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In the last six months there has been the most
extraordinary changes to bank policies. For mortgage brokers who
deal with banks every day this has been challenging, but for those
doing their own research I imagine that it is near impossible to
keep up! This alone, I believe, is why recent surveys show that over
40% of all loans in Australia are written by mortgage
brokers.
These changes are so extensive that I can't cover
them in this newsletter. So I will be covering these at a special
Sydney workshop later this month. See the details below.
This
month I was invited by Australian Property Investor Magazine to
contribute to their cover story "Safe Strategies for Stress-Free
Profits". As many of you know I worked in the mining industry for
over fifteen years, with the last ten years specialising in
explosives. Like investing in property dealing with explosives
requires careful attention and risk minimisation techniques. Over
the next few weeks I will share my thoughts on how you can protect
yourself in the coming years.
Just for those of you
considering purchasing in the near future. Bank delays are longer
than ever, please allow at least 10 days for your finance clause and
cooling off period - for most lenders this is even a stretch. As a
consequence of the strong first home buyers market we have seen many
valuations come in low, so remember you want to have the formal bank
approval, if possible, before you commit to the
purchase.
Finally, it was great to see so many of you at
my recent Property Investing and Renovation courses. Thank you for
the great feedback. For those of you who missed out, check the
website for details on upcoming courses in Sydney in
Oct/Nov.
Jane
| Special once
only Sydney Workshop - Creative Strategies for Maximising
Finance for Building your Investment Portfolio
Rich Harvey, founder and Managing Director of
propertybuyer, Sydney and Australia’s leading buyers agent was
recently awarded the 2009 National “Buyers Agent Award for
Excellence” by the Real Estate Institute of
Australia.
Rich has invited me to join him on the 15th
September in Sydney for a special evening to discuss changes
to bank policies changes and how to maximise your lending in
order to expand your property portfolio. This special evening
is for newsletter members and their friends only, so be quick
to get your tickets at early bird rates.
For anyone who
thinks that the strategies they employed last year can be used
in the future need to attend this special information
evening.
For more details and Bookings Click
here |
| InvestKit
As a Newsletter member you also have access to the
InvestKit containing easy to use spreadsheets for researching
and locating the right property.
If you haven’t yet
looked inside the Invest Kit to see what’s on offer, don’t
delay because you could be missing out on something that will
make a difference to your investment strategy.
This link is not active for those who are not
members of the newsletter.
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| Low risk
investing
When considering risk minimisation for property investment
I break down the investment into six bite size pieces and make
sure I have a strategy that covers each of those steps. In the
next few newsletters we will look at each of these.
1.
Investment Strategy
2. Exit Strategy
3. Finding the
Property
4. Property Ownership
5. Cashflow
Management
6. Ongoing Portfolio Management
1.
Investment Strategy
Ask yourself 'how am I going to buy
this property?' Are you: going to buy by yourself; in a Trust;
with your spouse, and if so would the investment be in the
name of the lower spouse that earns the least, or the one who
earns the most?; tenants in common or joint tenancy; or with a
family guarantee?
These are just some of the options.
Each has significant implications and should be worked through
with your accountant.
For instance be aware if you are
buying in a Trust. Some lenders will not consider lending to
this type of structure, especially the structure you may need
for asset protection, ie the name on the Title being different
to the name on the loan. Although some lenders will consider
Trust structures they do so as a business loan and you would
have to pay higher commercial interest rates. Alternatively
for it to be considered a residential loan, you may be limited
to a 80% or lower LVR. And that’s just the lending part - it
may cost thousands every year to maintain a company structure,
and you may be excluded from any land tax threshold and the
list goes on. So do your research upfront.
Even if you
are considering borrowing with a partner/spouse/friend and you
have plans to expand your personal property portfolio in the
future, you may find you become limited in your borrowings due
to having borrowed with someone else. For instance if you buy
a property with someone else then you are directly responsible
for half the debt, however by the nature of the loan
agreement, you will be indirectly responsible as a guarantor
for the remaining balance of the debt ie if something happens
to the other person you are responsible.
The biggest
stumbling block I find for my clients is when they then want
to borrow by themselves in the future. The new lender would
consider you are responsible for the entire debt but only
allows you to claim half the rent and hence you may find that
one financial structure greatly impedes any future investment
as your access to new funds is
diminished.
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| How Banks
Assess Risk
In recent months I have had many clients find properties
with great 'twists'. A 'twist' is when you can see more
potential in a property than its current use eg via
renovation, options to change the usage or significantly
increase the rent. Unfortunately banks don't always see it
that way. To understand how they consider securities allows us
to understand how high a LVR we can borrow too and why they
may shy away.
In essence lenders want to be able to
easily dispose of the property if you can not keep up with the
repayments. So when looking at a property that is a boarding
house, a house in a mining town or a student apartment, think
of how easy these properties are going to be to on-sell then
keep in mind that not only will the lender have issues off
loading this property - but so will you - especially if you
need a quick exit strategy.
Check out my thoughts on
the API Magazine Web Special
How Banks Assess
Risk |
A final comment
If there is any way the
team at Investors Choice Mortgages can assist you, regardless of how
big or small your query, please let me know.
Until next time,
I wish you prosperous investing and happy house
hunting.
Jane
PS: at Investors Choice we
believe in sharing our systems, information and resources. Our
website is continually updated to reflect any new information we
think you might find of benefit. Check out the website at
www.investorschoice.com.au
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Disclaimer: You
should always speak to a financial planner or accountant about your
particular circumstances, the hints mentioned here are for general
discussion only and do not relate to your particular
circumstances |
