Investment loans

Replies to This Discussion

Permalink Reply by Bandwidth on November 13, 2009 at 7:35

Hello Nikki

As far as tax is concerned as long as you can properly allocate expenses, such as interest charged.

Your fees sound high :-(. I am with one of the big four and pay nowhere near that amount of fees and the overall service is good.

A number of the banks offer a "Professional Package" which for a single annual fee waives the majority of account fees. These packages also offer discount on the advertised rates.

I prefer to keep loans seperated, from a flexibility point of view. As the properties increase in value I get the bank to remove any extra security to allow each poperty/loan to stand alone. This makes any future borrowing or restructuring a bit easier.

Might be worth sitting down with a good broker and looking at your options or going to one of the other banks and offering them the opportunity to do something for you

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Permalink Reply by nikki on November 13, 2009 at 8:32

Thanks for that bandwidth :)
I logged onto ATO site. Checked out Taxation rulings pertaining to LOC investment loans and you are correct. Keeping allocated expenses seperate. I don't think a LOC is a good idea but a consolidation loan may be. The savings are substantial. I have calculated savings of about 600 per month. We have no intention of moving into either home and hope to sell in 5 years or so. So consolidating would be good.
Each loan and we have four have $10 a month account fees and $5 per month transaction fees! Considering that we have so many investments with them I feel that the fees are unfair. I cannot complain about the service though. It is very good but we sure do pay for it :)
I have called some brokers already so will post my findings.
Thanks again
Nikki

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Permalink Reply by Bandwidth on November 13, 2009 at 16:23

I have seperate loans for each property and I pay no account fees. I use a LOC as my expense account and it has no transaction fees. The cost is the same for me whether I consolidate or not. Wonder what the bank will do for you if you threaten lo leave. Problem with consolodation is that if you do get into financial difficulty then it makes it harder to unwind as both properties are tied up in the one security.

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Permalink Reply by nikki on November 13, 2009 at 18:57

What do you mean? Harder to unwind? can we sell one proprty and pay down the loan with the funds? or do we have to sell both at the same time? I did threaten to leave today, asked them for their best rate we are on 7.75% on one and 6.73 on the other they offered 6.37. I asked if that was their best offer and they said yes. I would think they would try harder.
Will post developments :)

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Permalink Reply by Bandwidth on November 14, 2009 at 9:04

If you are in the position to choose, yes you can sell down one property. The problem is if you get in arrears the whole structure is in arrears and any potential foreclosure is on the entire loan and securities. This why organisations set up their businesses in different companies, it allows one to continue to trade while another may be in trouble. If you had a cash flow problem you could decide to let one fall in arrears while paying the other

Cash flow can kill any business, even more so if the business is structured wrong.

Westpac Rocket loan with the Professional package is 5.61

Are thes loans fixed or variable

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Permalink Reply by nikki on November 14, 2009 at 11:11

One fixed the other variable. One is security for the other so would'nt that mean that if one goes in arrears so would the other? You would lose both anyway? This is very informative discussion as you have raised some interesting points that i had not thought of.
You should never allow yourself to get in arrears. mortgage payments take priority over all else. i just dont understand how people can allow their loans to get so far into trouble that they risk losing it all. We have been between jobs and still made our payments. We have landlord protection, income protection, mortgage protection and stay in advance. We have worked too hard to gain our assets to risk them.
Anyway, I digress.
Westpac......How do you find their service and fee structure? How approachable are they?
Thanks
Nikki

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Permalink Reply by Bandwidth on November 14, 2009 at 13:44

Sounds like you have taken a managed approach to your investments.

In business one never knows what can happen so spreading risk and security is a good thing

I have removed the cross security on my properties by having them revalued so they cover the loan so I choose what happens.

I find Westpac good to deal with. Their prime business is Residential home lending and they are structured to service this market. All the loan processing is done through the Mortgage Processing Centre so it is consistent.


i am part of the Investors Club and often the brokers use Westpac. Westpac are responsive and usually flexible. I managed to get myself into Privat bank so I deal with the bank on a very personal level. Once you have a numer of investments with them you can ask for a account manager.

Something about myself. I am just short of 55 and effectively retired, have not worked for 3 years. I have a number of properties throughout Australia and am about 2 years short of being comfortable just from rental income. I am working on a share trading package which brings in good return, most of the time, and saved my butt in recent times. I love to help others in their path to financial freedom, especially people such as yourself who are taking action.

My main passion is cooking and baking so I need to go and get my Chocolate Raisin cake out of the oven and prepare the Chocolate Glaze :-)

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Permalink Reply by nikki on November 15, 2009 at 19:26

You are very knowledgeable Bandwidth.
Our investment homes are almost covered by rent payments but we like the deductability also. Hubby works in mining so any way of reducing tax is good. We hope to stay here saving money for next 5 or so years or until we are 55 then sell up and buy a farm in NQ. We figure housing prices should rise considerably in 5 or so years. What are your thoughts on this? One house is near the Kepple islands and the other in 15 ks from beach.
"I have removed the cross security on my properties" What does that mean?
We are going to shop around for a better deal. I called refund home loans and will call Mortgage choice and aussie. First time ever used brokers. Never know til you ask I guess :)
I don't understand shares though we do do shareplus and buy shares in BHP out of our pay but that is all I know. We won't do stuff we don't fully understand. I worry that shares can end up worth 0 but property will never be worth 0. How do you offset the risks and know when to buy and sell? I just dont get it.
I am 43 have 3 kids still at home and have moved to mining town so had to leave my job. Should be back into work again soon.
Choclate raisin cake! Good grief, i can feel my wideload sign being attached already LOL. I love love love french pastries :P I like gardening and cooking sometimes.

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Permalink Reply by Bandwidth on November 16, 2009 at 11:04

Thank you for your compliments.

From your conversation i feel yu have made some intelligent investmant decisions.

If you save 600.00 a month then that is an opportunity to purchase another property and that may be a way to get a better financial deal, by upping the loan but keeping the payments the same.

I feel we are, in general, on the up side of the property cycle. Some areas will do better than others. If you are looking at another property it may be better to look further afield

Cross security is where one property is held as security for another. Once a property has risen in value enough to cover 80% of the outstanding loan then I get the bank to revalue the property and remove any other property off the mortgage security.

In shares yes a share can go t 0 but there is normally a series decline before it does that. I set my portfolio up so I never risk more that 2% of my entire portfolio in any given share. I have 15% stop losses set and if they trigger on a share the 15% loss in the one share is only 2% of the entire holdings.

I am working with some developers on a share trading system which generates the buy and sell signals. Emotion still gets in the way sometimes.

Shares are more liquid than property and the cost of buying and selling is a lot less so it is easier to make appropriate adjustments.

I have not used brokers as i have always been able to manage a good deal from my bank. Brokers are good thing if they can show you different ways of looking at things.

In 12 years you should be able to build a big enough portfolio that you have the return from the property AND buy the Farm in NQ.

We are looking at eventually moving to property on Northern NSW

Permalink Reply by Keith Musgrave on November 20, 2009 at 10:21

Hi Nikki,
I am a mortgage broker in Brisbane. We are an independant company with access to over 35 lenders. Our goal is to provide you with the best loan for your circumstances. Our services are free with no obligation.

I have been a mortgage broker for almost 8 years with this company. Prior to becoming a mortgage broker I was a financial adviser with Westpac for 6 years. I also spent 8 years with NAB in branch banking. I have experience in most forms of finance, (home lending, leasing, chatel mortgage, leasing, personal loans, etc) superannuation, basic tax rulings, investment property, futures trading, salary packaging and others. I was born and bred on the land in central NSW and have managed rural properties as well.

The most important issue about our business is the relationships we build with our clients. If I do a good job for you, you will refer me to your friends & family. If I don't, then everybody will hear about it at your next BBQ!!!!

I would be happy to offer my services if you are interested. You can view our company at www.fasttrackhomeloans.com.au. We are based in Aspley in northern Brisbane.

You sound like you have a good understanding of your financial position, and Bandwidth has given you some very good advice.

The advantage of using a mortgage broker is that they have access to most lenders around Australia. If you go into your local bank, they can only offer you what they have. And, of course, they have their promotions from time to time, which may not be their best lending facility, but their staff promote it anyway. A mortgage broker compares 100's of loans and gives you the choice of what will best suit your needs without you having to tell your story to 20 different lenders.

I would be happy to help if you decide to contact us.

Regards

Keith Musgrave

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Permalink Reply by nikki on December 22, 2009 at 10:34

Hi Keith?
Sorry it has taken so long to respond. I have been offline for a bit.
I am very interested in what you have said.
As you know, we have 2 investment loans. 1 personal loan for $9000 and two car loans.
We need to restructure so we can have our assets and a LIFE! Honestly, we can't enjoy our lives as we are constantly paying our homeloans etc.
Any advice as to where to find a good, honest and knowledgeable financial planner that doesnt have his/her own agendas? ie Storm financial scenarios.
We want to refinance in June after tax time and get our finaces stream lined.
We want some toys too. We live in the desert and we want to have fun on days off as we are not getting any younger. Bad enough having to live and work here let alone spending days off here too.
So in a nutshell, we would like to consolidate, reduce interest only repayments put away savings and have a life.
How do these people on ACA have 20 houses in their portfolios and still live?
Any suggestions?
Ta
And have a great 2010 :)

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Permalink Reply by Keith Musgrave on December 23, 2009 at 9:06

Hi Nikki,
Prior to joining Fast Track Home Loans in Aspley Brisbane almost 8 years ago, I spent 6 years with Westpac as a financial adviser. I no longer practice as a financial adviser so any advice that I give you should be confirmed through a local accountant or financial planner.

Either send me an email at keith@fasttrackhomeloans.com.au or visit our website at www.fasttrackhomeloans.com.au and complete the online questionaire making reference to having spoken with me.

I will have a look at your circumstances and get back to you in the early new year with some options.

I hope you have a Merry Christmas & a Happy & Prosperous 2010.
Regards
Keith

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