Forum Replies Created
Couldn’t agree more, businessglobal. We think of our 2000 Daewoo Matiz as a kind of “reverse status symbol” these days. I’m not criticising those who truly value cars and have a passion for them; I think one *should* enjoy the fruits of their labours. But I think those people are a minority – most people are much more heavily influenced by what others think of their choice of car (even if it’s subconscious). We see cars as a tool, and as such, I only value them for their reliability in getting me from place to place in reasonable comfort, but they have no value beyond that.
Thanks, Karen, for your completely reasonable response. Thank you also for assuming that I’m raising this issue in good faith – because I am!
I guess I like accounting sheets to balance. Let’s say I have a $1M asset with an $800K debt in a Trust for which I am Trustee and a beneficiary (so I can gain control of the asset), and I am guarantor for the Trust’s loan.
If the Trust was applying for finance, they would declare a $1M asset and $800K debt, and have a net worth of $200K.
If I were applying for finance, I couldn’t declare the $1M asset but have to declare the $800K debt, and have a net worth of $-800K.
Combined, the Trust and I have a -$600K net worth, due to the liability having to be accounted for twice. This just doesn’t seem logical… I’m not saying it’s not correct; I’m just asking somebody to explain the logic, if they can. Or maybe it just is a terrible idea – in terms of servicability – to guarantee loans.
As per my earlier question, how do company directors ever get loans to buy their own home, when I assume some of them will have provided director’s guarantees for potentially enormous company borrowings?
bfantastic wrote:if you have assets that pay for themselves your actual borrowing power is unlimited.‘taint necessarily so.
1) Banks often only allow you to count approx 75% of rental income, which often changes your positive cashflow to negative cashflow.
2) Many lenders have an absolute lending limit, ie limit their exposure per customer, such that you can only borrow $1M (or whatever their figure is) regardless of how good your cashflow and LVR is. (Obviously this is for resi investors, not businesspeople or commercial investors.) Of course, you can always go to another lender, but you would eventually exhaust all practical lending options.
Having said that, I do agree with the philosophy that if you find a good enough deal, you should be able to obtain finance.
neilvs wrote:After all, the problem here is that the banks only recognise somewhere between 65% and 80% of the rental income of the property…Let's be positive and assume the bank recognises 80% of the rental income. That still leaves a shortfall of the other 20% – which they're going to come looking for in one's personal income.
But like i said – if you're cash poor as far as your monthly income is concerned – HOW can one still get the loan?Note – i've got the 20% deposit – it's the MONTHLY premium thats the problem – since the banks wont recognise a big portion of the monthly income i'd be getting from the property (and yes – 20 to 35% is a big proportion)
You might consider finding a tenant, such as Defence, a company, or even Housing Trust, who will take out a 10-year lease. If that suits your circumstances (ie prepared to eliminate the possibility of selling to an owner-occupier for that length of time), then many lenders will allow you to count 100% of the rental income. I’m not suggesting it’s appropriate for everybody, but it is one way to get around the serviceability issues you mention.
Since I’m sure many are concerned about this: if you let to the Housing Trust, I believe they guarantee to return the property to you in the same condition as it was let, and they manage the property. So it can be a very low-hassle option.
Sure did – that was us in "Our Property Nightmare". I hope if I ever again appear in API, that it's in a column that's less of a dubious distinction.
Wow, you guys are all talking way lower figures than I'd anticipated. I'd planned on budgeting >$2,000/m2 for my new PPR.
Are you guys talking brick and tile Tamawood-style project homes?
The main problem with investing in student accommodation – as in UniLodge etc – is that you can usually only get 60% LVR, which makes them not really stack up as an investment because you need to put too much equity in. If you mean buying a regular house and setting up as a "rent by the room", then it really depends on the particular property as to whether it's a good idea.
When deciding whether to buy or not, I make my decision based on the merits of the particular property, rather than based on the overall market picture. For example, I would never say "I am definitely not going to buy in 2008", because I don't know what deals I'm going to find. And if I find a great deal, I don't really care what "the market" is doing.
Yes, if they're on a fixed-term lease you must honour it. It's only if they're on periodic ("month-to-month") that you can give them notice to leave. Your best bet, if you want it vacant, is to offer the tenants an incentive to break the lease, such as assisting with their moving costs.
Welcome, Michelle and Colin! Good luck on your journey.
Like the way you think, Linar…
A normal interest-only loan has a fixed amount, say $100K, and the $100K is all paid out when the loan is settled. Interest is payable on the full $100K, whether you've spent it or not.
A line of credit is more like a credit card with a $100K limit. If you don't use any of it, you don't pay any interest. You can take out $50K, then repay it, and draw it down again. Interest is payable on however much you've drawn out at the time.
If you had an interest-only loan with a 100% offset account, you could effectively draw down the $100K and put it in the offset, and operate in the same way as if it were a line of credit. The difference is you'd have two accounts (one fully drawn $100K loan and a varying amount of that $100K on deposit in the offset account) rather than a single account.
Yes, I usually would. But others may not. I'm just suggesting what their thinking might be.
JL wrote:Buisiness will occur anyway, if you give refunds or not.I know that even if I have enough deposit that I don't need LMI, I may choose to go for a higher LVR lend and pay LMI because it leaves my equity free to get into more deals. Knowing that if I manufacture growth – which I aim to do immediately after purchase – I can obtain a partial refund of LMI makes me more inclined to pay it than if I knew I could never get any of it back. So yes, it encourages people like me to take out LMI more often than would otherwise be the case.
Good idea, but it's not right next door, SNM. It's "next door but one" and 80m away. Good suggestion though. Perhaps Ozduke can buy all THREE
I think asking them to waive their fees for a year is a bit rich. And possibly counter-productive – what's their motivation to give you good service if you're not paying them anything? You are not going to be restored to the position of having the higher rent that you wanted and a 12-month lease, so forget that. Aim to compromise and achieve the best position going forward, and take a long-term view.
If the current tenant makes up arrears and wants to stay, see if there's a lease drawn up. If there is, you have to honour it. I would perhaps ask the agents for a reduced commission for that six-month term, perhaps half-commission, as a gesture of goodwill.
If there's not a lease, see if you can negotiate the terms you want and sign them up. If you can't (and remember this isn't the tenant's fault either), then I think you're best to just wear it. It'll take nearly as long and cost nearly as much to evict them as to just wait for the 6 months to be up. If they choose to leave, I think the agents should wear the cost of installing a new tenant, but thereafter, I think you should pay their standard commission.
The aim of every negotiation should be win-win, not win-lose. If you screw the agents, it will ultimately go against you. Remember that the remaining staff at the agency are as blameless as you are. The actions of the former staff member have resulted in a situation where you'll probably all have to lose something, despite it not being anybody's fault but the former staff member. It's not fair, but it's reality.
JL, if you're having difficulty grasping this concept, consider this analogy. You buy a year's worth of car insurance, but after 6 months you sell the vehicle. You can get a refund on the remaining 6 months of car insurance.
LMI is like "default insurance", but because the value of the underlying asset increases, you use it up unevenly – more initially when your LVR is lower, and less each month.
I think that the agency realise this PM was no good and they're probably having a horrific time trying to sort out her mess. I would have thought they'd be pretty sympathetic to your situation. Were you at all understanding about the fact that the current staff had nothing to do with this stuff-up, or did you go in angry with them? If it's at all possible to approach them in a spirit of:
"look, I know this isn't your fault but the fault of your previous PM, but I'm feeling really hard done by because I wanted this rent level and a 12-month lease, I got 10% less and a 6-month lease and they're not paying anyway. How do you propose we remedy this situation?"
then I would do that. I would think they'd be glad of the opportunity to try and clean up this mess that their staff member has put you in. If they propose something reasonable eg "We'll evict this tenant and get a new tenant in for you on the terms you wanted, and charge you no letting fee or fees for the eviction of the current tenant", then I think that's about the best you can expect.
If you go to another agent, you may or may not get better service, but they certainly won't be making good for nothing, as they're not in a position of feeling that they owe you anything. At least the current agents may feel motivated to try and remedy the situation for you, out of guilt for what their bad staff member did.
I think that if the deposit is enough to cover their reasonable costs – ie at least $5 or $10K, they'll probably just take your deposit and put the property back on the market.
If you got away with a tiny deposit though, eg $500, and they get wind that you're only pulling out because you're not happy with the deal that you've made (rather than due to a sudden job loss or some other compelling circumstances), they may decide to sue. It's really hard to tell – it's probably not worth their while to sue, but if they're pissed off enough, they may decide to sue just to make a point.
I've actually had a refund previously, so I know a wee bit about this. As Richard has said, it depends on how long you've had the loan. Though the proportion isn't straight line – you lose most in the first month, and I understand that the refund drops down to zero after 12 months. Even after 6 months, you wouldn't get half back, you may get a quarter or a third, so after 9 months you're getting close to a nil refund anyway – probably less than 15%. Even after only a month, you'd probably lose 20%. The logic is that you're most likely to default in the earliest months.
Chan & Naylor never claimed to be the cheapest. I have no idea whether they're the best or not, but I'd be willing to bet they're worth every cent they charge. I don't think that debating fees is appropriate in this forum.
