Getting Started

W

WebBoard

Guest
From: Mike .


On a Rollercoaster
From: Wayne
Date: 2/16/00
Time: 4:24:06 PM

Hi all, I feel like I'm on a roller coaster and it's turning out to be rather unpleasant. My sister built an IP and then gave me Jan's white book for Christmas. I read this and tried to get my wife to do the same. She was finding it hard going so I bought the orange book (for me) and the video, (she went to sleep watching it).

I then decided to take the bull by the horns and dragged her out to look at a median priced unit. Well I awoke a monster. While I was at work she went and looked at an upmarket unit fairly close to the beach. Then she dragged me back to look at it & also arranged for a mortgage broker to visit us in our home. Meanwhile I purchased the blue book and the PIA software.

The next thing I know We are making an offer & receiving a counter offer. Finance hasn't been arranged. We accepted the counter offer and were advised by the agent that the contract was unconditional because the contracts would be signed within 3 days of an auction. We contact the mortgage man and he says to go ahead and sign unconditional. I check out several other sources for advise and am told that if my finance falls through I could lose EVERYTHING.

I convince the mortgage man to get the loan approved before I sign & he now says he will have it ready to go (subject to my home's valuation). As for the finance, I was expecting him to give me some choice in lending institutions ( my sister is with a small regional bank IO fixed for 3 years). My current loan is with a large bank and I was surprised when he said he would set up a mortgage offset account with the same bank.

This all seems to be moving too fast for my liking, and I am wondering what other people think.

The details are as follows:

Price of IP 238000 3 B/R 2 story unit beach suburb Loan 252000 IO fixed for 12 months 5.9% housing loan 59000 PI variable (app.8 yrs left) house value 160000 - 180000 approx (I think) combined income before tax 75000 Our intention is to buy it in my wife's name. (highest wage earner) Does this all seem OK to you any ideas and suggestions will be greatly appreciated because we're only starting out on this roller coaster and want to do everything right now so we might be able to buy more tickets in the future:)

Finally allow me to thank both Jan & Ian for all they are doing for us with the books, video, PIA & now this forum. They're blood's worth bottling.
 
Last edited by a moderator:
W

WebBoard

Guest
Gee Cee

Reply: 1
From: Mike .


Re: On a Rollercoaster
From: Gee Cee
Date: 2/17/00
Time: 7:19:01 PM

I have been investing for over 20 years and what you are doing even scares me.

I have not been over the figures but it appears you have fallen into a pool and all the other creatures in it are sharks.

A few questions{

Where actually is the unit? What is it's ability of being rented. Is there a demand or oversupply for this type of property Have you already purchased or is the property coming up for auction What are the future growth prospects for the area and this type of property. Are you locked in and have to purchase or can you get out should you want to purchase something else Why have you bought something at the top end of the market. IE most people drive Commodores & FALCONS SO THERE IS ALWAYS A LOT OF MR & MRS AVERAGE OUT THERE. But few people drive Porches so why aim at this limited market. At the end of the day it all gets back to supply/demand and return.

Forget about having to have this once in a lifetime investment. Do not ever get emotional as sure as if this escapes you this month another beauty will come be available next month.

Above all keep learning, stay focused & never believe sales people.

Successful investing, Gee Cee
 
Last edited by a moderator:
W

WebBoard

Guest
Les

Reply: 1.1
From: Mike .


Re: On a Rollercoaster
From: Les
Date: 2/20/00
Time: 3:56:32 PM

G'day Wayne,

You used the term "upmarket" which seems to put you into the "Porsche" arena - but if this is in Sydney, that would probably be a very reasonable price - probably Falcon/Commodore territory. And, of course, this is the area that Jan suggests for IP's (because EVERYONE can afford to rent them).

If you are already "locked in", don't start losing sleep yet - you appear to have a significant amount of equity in your own home, so (at worst) you may need to wait a few more years before getting #2. It really depends on your answers to GeeCee's questions.

One other area I thought deserved comment was your intention to purchase it in your wife's name. That COULD be valid, but consider the following:-

You can arrange to purchase property in a 99% to 1% ratio (so that BOTH partners MUST sign to sell it) with very little change in the Taxation arena.

Second, it depends just HOW MUCH more your wife earns than you. You may BOTH be in the same Tax bracket, in which case you may wish to consider going 50/50. No need to broadcast this info - just consider it in private, or with your accountant. (Depending on your situation, your wife may cease work in the future, in which case you would LOSE all Tax deductions if only in her name....)

Do come back with that info for GeeCee - with answers to his questions, it allows a more complete answer.

Regards, Les
 
Last edited by a moderator:
W

WebBoard

Guest
Wayne

Reply: 1.1.1
From: Mike .


Re: On a Rollercoaster
From: Wayne
Date: 2/25/00
Time: 7:03:13 PM

Thanks for the replies Gee Cee & Les.

The unit is in Altona (a beachside suburb on the Western side of Melbourne.

I believe we will have no trouble renting it.

There is a demand for good rental properties in the area.

It was going to auction but we bought it beforehand.

As for future growth prospects I wish I had a crystal ball :) but if all goes well it should keep appreciating. It is not far from Williamstown and properties there are now out of most peoples ability, so here's hoping.

I am now feeling a lot better about everything. When I wrote, I felt that things were moving too fast, but now we have the finance almost through and the agent tells us that they will have not have any trouble renting it. The only thing we don't know is whether we paid an inflated price and we will never know that.

I realise that we may be getting out of the commodore class but it is only one street back from the beach and there seems to be a lot of "yuppies" & "Dinks" around these days who are willing to pay for luxuries such as this.

Thanks again for the advice, Wayne
 
Last edited by a moderator:
W

WebBoard

Guest
Kym

Reply: 1.1.1.1
From: Mike .


Re: On a Rollercoaster
From: RightLoan.com.au
Date: 3/8/00
Time: 6:31:08 PM

Hi, Looks like you have been rushed into it all! There is no cooling of period after an auction. You do stand to lose your deposit (10%) if you do not proceed.

The other thing that is a worry is your mortgage man (I am a mortgage man too). The questions you really should have asked him is how many lenders does he deal with? Next you should have asked him specifically why had he not shown you a comparison of other loan products? I mean how come the one he suggested is the best when their is no yard-stick to compare it against?

Wow! 'Subject to your home's valuation' this means you only have a approval in principle, not an un-conditional approval.

May I humbly suggest that you want an offset account on your owner-occupied loan because your not getting any tax benefits from it. So you want to incur as little interest on your owner occupied portion.

What is your interest rate after the 12 month honeymoon rate of 5.9% finishes? is it 6.8 or 7.3 or what? Also can you break out of it without any penalties? Can you make extra repayments? Can you redraw on extra funds paid into the loan?

Also with structuring the loan in 1 or 2 names, well put as much into your wife's name such that the income tax deductions reduce her tax bracket down to your tax bracket. And if this is not achieved, put at least 1% of the loan/property into your name.

Good Luck! If you have any questions on your home loan, give me a call and I will be glad to help out.

regards Kym tel: (02) 9552 1514 Email: krampal@freeOL.com.au Web: http://rightLoan.com.au/
 
Last edited by a moderator:
Top