Financial Advice

Had an interesting conversation on the phone today with one of the 'higher ups' at my local Bank branch.

I go there for all our business banking deposits, and had to spend several visits there getting all the necessary accounts opened up, eftpos etc for the Tyre Centre before we commenced trading.

The person who called me wanted to know if I wanted to set up and online saver account to park the business takings in while I was waiting to pay some bills. Earn some nice interest...

I tried to explain that due to the various loans we have now, and the interest rates attached, it is far better for me to pay any excess funds into the loans (which are all LOC's) and minimise the interest on them than to cop a rate of interest paid to me less than what I am paying out. Not to mention the tax I'd pay on that interest earned.

This person struggled to make sense of this.
 
LOL are you surprised?

I once applied for a mobile phone and was rejected. I was doing a million dollar development at the same time but did not have a good enough credit rating for a mobile phone.

No one understands investors :(

that's why we are all here lending support to each other :)
 
man there's some wierd ones out there.

like the guy only a few days ago at the bank - ANZ to be specific - who tried to "help me" with my small business accounts.

he couldn't understand why i needed a trust sccount, business account and personal account - all seperate - if myself and the business are beneficiaries of the trust (as in, it should just be one account).

my jaw dropped....i was stunned into silence - and that's a rare occurence. here's the BANK telling i shouldn't have to have what they require me to have.

i just said thanks and walked out. no point trying to alleviate people of their own stupidity - it takes too much time. he'd probably bring me down to his level and beat me with experience anyway.
 
I still remember many years ago when we were refinancing IP#2 and the RAMS lady came out to our home. She started her spiel about how I could pay off our own home quicker. I stopped her and asked "Why on earth would I want to pay off my own home?" "If anything I want to mortgage it up to the hilt and only pay IO forever if I could and use the equity to gear into more IPs".

The poor thing just sat there with jaw dropped firmly on the floor. I guess they did not cover that in MB school where she was fresh out of. ;)
 
So Xenia

Would u like to provide some lending support for my clients :)

ta
rolf


so they can qualify for mobile phones or developments? ;)

That was years ago, our latest development site is sitting there unfinanced currently while lending institutions are trying to decipher what it is that they need to make it happen!!! :(
 
On tuesday, DH and I popped into Service One to get some mortgage product info. You have to ask the tellers to give you the printed info, and of course this teller decided to try selling the products to us. She demonstrated a complete lack of knowledge, but the kicker came when I asked about IO repayments.
Her response "IO? We don't do IO repayments. How can you pay off your mortgage if you do IO? Why on earth would anyone want an IO loan?"
I couldn't resond to such idiodicy. DH was more patient and said "Because it makes the most sense when structuring our investment portfolio."
The teller then said, quite snappishly "You never told me that it was for an investment property."
I walked out at this point - we had actually mentioned that it was for an investment 2 or 3 times (not that it is any business of the tellers, we just wanted some written info).
DH stuck around and managed to get the mortgage managers details off her. It turns out the mortgage manager is one of my friends hubby's, I think I might have to let him know about this 'helpful' staff member.
 
i remember years ago when we took out a bank mortgage for ip# (whatever, but around 5) and one of the stipulations was that we met with the inhouse finance guy. we talked to him for the 5mins that it took for him to realise we knew more than he did - and then he gave up.
 
I still remember many years ago when we were refinancing IP#2 and the RAMS lady came out to our home. She started her spiel about how I could pay off our own home quicker. I stopped her and asked "Why on earth would I want to pay off my own home?" "If anything I want to mortgage it up to the hilt and only pay IO forever if I could and use the equity to gear into more IPs".

The poor thing just sat there with jaw dropped firmly on the floor. I guess they did not cover that in MB school where she was fresh out of. ;)

No disrespect but this kind of mindset is what got the property flippers in the states into the trouble they are in now. I would hate to be the last person holding.
 
most flippers in the states were on AltA loans (some credit history - obviously from flipping). when the market was forced to tank, they got stung being AltA - higher rates, no value and no one to buy even at a loss.
 
most flippers in the states were on AltA loans (some credit history - obviously from flipping). when the market was forced to tank, they got stung being AltA - higher rates, no value and no one to buy even at a loss.

And you know most of the flippers in the U.S?
You can't expect prices to keep going up forever.
Inflation is caused by an increase in the money supply, this in turn causes alot of money going into malinvestments. The malinvestments will then be corrected when the bubble pops.
Inflation is nobodies friend because it is the hidden tax on the average working people.
When the bubble pops everybody will be affected, not just flippers and may I add, not just in property.

I personally do not reccomend my customers going IO on their principle place of residence if they owe money on it. Let alone someone buying one now.
I can understand going IO on an Investment Loan whilst paying PIF on your owner occupied premises. But doing it just so you can squeeze additional borrowing capacity is bad investment advice.
In the last 12 months I have seen alot of bad bloody advice given out there. People with 1-2M worth of lending geared well over 80%+. (because the prices corrected marginally by 5-10%). All the loans at IO. They are now wanting to refinance because the non-bank lenders they are currently with have their rates 100 to 200 basis points (1-2%) higher than the majors and/or will not give them additional funds. The serviceability was tight in all the scenarios!
One off cases? perhaps, IMO definately not.
Do you realise that the cost of funds for the major banks reached over 10 times what it cost before the GFC? Notice that I mentioned Major. Imagine what it is costing for the smaller tier banks and credit unions.
This has gotten a little better, but it is still over 7+ times what it cost prior to the GFC.
We are in a scary environment at the moment and like I said, I do not want to be the last person holding.
 
No disrespect but this kind of mindset is what got the property flippers in the states into the trouble they are in now.
Well no disrespect to you either, but this kind of mindset has made me and others a lot of money over the years. Yes, granted in the wrong hands leverage can also bring you undone. But with risk management strategies in place and in experienced hands it is just a tool like any other.


I would hate to be the last person holding.
I don't understand your point here.:confused: I did not mention anything about 'flipping'. This was for a long term buy, reno, hold, refinance cash out, repeat strategy.
 
There are just so many things that I see wrong with your post, but I beg to differ on the following points:

You can't expect prices to keep going up forever.
Huh? :rolleyes: Sure we can all go and buy 3brm brick homes for $65K like they were in Sydney 20 years ago - cause prices can't be expected to go up forever :rolleyes:

Inflation is nobodies friend because it is the hidden tax on the average working people.
Inflation is every borrower's friend. You pay back today's loan with tomorrow's money (which is worth less)

When the bubble pops
What bubble?

will be affected, not just flippers and may I add, not just in property.
Again with the flippers? Who are you talking about?

I personally do not reccomend my customers going IO on their principle place of residence if they owe money on it.
Well you can recommend what you want and your customers can choose to take your advice or not.

Let alone someone buying one now.
What's the matter with now? Despite all the D&G that was around 6+ months ago, the market where I operate has taken off (I am unfamiliar with the Gold Coast market where you are). And it is not flippers I see - it is some FHB, lots of upgraders and some investors.

I can understand going IO on an Investment Loan whilst paying PIF on your owner occupied premises. But doing it just so you can squeeze additional borrowing capacity is bad investment advice.
That would depend entirely on the goals, strategy & risk profile of your customer, surely?


In the last 12 months I have seen alot of bad bloody advice given out there. People with 1-2M worth of lending geared well over 80%+. (because the prices corrected marginally by 5-10%). All the loans at IO. They are now wanting to refinance because the non-bank lenders they are currently with have their rates 100 to 200 basis points (1-2%) higher than the majors and/or will not give them additional funds. The serviceability was tight in all the scenarios!
Yes gearing is a double edged sword. But people are responsible for their own actions. If SVRs are 5% atm and these people are paying 2% over = 7% and the numbers still work for them, I don't see the problem. I'd have given an eye tooth for 7% IRs 2 years ago :)


We are in a scary environment at the moment and like I said, I do not want to be the last person holding.
You think scary - I think opportunity. Its all in the eye of the beholder.
 
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There are just so many things that I see wrong with your post, but I beg to differ on the following points:

Huh? :rolleyes: Sure we can all go and buy 3brm brick homes for $65K like they were in Sydney 20 years ago - cause prices can't be expected to go up forever :rolleyes:

Inflation is every borrower's friend. You pay back today's loan with tomorrow's money (which is worth less)

What bubble?

Again with the flippers? Who are you talking about?

Well you can recommend what you want and your customers can choose to take your advice or not.

What's the matter with now? Despite all the D&G that was around 6+ months ago, the market where I operate has taken off (I am unfamiliar with the Gold Coast market where you are). And it is not flippers I see - it is some FHB, lots of upgraders and some investors.

That would depend entirely on the goals, strategy & risk profile of your customer, surely?


Yes gearing is a double edged sword. But people are responsible for their own actions. If SVRs are 5% atm and these people are paying 2% over = 7% and the numbers still work for them, I don't see the problem. I'd have given an eye tooth for 7% IRs 2 years ago :)


You think scary - I think opportunity. Its all in the eye of the beholder.

I find it interesting that you have an answer for everything. What bubble you say? inflation being everyones friend? are you crazy? Definately have no idea on sound economic theory and the creation of money.

Who loses out when property goes up and up and up? the next generation, our children. What happens when inflation kicks in? the price of goods and services increases because what $1 buys you today, can no longer buy you what it cost yesterday. This as I said earlier is the hidden tax on the working class.

Let me add, this is my opinion only and I mean no disrespect to anyone on this forum.
 
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I find it interesting that you have an answer for everything.
Yes, I am the first to admit that I am very opinionated. It is one of the hazards of my job. People keep asking my opinions about where to buy, what to buy and so on.

inflation being everyones friend?
No, read what I said. Inflation is every borrower's friend.

are you crazy?
Probably :p, especially when I find myself engaging in this kind of conversation.

Definately have no idea on sound economic theory
Probably you're right there, but I don't give 2 hoots about economic theory

and the creation of money.
Nah, disagree. I must have some idea about this one as I made some (money) along the way

Who loses out when property goes up and up and up?
2 sets of people. The first being the previous owner of the property if they sold it. Second lot being tenants that keep getting hit with rental increases.

the next generation, our children.
pfffffffft! If that were true there would be no new entrants into the property market. Yet my kids have purchased houses. And I'm pretty certain that their kids will buy too.....and at much higher prices than today's.

What happens when inflation kicks in? the price of goods and services increases because what $1 buys you today, can no longer buy you what it cost yesterday.
With the greatest of respect, that's why I said earlier that, inflation is every borrower's friend. You seem to have forgotten about wages inflation in your calculations too.

We might have to agree to disagree on some issues - but that's OK by me :)
 
No disrespect but this kind of mindset is what got the property flippers in the states into the trouble they are in now. I would hate to be the last person holding.

This will never happen.

Many people come into this property game and think that where they came in was the start, and that there is an end. There is no end; no "last one holding" unless the human race stops reproducing and stop living in houses.

It's merely a window that you are part of.

In relation to other posts you've made, there is no reason why every person with every sale shouldn't make money.

The guy we bought our current PPoR from was a builder who bought an old cheapie, did it up and sold at a profit to us I'm sure.

That's fine with us - we wanted the house. Since we've owned it, it's doubled in value.

The next owner will buy it, love it and maybe sell at double the value after the next 10 years, and so on.

Everyone wins.
 
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This will never happen.

Many people come into this property game and think that where they came in was the start, and that there is an end. There is no end; no "last one holding" unless the human race stops reproducing and stop living in houses.

It's merely a window that you are part of.

In relation to other posts you've made, there is no reason why ever person with every sale shouldn't make money.

The guy we bought our current PPoR from was a builder who bought an old cheapie, did it up and sold at a profit to us I'm sure.

That's fine with us - we wanted the house. Since we've owned it, it's doubled in value.

The next owner will buy it, love it and maybe sell at double the value after the next 10 years, and so on.

Everyone wins.

Oh really? is that how it is supposed to work?! thanks for sharing your fantastic insight into the property market
 
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