Peter SPANN in WA- April

[Rixter]

Was thinking of using funds from a LOC at 6.64% (as per Rixter), but it would be looked upon as a loan to be serviced (DSR), also I gather it would encrouch on my LVR, which I want to maximize with loans for developing 2 vacant lots and reno another 2 IP's.

BF

BF , if the funds are coming from an already existing LOC then the bank has already accessed it as being fully drawn (even if its not) so it wont increase your existing LVR or DSR calcs, however I would use any existing undrawn funds in your LOC for expanding you asset base into more IP. And use their 100% loan with the 7.5% rate - the slight increase is a small price to pay but it lets you build IP & get into shares aswell.

Just my thoughts

 

[bigfella966]

BF , if the funds are coming from an already existing LOC then the bank has already accessed it as being fully drawn (even if its not) so it wont increase your existing LVR or DSR calcs, however I would use any existing undrawn funds in your LOC for expanding you asset base into more IP. And use their 100% loan with the 7.5% rate - the slight increase is a small price to pay but it lets you build IP & get into shares aswell.

Just my thoughts

Rix,
I agree, I was looking at the possibility of drawing another LOC for funding, but as you say, it would affect our LVR & DSR because it would be an additional LOC.
So by going with the McQ 100% loan, would my current lender look at it as a serviceability issue?

BF

 

[Rixter]

Rix,
I agree, I was looking at the possibility of drawing another LOC for funding, but as you say, it would affect our LVR & DSR because it would be an additional LOC.
So by going with the McQ 100% loan, would my current lender look at it as a serviceability issue?

BF

No Idea for sure,,,,,,ring them and ask. Id say probably increase the loan value ratio and also help you DSR to a certain extent.

 

[Peter Spann]

The one thing I didn't complete agree with was with the 3 key elements of Investment where you can only have 2 of the following 3.
a) Growth
b) Yield
c) Low risk

Normally this will be the case, but there are abberations where you can get all three.
At least in the short term I believe. ie..certain markets present both growth as well as yield with a low risk factor.

I may agree in the (very) short term but for two reasons that is irrelevant to me...

1. I ALWAYS view my investments in the long term.

Remember, my approach is to automate, to reduce personal time commitment - the approach you are suggesting requires me to constantly monitor the market and my investments - not for me.

2. Markets very quickly "normalise" - as soon as an arbitrage opportunity exists it usually is spotted, traded and normalises so far too small a window for me to be interested or to take advantage of.

 

[Peter Spann]

Here's my view on financing:

Why borrow against a LOC for this type of investment? Home Loans are hard to get and require a LOT of "skin in the deal" - equity, personal guarantees, bowing and scraping to Bank Managers etc - hence why they are cheaper - lower risk for the lender. Why not keep that powder dry for other opportunities?

This form of lending is MUCH easier to get, has as it's only security the product, and doesn't affect your capital position in other investments - cost - about 1% more - seems a small amount to pay for so many benefits.

 

[NigelW]

Here's my view on financing:

Why borrow against a LOC for this type of investment? Home Loans are hard to get and require a LOT of "skin in the deal" - equity, personal guarantees, bowing and scraping to Bank Managers etc - hence why they are cheaper - lower risk for the lender. Why not keep that powder dry for other opportunities?

This form of lending is MUCH easier to get, has as it's only security the product, and doesn't affect your capital position in other investments - cost - about 1% more - seems a small amount to pay for so many benefits.

Just to clarify Peter, is the loan truly a limited recourse loan?

I.e. if you default is it the case that ALL the donut will do is liquidate your holding of the particular fund and they will NOT sue you under your personal covenant to repay nor will they bankrupt you if you don't?

Thanks
N.

 

[kph]

I may agree in the (very) short term but for two reasons that is irrelevant to me...

1. I ALWAYS view my investments in the long term.

Remember, my approach is to automate, to reduce personal time commitment - the approach you are suggesting requires me to constantly monitor the market and my investments - not for me.

2. Markets very quickly "normalise" - as soon as an arbitrage opportunity exists it usually is spotted, traded and normalises so far too small a window for me to be interested or to take advantage of.

Yes, I agree in the context of your criteria of both long term view, as well as a hands off approach.

Definitley need to maintain a more hands on approach to monitor and react to any change in the three indicators.

I guess that is the challenge for some of us novice investors, that we take on board this idea of doing it 'hands off' ...

kp

 

[Peter Spann]

I guess that is the challenge for some of us novice investors, that we take on board this idea of doing it 'hands off' ...

It's just a mind-set thing. Most people have the view that nobody can do it better then them, which in some areas of wealth creation may be true...

However in most areas there are others who can do it as well as, if not better, more consistently, and with an approach / structure not available to individual investors.

While my obsession is to automate (ie hand over to somebody else) ALL of my wealth creation - even the "stuff" that I am really good at - I think it would be sensible for most people to at least start with the "stuff" they believe others could do better.

 

[kph]

Makes sense and I agree with what you are saying.

In fact, it was an enlightening moment hearing you mention it at the seminar.

But I don't think its because we think we can do it better that others.
Might be more in relation to having a bad experience when you trusted someone else to do it ( in the past ) and got burnt, and then decided thereafter to taker control and do it yourself.
More to do with 'trust' than being able to do it better.

So its a mind-reset thing to go back and select someone you feel you can trust to take over and thus automate..

kp

 

[yadreamin]

I know the PDS is on the FF website but has anyone recieved their hard copy yet?

 

[The Y-man]

I know the PDS is on the FF website but has anyone recieved their hard copy yet?

I have.....

Cheers,

The Y-man

 

[yadreamin]

Mine arrived today.Wonder why it took soooo long?
I noticed a photo of Peter Spann in the gallery, Crickey he has also made an investment in reduction Lookin good Peter.[ no not a photo next to a ferrari] well done

 

[Rixter]

Mine just arrived today as well. 3 weeks it took.