James, I've just realised this is probably the same property purchase that you've posted about several times before, where problems showed up after building and pest inspections, and where there was a dispute about the date that you had to complete them by.

Last I heard you were saying that there was no binding contract because you hadn't agreed to the B&P date inserted by the agent, and were offering to affirm the contract in exchange for a price reduction. Did that happen, and if so, why do you want to pull out now? I would have gotten a lawyer back then, but done's done; my QLD lawyers, Munro Thompson, recommend Andrew Lumb at Nevett Ford, ph 9615 4303 or email [email protected].

Usually vendors won't sue for termination of a contract in such circumstances, but given that you have reasonable earnings and presumably have more cash that you'd saved for a deposit, I wouldn't be totally surprised if they do sue you in this instance because they probably feel that you've mucked them around. There has been a lot of back and forth and threats of legal action, and that tends to piss vendors off…

What's going on? Buyer's remorse? Interest rates got you spooked? Indecisive?

Get another broker who'll help you do what you want to do, not what your broker thinks you should do.

If your income will still allow mortgage servicability, take out a personal loan for your deposit on the next property.

See if you can manufacture some equity in your existing IP by doing some improvement – add a garage if there isn't one, add a deck or outdoor area, renew the kitchen, stuff like that.

If you're very bullish about the area in which you next plan to buy, take out a high LVR loan (you can get up to 106%, but the higher percentage you borrow, the more expensive it is). PROVIDED your forecasts about growth are justified, it can still be very worthwhile using these expensive products rather than being out of the market during the time it would take to get a deposit together.

How much equity did you put into your first IP? You can redraw to 95% if you put in more than 5%.

People talk about finding an equity partner, but I don't know whether it really happens in practise. I'm sure that I don't know anybody who'd let me use their equity rather than using it themselves! But that may be an option for you.

Good luck!

With regards to the deposit, it would depend on what the contract conditions were with regard to the deposit; be very careful that you don't lose what you've already paid for breaching.

You should definitely seek urgent legal advice. There's a big difference between a requirement for title to transfer without the caveats – which is what I suspect your contract says – and removal of the caveats by date xxx being a condition of the contract. I doubt your vendor's solicitors would have allowed the contract to remain unconditional until such time as the caveats were removed.

And sorry if I'm preaching to the (now) converted, but I don't recommend anybody buy property without a solicitor, ever. Even with a solicitor it can get ugly – but it sure has a higher probability of turning ugly without one. At least a solicitor has to have professional indemnity insurance that you may be able to claim against…

Thanks, Jon, for your thoughtful response. I do agree that auctions may be a useful tool at the higher end; the disadvantages of auctions are less likely to be significant for these properties.

I agree that people attempting to use building inspections to get the price down is dubious. I don't know why people think they have a right to buy a 50 year old house in perfect order.  I think it's ridiculous that people ask for vendors to repair minor things, eg a few loose tiles, a couple of rusty pockets in the gutter, a few dings in the wall. If it's not a new house, these things are part of the deal, as far as I'm concerned. I look at a B&P as a "make sure there's no big nasties" – if there are huge structural problems, I'd probably use it to walk away. But using it to try and get everything perfect – or get a price reduction – is not in the spirit in which I like to conduct myself. (I wouldn't go as far as saying unethical, as I know people that I respect who routinely do this; it's just not consistent with the golden rule – I'd hate others doing it to me, so I won't do it to them.) I like your idea of having a B&P done prior to negotiations and the negotiations being done on that basis. Then the purchaser would only have the right to renegotiate if their own B&P uncovers something new.

If what you say about the valuers/lenders recognising an auction price as market value, then fair enough, I didn't know that. Is that a policy, or just the way it tends to work out? Have you not ever heard of people buying at auction and then the property being valued at a lower price?

But there is no logical contradiction in what I said, Jon: I think that auctions generally get a lower price. IF the property has no hidden nasties, then I believe most properties bought at auction are bought below what they'd fetch via a private treaty sale and therefore are a bargain. How often is a property passed in at auction for not reaching reserve, then immediately sold via private treaty for a higher price? If, as I would always fear, there are hidden nasties, then the bargain is not so much of a bargain, because it could cost a fortune to fix hidden defects. Because I'm afraid I'll get the one with hidden nasties, I won't buy at auction, even though there's a chance of a bargain.

Best wishes, Tracey

Um, we aren't.  Where did you get the idea that you can do that?

Yes, that's why we invest.

I found this on their website:

CHAN & NAYLOR PERTH 
Level 1, 251 Hay street 
EAST PERTH WA 6004

Phone: 08 9467 7509
Fax:     08 9221 5533

Forget the things that stay the same – eg you'll get capital growth on the Canberra property CGT-free either way (provided you maintain Canberra as your PPR), and make the mortgage payments, either way.

So, the things that change are (assuming 30% marginal tax rate):

* you start paying $250 in non-deductible rent – after tax – $250

* you start receiving $320 in taxable rental income – after tax + $230

* your expenses of holding the IP now become deductible – reduced tax bill of approx $120 pw (assuming expenses $400 pw)

So the difference in position is -$250+$230+$120 = $100 of after-tax dollars.

But if you do buy in Newcastle, and Canberra stops being your PPR, then you incur CGT on the gains in Canberra. $5000 per year of after-tax dollars difference equates to $5000/0.3 = $17K of taxable gains, or $34K of capital gain. I estimate your PPR is worth about $450K (just based on the figures given), so in other words, if you make a 34/450 = 7.6% capital growth – which is probably right as an average over the long term – then it wipes out any difference between the two scenarios.

To my way of thinking, that's very little financial impact either way, so you should base your decision on wherever you think you'd most enjoy living, or take the job that has the best opportunities. Good luck!

 
 No, you stated "his newsletter states he has been an accountant for 25 years when our research shows this is not the case at all". (The grammatically dubious question mark that you put after it doesn't convert this statement to a question.)

wealth4life.com, if your statements were true, I'd be applauding you for exposing this. I don't know Ed, nor have I been a customer, but I get the impression that you're publishing speculation as fact, and therefore I feel morally obliged to defend Ed because what you are doing in publishing baseless allegations is highly unethical and also illegal.

If I'm wrong, and you have proof that either a) Ed has not been an accountant for more than 25 years, and b) Ed received a commission of $30,000, then please provide it.

If I'm correct and it's just speculation, then you should show your strong character and ethics and offer Ed an unreserved public apology for your outrageous behaviour in publicly slandering him.

Do you want a valuation that you can use to refinance, or an appraisal for your own interest?

Good on you, Ed, for your very calm and polite response.

wealth4life.com, alluding that you've done research that shows that Ed's statement of >25 years as an accountant is untrue, without providing that research, is really unfair to Ed. He has no chance to reply and defend himself, and explain where your information is wrong (if it is) eg "that's another Ed Chan".

If you've got information, I think it's only fair to either provide it and allow Ed to respond, or to unreservedly retract your allegations. Even if your information is wrong, I don't think there's any reason for you to leave the forum; I'm sure an apology to Ed would serve.

Without commenting on the accuracy or otherwise of what wealth4life.com has alleged, may I take this opportunity to implore all forumites to think very carefully before making public statements that have the capacity to affect people's livelihoods and reputation. If what you're saying is true, then provide the facts for others to judge for themselves. But if it's a rumour, something you've heard, or just a perception, then I think it's really unfair to publish that on the forum.

Remember that old story about "mud sticks"? You can do a lot of damage to a decent person's reputation with just a hint; it's a power that must be exercised with discretion.