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From: Ken Andersen


Need heaps of help. Have just starting reading the book series, & am very excited about going onto my nest Somers book. As a first time IP investor, I believe that I will need some expert guidance. Am expecting a Workers Comp payout due to injury that has left me unable to return to work. Had to sell up our house in Sydney so the Bank would not foreclose, took the capital gain and bought a similar house in a small north nsw country town. Paid cash for the house, paid up all our debts, & took a small loan to renovate the new house.
Have approx $35,000 available on credit cards, approx $24 K in super, (which I will be able to extract from the super fund) & expected W/C payout is in the order of $800 K. Have spoken to my Super rep who advises most tax effective way to handle this large amount is to put it into my super account etc etc. Don't really believe him. Would like to structure future security through IP's, and rather than read all of Jan's books am eager to start IP investments asap.
Can your forum give me some of your valuable expertise and suggestions. I intend to commence IP portfolio post Xmas 2002. Thanks in anticipation.
 
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Reply: 1
From: Mike .


Hi Ken,

Welcome to this fantastic forum. Your situation is another reminder how adversity can sometimes lead to a world of new possibilities. Jump on, Ken. I'm sure the ride will be a thrilling one. Every time I get together with a group of investors the excitement in the air is electric.

I think if I were starting out again, before buying anything I would read our accountant-in-residence Dale Gatherum-Goss' Tax Battles Manual. It contains info about Trusts. E-mail him for a copy.

At http://www.freestyler.net.au/members/meeting_notes.html Dale says:

"Trust structures have been around for 1,200 years! Trusts enable you to structure your assets and investments in the manner you want, and can assist in minimising or avoiding tax all together. Trusts are also particularly helpful in protecting your assets and investments in the case of legal actions etc."

Another important bit of advice I've seen on the forum is to take out insurance which pays off all debts or outstanding loans should the unthinkable happen. Not sure what this policy is called. If anybody can provide details I would appreciate it.

A property buying strategy favoured by many investors is a mix of high growth and cash flow properties. Don't assume if a property is Negative Geared that it is necessarily a good growth property. Many people have come unstuck buying overpriced units or townhouses in low-growth suburbs. They bought them because the marketers sold them on Negative Gearing. Try to buy 4 cash flow properties to every 1 good growth property. Some people on this forum say that it is possible to have good growth and cash flow as well.

Lastly, don't underestimate the value of inspiration to help motivate you when the future seems uncertain. Their is plenty of uncertainty in this game so seek out role models who you can gain inspiration from. I came across a good story recently on a UK forum. I've attached it below. Click the icon to open it in Microsoft Word.

Regards, Mike

PS I see Dale has passed 1000 posts. The issue of tax savings is an important element of successful investing and I'm sure we have all benefited from Dale's advice. Congratulations for passing 1000 and for being so generous with your time and knowledge.
 
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Reply: 1.1
From: Marina .


HI,

There is one thing I don't quite understand with Davids story.

He writes " WE HAD RAISED MONEY FROM THE EQUITY IN OUR HOUSE AND THE BANKS WERE WILLING TO LEND US THE MONEY"


I understand this point and am using this strategy myself to purchase more IPs with no cash down.
The next statement that he writes directly after the above statement is

THE HOUSING MARKET CRASHED AND THEY DECIDED TO CALL IN THE LOANS.

My interpretation of this is something like margin share lending. If the share drops you need to pay the margin, and if you don't you lose the whole lot.
Is this what happened to David with his realestate.?

Could the National Bank for example CALL IN THE LOANS if the housing market crashed.?
Why would they do that if the interest on the IP loans is paid every month.
Could it possible happen here?

Any clarification would be appreciated.
Thanks Heaps
Marina.
 
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Reply: 1.1.1
From: Rolf Latham


Hi Marina

If you check your loan contracts in fine detail, you will find that most of them do actually cover for the eventuality of a drop in the value of the security as deemed by the lender.

At this point you would technically be in default of your loan contract with two remedies, lower the percieved LVR or pay the loan out.

While it is said that the lenders would not force you to sell if the market contracted because no one coukd be buying and the lender would lose big time much depends on other issues.

I could foresee such an event in a financial meltdown, with the first targets being those people with revolving mortgages, Lines of credit, since these tend to carry the most exposure.

Ta

Rolf
 
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Reply: 1.1.1.1
From: Mike .


Hi Marina,

You picked up a good point. In the UK in the '80s there was a property price bubble which burst leaving many properties with a market value less than the secured value. This is called 'negative equity'. In those heady days it was possible to get 100% loans. A rise in interest rates meant many people defaulted on their interest repayments.

I know that it is the mortgagee's responsibility to maintain the value of the property or provide enough mortgage insurance to protect the interest of the bank, however, my mortgage contract doesn't indicate that the bank can call in the loan due to a price drop based on Market forces. It is not expressly stated anywhere, so I would query Rolf's view on that. The bank can only terminate the contract if the mortgagee has breached any of the conditions. Clearly, the mortgagee is not in breach if the market goes south. Afterall, the bank is making an investment just as much as the property owner is. The bank has to take some risk, however small. It would be unethical to chuck somebody out of their home if the repayments were maintained. Perhaps the bank would be entitled to ask you to increase your mortgage insurance just in case you default they are still covered.

Perhaps, there are certain loans which have margin calls but they wouldn't involve chucking you out on the street. Sorry, Rolf, can't see that happening with a home loan. In David's case at least one loan was for his computer games business which he said failed. Perhaps he defaulted on his business loan. I will try to get a response from David to clear up the matter, but in the meantime clarify the point with your lender.

Regards, Mike
 
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Reply: 1.1.1.1.1
From: Rolf Latham


Hi Mike

Reality, ethics (banks remember:O) would more than likely prevent a mass dumping.

I should have clarified the point that loans controlled by the consumer credit code (mainly PPOR loans) can not be so harshly operated, but see below

Typically clauses are not on the loan contract itself but in the standard terms and conditions usually provided separately. They may say something like:

If at any time any security is not effective to our satisfaction, we may require you to provide us with additional security acceptable to us.

This becomes especially interestitng where you are using Lines of credit with review times as short as 1 year.

Other clauses which are more wide ranging include:

An Event of default occurs:

You do not make payments by their due date

Any Material Adverse Change occurs including but not limited to:

half a dozen more and then this one

any reduction in the value of property mortgaged to us as security for this loan

Before we require immediate payment in full, you will be given 30 days written notice to allow you an opportunity to remedy your default.

Legally I reckon you would not have a leg to stand on. AS I said reality hopefully is otherwise.

Ta

Rolf
 
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Word .doc Attachments = Bad (Off Topic)

Reply: 1.2
From: Paul Zagoridis


Hi Mike. Thanks for that great summary and the link.

I am hoping you'll rethink one part of your posting process. I quote from http://www.gnu.org/philosophy/no-word-attachments.html

Your attachment was in Microsoft Word format, a secret proprietary format, so it is hard for me to read. If you send me plain text, HTML, or PDF, then I will read it.

Did you know word took 25,600 bytes to send 6,990 bytes of text? That takes up bandwidth and drive space on this server.

Distributing documents in Word format is bad for you and for others. You can't be sure what they will look like if someone views them with a different version of Word; they may not work at all.

Receiving Word attachments is bad for you because they can carry viruses (see http://www.symantec.com/avcenter/venc/data/acro.html). Sending Word attachments is bad for you, because a Word document normally includes hidden information about the author, enabling those in the know to pry into the author's activities (maybe yours). Text that you think you deleted may still be embarrassingly present. See http://www.microsystems.com/Shares_Well.htm for more info.

But above all, sending people Word documents puts pressure on them to use Microsoft software and helps to deny them any other choice. In effect, you become a buttress of the Microsoft monopoly. This pressure is a major obstacle to the broader adoption of free software. Would you please reconsider the use of Word format for communication with other people?

To convert the file to HTML using Word is simple. Open the document, click on File, then Save As, and in the Save As Type strip box at the bottom of the box, choose HTML Document or Web Page. Then choose Save. You can then attach the new HTML document instead of your Word document. Note that Word changes in inconsistent ways--if you see slightly different menu item names, please try them.

To convert to plain text is almost the same--instead of HTML Document, choose Text Only or Text Document as the Save As Type.

Your computer may also have a program to convert to pdf format. Select File => Print. Scroll through available printers and select the pdf converter. Click on the Print button and enter a name for the pdf file when requested.

PaulZag
Dreamspinner

Sorry for the infomercial. Hopefully it provides food for thought.
 
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Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1
From: Mike .


Hi Paul,

Thanks for bringing that to my attention. Won't attach docs anymore. Have attached Html version to original post but can't delete doc version. Html version uses half of space required for doc. Glad to see your presence on the forum again. Have enjoyed many of your previous posts and look forward to more of the same.

Regards, Mike
 
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Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1.1
From: Paul Zagoridis


Hi Mike

Thanks for the HTML.

Thanks also for not taking my cranky, late-night diatribe personally. You are a gentleman. I hope that is one of the advantages of having met you face-to-face and broken bread.

I've received some polite rebuffs for the tone and content of my post.

Hi there gang - you know who you are. More comments for you guys rather than Mike.

Yes I can currently and will probably always be capable of opening .doc format files. I am a propeller-head after all. They still are not a good thing.

I am 6 months away from removing all Microsoft products from my companies. I'm waiting for a few newer versions of SQL-Ledger before we dump MYOB and Windows forever.

HTML is open source, Text is universal readable, and PDF is cross-platform (open source is available).

I don't think any of that invalidates the quoted material. Do a Google seach on Word attachments bad and research for yourselves.

here it is
http://www.google.com/search?hl=en&ie=ISO-8859-1&q=word+attachments+bad

But all I ask for is a rethink, not blind obedience to my every whim.

Hold it...

There's a plan...

Paulzag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/
 
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Reply: 1.3
From: Ken Andersen


Dear Mike,
Thanks for the tips.
I will do some very indepth searching over the next three - four months in all areas, so that by the new year, when funds are available, I am able to start my financial strategy. The forum offers very concise and valuable advise so I will be hitting it nightly.
Regards
Ken
 
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Reply: 1.3.1
From: Jenny Nowakowski


Hi Ken

what about wraps? You get positive cashflow with having to fork out for rates, water, insurance and repairs because the buyer pays it all.

I've just been to Rick Otton's wrap bootcamp and it was great! His site is at www.creativerealestate.com.au and also www.webuyhouses.com.au

Jenny
 
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Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1.1.1
From: Geoff Whitfield


Paul,

Microsoft is perhaps not a good thing. But it's here, and we have to live with it.

To tell off a user for posting a Word document I thought was a bit extreme.

I have evaluated Star Office as an alternative to Word- but (in the version I looked at 12 months ago), I found it to be unstable (once it crashed, I could not start it again without a reinstall); and I found the macro language did not come near our requirements. If there is a good alternative out there now, I would look at it- but, considering the amount of power we've incorporated into out Word Apps now it would take a lot to come up to Word.

I started out in Wordperfect, and I liked it, I did not see any alternative then. It's entirely possible one will come out (or already has).

But until another product has come out which is as ubiquitous as Word, I'd suggest it is a bit harsh to knock people for posting in that format.
 
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Sim

Administrator
Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1.1.1.1
From: Sim' Hampel


On 8/26/02 10:13:00 PM, Geoff Whitfield wrote:
>
>Microsoft is perhaps not a
>good thing. But it's here, and
>we have to live with it.

What a load of crap.

>To tell off a user for posting
>a Word document I thought was
>a bit extreme.

I thought he did it rather politely.

>I have evaluated Star Office
>as an alternative to Word- but
>(in the version I looked at 12
>months ago), I found it to be
>unstable (once it crashed, I
>could not start it again
>without a reinstall); and I
>found the macro language did
>not come near our
>requirements. If there is a
>good alternative out there
>now, I would look at it- but,
>considering the amount of
>power we've incorporated into
>out Word Apps now it would
>take a lot to come up to Word.

Paul was not asking Mike to stop using Word.

>I started out in Wordperfect,
>and I liked it, I did not see
>any alternative then. It's
>entirely possible one will
>come out (or already has).
>
>But until another product has
>come out which is as
>ubiquitous as Word, I'd
>suggest it is a bit harsh to
>knock people for posting in
>that format.

Word is by no means ubiquitous. Adobe Acrobat documents ARE ubiquitous, because the readers are free and the file format is open and portable. HTML is ubiquitous because the file format is an open standard, and browsers are free. Word is a closed, proprietary format.

All Paul was asking (and I agree 100%) is that people use one of the many truely non-proprietary formats available to us... and he gave some examples. Mike responded with some HTML, which was a perfect choice. Thanks Mike !

Geoff, I would suggest that you may be surprised to see the results if you did a survey looking at the number of people on this forum with a completely legal copy of Word on all the machines that they read the forum with (particularly those at home). I know many people who have a copy of Word at home that they brought (illegally) home from work.

Communication is about openness. If you choose to communicate in such a way as to cause a significant portion of your audience to not be able to understand, then what is the point of communication ? Is it only for the "elite few" who choose to use Word ? If I chose to write all my posts in German in the future, would that not be a silly thing for me to do... given that my goal is to communicate with a broad audience ?

What a pity the Acrobat Writer is so expensive (around $500)... it is among the most useful pieces of software I've ever used. When it comes to communication, given that our corporate standard for office software at IBM is Lotus Smartsuite, I rely on Acrobat writer to produce transportable, easily readable documents to send to my customers.

 
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Reply: 1.3.1.1
From: Mike .


To Marina,

I finally got a reply from David Jones. My questin was:

Hi David,

If you see this could you clarify something, please? You said the bank called in the loans. Was that because of falling property values, or because the business failed, or because you defaulted on the interest repayments?

I've heard of banks calling in loans on margin lending for shares but not for home loans that have Negative Equity. Normally, the banks won't call in a loan unless you default on the repayments.

Regards, Mike

Mike,

It was a combination of factors. The bank could see its security evaporating and the business wasn't going anywhere. We didn't default on any interest payments, but we were fast approaching the point where available funds were running out and it would be likely.

"Normally, the banks won't call in a loan unless you default on the repayments."
Maybe so, but those weren't normal times.

As I said in the article, I was a bit naive at the time and there may have been other factors that I was unaware of. I don't think there were, but I can't be 100% certain.

Dave

..................................................................

To Rolf,

Thanks for those insights. Just wondering if you were acting as my mortgage broker whether your role extends to negotiating for the removal of any clause related to foreclosing based on the devaluation of security caused by a market slump. I believe Donald Trump came unstuck that way in the early '90s when the banks called in the loans. Fortunately, they gave him a lifeline and kept him in the game, by allowing him to minimise his (and the banks) exposure by selling some of his holdings. The rest is history with Trump bouncing back to the delight of his creditors.

In David's case, they treated him much more harshly. Can we avoid the same thing happening to us or do we have to be Donald Trump to get preferential treatment?

...................................................................

To Paul,

The only words that were yours in relation to attachments were, "I am hoping you'll rethink one part of your posting process."

The other words were a direct quote from an article by someone else.

I wasn't and can't understand how some people might have taken any offence at your words which are as far removed from a scolding (telling-off) as can be. In fact, as Sim said, I took it as a polite suggestion.

The fact that the article contained valuable advice also justified bringing it to our attention. Well done.

Regards, Mike

PS Could someone explain to me the meaning and difference of/between an open format and a closed format and why some people may not be able to read the Word doc I posted with their own Word reader?
 
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Reply: 1.3.1.1.1
From: Mark Laszczuk


Geoff,
Here's something to consider. When I used to use a Mac, if someone posted something in Word, I couldn't read it, because I didn't have Word or other Microsoft products. However, when someone posted in Acrobat, viewing the document was no problem. Not everyone uses Word, but anyone can access Acrobat (as one example).

Mark
'no hat, some cattle'
 
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Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1.1.1.1.1
From: Geoff Whitfield


Sim,

I'm sorry if I misread the original post. I read it as "telling off"- even if only to a small degree. If that was not the intent, then I obviously misread.

The point that Word is not available to all is valid. There is a free Word document viewer available, but it is by no means as common as a pdf reader. Though my own experience with reading pdf has been variable- it's great 90% of the time, but 10% of the time, grinds to a halt.

I thought my own response fair. I sought opinions immediately after posting, as I was worried. The people I asked thought my response was OK too. Obviously some people did not agree- that's their right. But to be treated with "what a load of crap" was demeaning and hurtful- no matter what your opinion of what I say. You have a right to disagree, and to state your opinion. To put someone down in that way goes beyond what I thought this forum was about- about trying to help people in the investment community, by sharing experiences.

Obviously Microsoft raises emotions. I shall try very hard never to mention the word again.

Geoff
 
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Reply: 1.3.1.1.1.1
From: Geoff Whitfield


Mark,

Fair point on people not being able to read the post. I guess I reacted more against a few other statements- like "you become a buttress of the Microsoft monopoly". I just felt that overrode some of the more valid points of the post.

There is a free Word viewer available- but granted, it's not well-known, and nowhere near as common as the pdf reader.

Geoff
 
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Sim

Administrator
Word .doc Attachments = Bad (Off Topic)

Reply: 1.2.1.1.1.1.1.1
From: Sim' Hampel


On 8/27/02 7:58:00 PM, Geoff Whitfield wrote:
>
>my own
>experience with reading pdf
>has been variable- it's great
>90% of the time, but 10% of
>the time, grinds to a halt.

mmm... I hope you're using the latest version (v5.0.5 if on 32-bit Windows platforms) - it should be very stable. Of course your choice of operating system may have an impact - Win2000 and WinXP are very stable and reliable in my experience.

Acrobat reader is not perfect for reading documents - although I find that the newer versions allow quite a bit of flexbility in how they are viewed. It is, however, unsurpassed for printing documents on any platform in a reliable and reproducable manner, unlike most other file formats.

>I thought my own response
>fair. I sought opinions
>immediately after posting, as
>I was worried. The people I
>asked thought my response was
>OK too. Obviously some people
>did not agree- that's their
>right. But to be treated with
>"what a load of crap" was
>demeaning and hurtful- no
>matter what your opinion of
>what I say. You have a right
>to disagree, and to state your
>opinion. To put someone down
>in that way goes beyond what I
>thought this forum was about-
>about trying to help people in
>the investment community, by
>sharing experiences.

Okay Geoff, I re-read your post, which I took to be an attack on Paul's well written and argued post... and so jumped in to defend it. A little too zealously it seems in retrospect.

My comment (as harsh and unreasonable as it was - oops)... was a direct reaction to you comment about Microsoft, "But it's here, and we have to live with it". Which is in my opinion a rather ignorant and unfair comment to make, hence my (over)reaction.

It is a matter of principal that Paul was trying to explain - that we do not just "have to live with it"... and to let yourself beleive that we don't have a choice, is a very sad way to be.

I do apologise for overreacting, and in re-reading your post, I do see that you were not directly attacking Paul.

My post was also not meant as a personal attack on you, I do not think you are a "load of crap", and my comment was a generalisation about the sentiment that I hear from many people about the lack of choice.

>Obviously Microsoft raises
>emotions. I shall try very
>hard never to mention the word
>again.

Oh please do... there's nothing wrong with an emotional argument... just so long as we are given the chance to step back and re-consider what is said, and apologise if we overstepped the mark ! What a boring place the world would be if we only ever stayed away from topics that raised emotions ;-)

 
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Reply: 1.3.1.1.1.1.1
From: The Husband


I know a lot of IT people have 'problems' with microsoft. Both from a software level and a sociopolitical level. Interesting!!

TH
 
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Reply: 1.3.1.1.1.1.1.1
From: Paul Zagoridis


Hi GAng

I'm back from a business trip and missed all the bile ;-)

The free Microsoft Word reader is not available to users of other OS's like Amiga (still out there) and Linux (they have more options). There are even text based browsers accessing this site.

All the computers accessing the internet can read HTML and Text files.

Mike . The difference between Open format and proprietary format is socio-political. An open format is publicly specified. If you don't like how your vendor is implementing or licensing the specification you can change vendors or even write your own code (hire a programmer). With Proprietary code the vendor tells you what and how you can access the information. e.g. Microsoft's new licensing actually forbids criticism of their products without their prior approval. They can and do change the word file format at will.

PaulZag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/
 
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