X-coll is not good

[kph]

Dazz,
I still cant' understand at 48% lvr what is worrying your bank? Have they lost faith in your decision making? Is there something that has spooked them (apart from the tight credit market)?

Ajax

AS someone alluded to earlier.
Not all the pieces to the jigsaw have been revealed ( which is Dazz's right)

Would it be something to do with 'cashflow' ?
If all properties for the last 6 yrs have been funded without any cash input, and from previous posts it was acknowledged that the loans were effective 110% and above, then can one assume that the cashflow position is 'fairly' negative ?
If this is the case, then it wouldn't matter if the lvr was down to 10%, if you can't afford to cashflow the repayments..

kp

PS why the change to your nick?

 

[Dazz]

can one assume that the cashflow position is 'fairly' negative ?

....no Kevin....one cannot assume that.

 

[JIT]

was acknowledged that the loans were effective 110% and above, then can one assume that the cashflow position is 'fairly' negative

You mean like being ''negatively geared'' into CIPs...

I thought they mostly paid for themselves on their own right / were ''neutral'' overall...

 

[Ausprop]

You mean like being ''negatively geared'' into CIPs...

I thought they mostly paid for themselves on their own right / were ''neutral'' overall...

office yields are at 5% or so, so still fairly neg there unless you develop it or chuck equtiy in

 

[nonrecourse]

Don't Blink Dazz

Hi Dazz; Just picked up on this thread about your cross collateralised debt and your LVR. My first comment is that the rules have changed. The banks make the golden rules..... cause they have the gold. Its payback time.

A year ago I woke up to the sub prime debacle when surfing on the net and realised what was coming. Like you back in 2005 I had to tie myself up with one principle lender when we purchased the crown jewell in our property portfolio. For the last year we have tried to devise stategies to see us through what we believe could be the worst financial debacle since the dirty thirties.

Our LVR is only 33% but that includes two super properties that are held in a Trevisan Unit Trust that the bank cannot get its hands on. Without the super properties our LVR is 54%.

Unlike you we have chosen to put the jewell in the crown up for sale and totally wipe all our debt. I have admired your attitude towards investing but I think your desire to move to LOE has distracted you from the end game namely having the gold so that you make the rules.

Your concern about capital gains can be partially offset by both you and your wife contributing $450,000 each into a self managed super fund that then could be used to purchase a commercial property at a later date with a limited recourse loan.

But before you do that you need to choose what you want to sell and when you want to sell it. If you wait until next year you may find the rules not to your liking.

Its very easy to get attached to your investments and you need to seperate your emotions from that razzor sharp mind of yours.

There is going to be an ocean of red ink in the next few years and those that are cashed up are going to clean up. The next ten years will seperate the wannabees from the real investors. Don't get mad get even; give the shirts the flick.

 

[JIT]

Your concern about capital gains can be partially offset by both you and your wife contributing $450,000 each into a self managed super fund that then could be used to purchase a commercial property at a later date with a limited recourse loan.

Do you mean 450k each in the same financial year??

 

[Dazz]

Thanks for your comments and considerations regarding our situation nonrecourse. Your comments have been taken onboard.

This is where investors prove their mettle.....as opposed to Bankers who only work on knowns and guarantees.

What is the best option to choose moving forward ?? This can only be answered when the goals are truly nailed down. Unfortunately for us, we are like a bunch of seaweed, drifting this way and that, whichever way the wind may blow us.

What do I really want out of this investing caper ?? Ten years ago the image of lying on the beach was attractive. I haven't thought of that image for 9.5 years.....it doesn't appeal much any more. Trouble is, I truly don't know what the hell I want to do for the next 70 years of my life.....

 

[Mr. Fabulous]

Trouble is, I truly don't know what the hell I want to do for the next 70 years of my life.....

You too, huh? You've got one of the best heads in the game Dazz, you'll make the right decision, whatever that may be.

Mark

 

[WinstonWolfe]

Swallowing any sense of ego here, I'll put up m2cw, cos it is a topical thing at work currently.

Most days at work, I see several school kid clients. So many of them seem directionless. I can't help but feel their parents and a hedonic society has let them down.

My life has had more turns than the road up Alp deHuez. I tell these kids what I try and remind myself of every week. When one doesn't seem to have an endogenous passion, such passion can be ignited by aiming to be a greater expression of love and wisdom.

Practically, you can become a greater expression of love by valuing and passionately fostering others' full 'potential'. And a greater expression of wisdom by letting that love guide your pursuit and application of knowledge.

Last week, a 14 yo girl with the deepest eyes, seemed to get what I was talking about.

It's an insurmountable feeling Daz, to help others find their way in life and move towards their full potential.

 

[nonrecourse]

A super property idea that makes shares suck lemons

Do you mean 450k each in the same financial year??

Yes you read that correctly. That means as a couple you cannot contribute any more super in the D.I.Y. fund for three years. So a couple could put in 900K and purchase a commercial property using an installment warrant with the property held in a bare trust by the bank but with all the income going to the D.I.Y. fund. The nab will agree to a limited recourse loan provided the D.I.Y. fund puts up 35% as the first installement.

That would mean you could comfortably purchase with legals, stamp duty and all a property for say 2.2 million If you have other super income from say shares or interest that could also go to paying off the property.

We started our D.I.Y. fund 14 years ago when we rolled over our industry funds contributions into our own super fund. Our fund has had an average annual compound growth of 53.4% year in year out. We have never showed a loss in our super fund. How is that you say? We purchased the two commercial properties that we operated our business from. Its a no brainer if your self employed or have enough cash to get into a commercial property with a long lease.

 

[Dazz]

It's an insurmountable feeling Daz, to help others find their way in life and move towards their full potential.

.....yes, I haven't really had the pleasure yet. I'm sure you are correct Winston. Maybe writing that book might keep me off the streets for a while.

 

[redsquash]

This is coming out of left base as I dont see any good options.

If you ignore re finance costs then would your portfolio be attractive to other banks to get a loan?
I will assume it is attractive.

You don't want to incur refinance but if the bank calls in the loan/s then you wont have a refinance cost as the bank is initiating this.............I assume thats how it works.

Can you manipulate the bank somehow to do this?
I cant help you on what to do on that.

Just a thought.
I understand about CGT ,but if you really have a better plan then make the move........... and at the same time tell the bank you will be moving all your assets, over time starting with the one you sell. ......... in reality it may have no effect but its all about putting money to the best use rather than procrastinating .

 

[evand]

Just sell something mate, take your profit, sort the crap out and come back in later. Its all a game , no? Money is only the score of the game.

Methinks Dazz likes a little side of melodrama with his investing main course.

 

[steveadl]

Whilst selling may be an option to ease the banks fears - what happens if it's not? What happens if he sells a property, the bank say 'oh thanks, we'll take all those funds' and still won't alter their position that he's not allowed to do anymore?

Then he'd have sold a property (which he really doesn't want to do anyway) for nothing. Remember he's on a relatively low LVR already and the bank won't let him move. What happens if he drops the LVR from 38% to 30% and they still won't budge?

 

[evand]

At that level of investing you would get a written undertaking from the bank that they wouldnt "take all those funds." If they refused that, then he'd have to look at his options, of which there'd be a few.

You'd have to be on drugs not to.

Remember, he's not buying a $120k IP at Ipswich.

Whilst selling may be an option to ease the banks fears - what happens if it's not? What happens if he sells a property, the bank say 'oh thanks, we'll take all those funds' and still won't alter their position that he's not allowed to do anymore?

Then he'd have sold a property (which he really doesn't want to do anyway) for nothing. Remember he's on a relatively low LVR already and the bank won't let him move. What happens if he drops the LVR from 38% to 30% and they still won't budge?

 

[steveadl]

At that level of investing you would get a written undertaking from the bank that they wouldnt "take all those funds." If they refused that, then he'd have to look at his options, of which there'd be a few.

You'd have to be on drugs not to.

Remember, he's not buying a $120k IP at Ipswich.

Yes I know he's not

Assuming they can't go back on that if they put it in writing, then fair enough, you could consider it.

 

[LynnH]

Would the bank give a written undertaking not to 'take all those funds'? From what Dazz has written to date, this doesn't sound very likely.

Cheers
LynnH

 

[Dazz]

Hello all - been busy digging holes - just saw the discussion.

....yes, melodrama it may be called from the sidelines, until you have to wade through it personally....then it becomes a tad more than that when it starts shutting down all of your options.

I initially started this thread to see if the forum collectively could help me in my attempt to get myself out of this pickle - that admittedly I have consciously and deliberately got myself into....thinking that it would be relatively easy to get out of.

I have tried the "give me a written undertaking before I act" with the Bank....they just laughed at me. No thanks they said - we are in a strong position contractually and we fully intend on keeping it that way. And no you can't have any money or titles and the answer will be no to any other question you ask us.

Selling something smallish will do absolutely nothing to benefit us - it's all still tied up in a ball, so even if you sell one and say pay off three or four loans, you still cannot get acces to any of the titles. No deal - the bank simply says ta very much and would you like to pay down anything else ??

The only way to get them out of our hair I fear is to sell the big one and eliminate all debt with them.

Fear not though - as a half way measure - through the forum, and this thread, I have one of the razor sharp MB gang onto the case....and he's trying to get one of those fine knitting needles into the morass of knotted security to weedle out a spindle of equity.

We'll see how he goes....if that course of action is successful, then this "melodramatic" thread will have been well worth it.

I suppose the import of this thread was to show some of the downsides of X-coll that some folks may have been unaware of. It very much does restrict your options down the track. OTOH, it is wonderful being down the track.

 

[kathryn d]

Dazz,
If you went along the way you are now...hands tied...at what point in time are you no longer under the control of the bank?

 

[Dazz]

Well if we simply sit and do nothing - nothing will alter until May next year when our situation once again comes up for review by the Bank.

God knows what mood they shall be in then, but a few of the cheaper loans we established 5 years ago shall expire, and hence a few of the properties will go from +CF back to -CF if we refinance....not good. I have no intention of going down that track.

At the end of the day the loans are of such a size that it would be impossible to ever even make a small dint in them by working and paying money into them. That was realised and acknowledged years ago. Why the Bank is insisting if we re-fi with them they'd like to convert our fixed interest only to variable P&I is beyond me....sounds like a dreadful plan. Repayment of capital and reducing risk on their part.....phhffft to that.

The only way to extinguish the loans and get them off my back is via asset sales....which is OK....it's just a question of timing really. Each extra day is worth a fair bit....