New Investor – please help :-)

Hi Bonnie

Firstly welcome to the forum and i hope you enjoy your time with us.

To be honest i would be very suspicious over a Company that is marketing property to you an also arranging finance.
They will be less likely to be truelly independant ad certainly not be keen to tell you if the Bank valuation comes is less than your purchase price.

The suggested structure is about right however you want to make sure someone acts in your interest and not their's.

Cheers

Yours in Finance 

Hi Bonnie
As Richard stated, they are as sure as god made green apples a marketing company is telling you what is best for you.
Deal with a reputable finance company that knows how to protect you assets and therefore give you the best option to create some more wealth.
The more people you talk to the more confused you will get.
Talk to Richard!
Look at this site http://www.raspinvestment.com.au to answer your questions.
Regards
Bluegrass

Hi Bonnie and welcome,

I’ll be very upfront and let you know that I work for a company that provides investment properties as per how the company you have spoken with does.
I will also state now that it NOT my intention to sell you anything. I am responding to you only as a fellow investor and a fellow new one at that.

I would firstly say that if you spend some time on this forum you will notice that Richard posts frequently and is always very helpful so you have nothing to lose following his advice

As Richard stated above, I would look very closely at how the finance is provided and by who. There is a very big difference between the company providing finance for you as opposed to an independent broker arranging the finance with you. In our case we put you in contact with a broker but they are totally independent from us, there are no fees and no commissions between our company and the broker. The broker receives his commission from the bank like any other broker.
Definitely, definitely do your research on how your finance is going to be organized.
Ask the question, “How is the finance broker getting paid?”

As an observation and only as my opinion given that I don’t know your individual circumstances, I would be very hesitant to borrow an extra $50, “for an emergency”. You will be paying interest on this amount from day one and could probably just arrange that finance if and when you need it.
Speak with your bank and accountant about how to best organize your finances for emergencies, NOT, the investment company.

I would also add that if this amount was recommended by the company you spoke with, I would then ask them the question, “Why do they think you need such a big buffer?” If this investment has the potential to cost you $50K in a year then I would ask yourself whether it’s worth the risk.

As Richard also stated, the suggested structuring is about right. It is the same strategy that we talk to our customers about but with one key difference in that we only offer investment properties with both a house and land component. We don’t build or therefore offer apartments. One of they key parts of an investment strategy of this nature, ie one driven by capital growth, is the land component. The land we package with our homes is sourced from the early stages of key developments where the land is sold at it’s cheapest. The subsequent stages are then released and sold for a higher price driving up the value of the blocks purchased in the earlier stages. In some cases blocks we packaged are now worth 40% more than what we originally sourced them at.
The question to ask here is.”Where are you expecting the growth?”.
Do your research on the areas they have talked to you about, don’t just take their word for it.

This is also a key point to note. We are a building company. We make our profit on building the house, not on the land. The land is passed to our customers at the price we sourced it at.
With any company, I would ask the question “Where are your profits are made?”.

Following on from this I would ask the question, “Who” are you dealing with? A building company or a marketing company?

With a building company you are buying off the plan and dealing directly with the builder. This keeps your costs “true” and if issues arise then you know who you are dealing with.
With a marketing company, there are possibly fees, commissions, 3rd party expenses that will be added to the cost of the investment and therefore add to it’s “true” cost.

Ask them the question, “If issues arise, who you will be dealing with at any given time?

While we’re on commissions. I get paid a flat fee from the company I work for, therefore there is no incentive for me to sell a customer a more expensive investment.
I would ask the question to the sales person you have dealt with, “How are you paid? Do you get a bigger commission if you sell me a more expensive investment?”
Where are his/her interests?

To wrap it up I would say this.

This is one particular type of investment strategy and one that works quiet well for a lot people. And it does work. But you still need to be proactive, you still need to do your research, you still need to know how you’re getting into the deal and just as importantly, how you’re exiting the deal. You must know the numbers in the deal and you must be able to afford it.

I sincerely wish you all the best in your investing future.

Cheers

Chris

Hi Richard,

Please understand that I ask these questions with all respect as, as I stated earlier, I believe you make a valuable contribution to this forum.

What if Broker X’s ppor was yet to be paid off but they were using some equity to finance an investment?
Would this not be smart and best use of the funds available to you?

Cheers

Chris

Hi Bonnie
Avoid the one stop shop where you buy a property, finance, and whatever else all in the same place.

Talk to Richard who has the runs on the board in this Forum and has helped so many.

Lay out all the jig saw pieces until it makes sense, then run your decisions and ideas past more people before making a decision.

Good luck
cheers
thecrest

Hi Bonnie
All you really need to do is get and asset and liability (A&L) form completed and then you are not stabbing in the dark.
Bluegrass

You've had some great advice here from a number of contributors, but someting I have not seen mentioned which needs to be considered if you are entering the IP market for the first time is 'structures'. You mentioned you have a new bub and a single income which makes establishing the right investment structure even more important so you can protect your investment for the future.

Before you jump in boots and all, you need to look for advice on how to protect your impending investment, this could be by placing it into your super fund, it might be setting up a family or testamentary trust, there are a myriad of ways, but the bottom line is get this set up first as it can be costly transferring property to a pretective structure after the event. You may already have sometning set up which is great, but if not get some advice on how to keep your IP at "arms length".

We made this mistake ourselves in the early days and have property in personal names, so it is totally unprotected if some 'gold digger' decides to sue for what ever reason. Transferring to protect our property after purchase can be an expensive business.

I'm new here so have'nt had a chance to see what's around relating to protecting asets, there is bound to be something somewhere… I hope.

Hope your first IP goes well.