Forum Replies Created
Thanks for clarifying re: paying directly from loan. I can only assume you are assuming this is done through the + balance in redraw.
And thanks for clarifying the rest – my thoughts exactly!
If you can use a IO that can be redrawn and paid directly from the loan account then this would be even better.
Sorry, could you elobrate please.
You mention that money from an offset account would not be tax deductible, of course – but if you have a $100k loan with $100k in offset and you withdrew $20k to pay (as an example) a contribution toward your development, would the interest then not be tax deductible on the loan?
I’m trying to understand why an LOC which is secured against an O/OCC is disadvantageous for development/investment purposes. Does it become a disadvantage from a tax perspective if the funds are used for both personal and investment use?
Thanks guys.
So providing the home (owner occ) is paid down to $0, the client uses this property as security and applies for a LOC for investment purposes then (in the example I gave), the total portion is tax deductible BUT if the home loan has not been paid down then it would be advisable to have two splits – standard loan for remaining portion of debt PLUS LOC for the development?
All very helpful – thanks!
Hi all,
What are the advantages/disadvantages of using a LOC which is secured against an O/OCC property to put a deposit on a development site + drawing on the LOC as funds to contribute to the construction? I.e., deposit for land + build from LOC and remaining funds to complete from the loan which is secured by the development site (no cross-collateralization).
Do you see any major issues with this?
What would be the difference in doing this as opposed to drawing from an offset account against an O/OCC IO loan…Thanks,
JThanks Corey,
I understand and we will look into this.
why anyone with the cash would not do it themselves.
A myriad of reasons Richard. As I’m sure you are aware, being in the insutry for quite a while:
a) many people do not understand the process involved
b) HNW individuals focus on their own occupation and have no experience in developing
c) provides a second income stream
d) cashed up but time poor
the list goes on…
We are currently looking after a client who has the funds and serviceability to complete a development but is too time poor and does not understand the process.What sort of ROR would an investor be expected to receive ?
That is dependant upon the profit to be made. As an example, >50% of the gross profit would be distributed to the financier and a ‘fee-for-service’ type arrangement would be paid to the developer.
And would the developer the second cut of sale profits, eg you get paid…..after the investor gets their guaranteed rate?
I hope the above answers your question Dean.
by doing what you suggest you are cross collateralising the securities.
Yes, correct. However, given that I’m working for a bank and not multiple (brokering) I guess it doesn’t matter too much considering the bank will hold both securities anyway. Still some disadvantages but very minor.
Thanks,
JDStill a *terrible* idea to even suggest cross collateralising Aaron.
The best option without question would be to setup a new split SOLELY against the PPOR to release the deposit funds and then the balance of the purchase finance against the new purchase SOLELY.I’m confused Corey – do you mean take out 3 separate loans?
1x PPOR loan,
1x Funds for Deposit and
1x Balance of INV?I’m in lending myself and I would simply do 2 loans. 1 would be the original PPOR loan + a second loan which would be for the deposit funds. Once the property has been secured I would increase the existing loan to cover the balance at settlement (or refinance the existing debt into the newly created investment loan) which is solely secured by the investment property.
Thanks,
JDSay for example, if I purchase a 5 bedroom house and intending to do a renovation which extend the house into another 5 bedrooms. Total is 10 bedroom house. They I rent each room out separately to individual person. I run it as a hostel/short term accommodation property.
I work as a lending specialist for a ‘Big 4’ bank and getting finance approval on something like this is extremely difficult. From what you are saying, it sounds like a ‘boarding house’ and not a hostel..
Buying a standard residential dwelling, and then converting it is a different story though.
Sounds good Terry. I've popped an email through to HoW. Thanks!
Thanks for the contact Terry, however all my tax returns are completed, are you saying he will charge $275 to tell we whether or not something is a deduction or not?
Hi Sunnycoast, the original intention was to buy, get DA, build and then sell for a profit. However, we bought, spent money on DA, didn't get approval and are now looking to include the costs of getting DA (architect, surveyor, aborist etc.) as a tax deduction in our previous years tax returns.
Thanks,
Excuse my ignorance I have very little knowledge of taxation, so any help would be much appreciated.
He did mention that the intention was to add value to the property or something along these lines, and because I made a loss and I'm not continuing with the project, these can be deductible..?
Correct, however I'm not talking about purchase costs. I'm talking about architect fee's council fee's, land surveyor etc.
I was speaking with an accountant who mentioned you can claim this back two ways a) as a capital loss or b) i believe he said 'revenue expense, or revenue loss' – basically, option b would mean I would be able to amend the tax return and have the money in my pocket now, rather than option a which would be deducted when making a capital gain…
Is this correct?
Just thought I'd have some input, I'm in Melbourne and have 2 properties, both loans were set up with interstate brokers. The most recent was set up by username: Qlds007 (which is Richard Taylor I Ph 07 3720 1888) and Richard was fantastic. Efficient and informative.
Great read Dave! Are you a BA for NSW only or Australia wide?
Also do you find development opportunities, or could your service help with the information required to make an informed decision about where/what to develop?
E.g., supportive growth council, new zoning, comparisons between average cost of townhouses/units in a particular area..
Wow, thats a decent size side-by-side site.
I'm with 10km from the city and DUPLEX developments are everywhere!!
1200sqm+ is probably a 7 unit site around here though
Hi all,
I received some great personal advice from people on this forum and was absolutely stoked with the response I got from everyone. So, thank you all who contributed.
I will be writing loans in less than a month and will build on the experience I gain in-house to then propel me into becoming a broker.
I didn't want to create a new thread but I have another question, my partner and I have some cash and are struggling to think of what to do with it. It'll be from the sale proceeds of a property that didn't quite work in our favor and have decided to sell up.
I'm looking for a mentor or someone who can provide some advice in Melbourne or around Aus (I'm not too fussed). I'd really like to do a development, but whilst we both have great serviceability, the upfront costs are a killer for us. Is there anyone around who can provide assistance?
Your help is much appreciated.
Thanks,
Thanks Alistair, much appreciated. It would be great to have a discussion with someone around what they are looking for as they hire. I'll PM you
Thanks for the advice and assistance guys,
Just to clarify, will most brokers pay there staff $0 base and then take a % of the commissions as well? That seems tough!
How does one start off in the industry with that?
Thanks for the reply Jamie, completely understand. By modest salary I wouldn't be expecting triple figures, or anywhere near that. However, the advertisement I found on SEEK seems to spruik $150+ and it just seems a little strange.
It's either that, or work for a franchise owner of a Big 4 – e.g., working for a mobile lender. But I just want to make sure I find the right person with the right skills.
