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From: Donna Larcos


Sorry, I'm chatty today. I introduced a
friend to property about two years ago ad
he has gone from a supporting parent
benefit to controlling about $2 mill in
property in that time, passing me well and
truly. I was talking to him about
off-the-plan and how you could control a
lot of property for a year or two with very
little money and if you choose well make
a substantial capital gain. Unfortunately,
he may have taken this too literally and
has now bought 3 units off the plan for
substantial amounts of money which are
due to complete late 2003. I have warned
him that I thought this was a bit risky
because you may have to come up with a
lot of money in a short space of time and
be unable to offload if there is a downturn
in the market.

Would you be worried about this plan?
Have I created a Frankenstein?

Donna
 
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Reply: 1
From: Rolf Latham


Hi Donna

A lot depends on whether your friend has finance approval for all three properties at completion. If not, and there is a bond securing each of them then all may be well if the market continues to grow, on the other hand he may have a fun time as you say IF the unit market goes to custard.

Ta

Rolf
 
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Reply: 1.1
From: Astro Boy



Hey Rolf,

is it realistic to have pre approvals for OTP's that are not due for completion for 24+ months - I would have thought that if I took a 2 1/2 yr old approval back to the bank they would laugh at me???

Is there another way to cover yourself on an OTP over the case of an unexpected significant downturn?

Cheers
astro
 
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Reply: 1.1.1
From: Rolf Latham


Hi AB

You can get bonds for up to 36 months. So called approvals are only indicative usually for 90 days, which is enough time to get a deposit bond.

The lender would not laugh at you. The would just ask for a new application including income documentation and liabilities. This is why an OTP approval is not worth a whole lot.

Protection, dont know really, if the market goes to custard and youre left holding 6 bonds and you have 600 000 negative equity, then bankruptacy ma be a good option.

Options of some sort may work for you where you can limit the loss, but thereby also limiting the return (hey sounds like insurance)

tA

Rolf
 
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