap properties, you may be able to get 100% finance, but it is extremely hard to do, and also hard to convince a valuer to value the property higher than the contract price.

Low doc loans start in the low 6%s at 80% LVR and range up to 10.15% at 90% LVR.

Terryw
[email protected]

There are currently only 2 mortgage insurers in Australia. GE will cover 4740, but not 4741. PMI will cover anywhere in Australia, but the LVR will depend on the purchase price. Possibly up to 95% if less than $150,000.

BTW the criteria for both GE and PMI has changed as of 01 July this year, and it is now easier to get mortgage insurance approval.

Terryw
[email protected]

vik_fam,

I’ve done some loease options and some wraps and I agree that LOs seem less complicated. Here are some comments:
In a wrap if the wrappees die, they can leave ‘their’ property to whomever they want, if they want to move out, they can sell it, or you wraper may even buy it back. They will probably have some equity, depending on how soon they want to leave.

In a lease option, they can move out at any time, but the tenants will lose their option fee and all of teh extra rent that would have been credited against their future purchase price. The tenant may also sell their option.

Other reasons why LOs are less complicated include:
-tax (when does a sale occur on a wrap?)
-Disclosure to financiers

Terryw
[email protected]

I have mixed feelings. I agree that his first 2 books really opened my eyes and changed the way that I invested.

What he writes is generally good, even if it is part fiction. But I don’t like him making money by selling overpriced tapesets and courses to the masses. I went to one of his seminars in Sydney (free tickets) and he said he made US$2 per book and at teh time he was selling 200,000 books per year in Japan alone! But it still wasn’t enough, he wants more!!!!

Terryw
[email protected]

I’ve done a few wraps, and the quickest that I have been cashed out is 16 months. (this happens when they refinance with a bank-at a cheaper interest rate).

Terryw
[email protected]

Can’t do that in Australia. You can only offset a capital gain against a loss.

Terryw
[email protected]