Category Archive for Purchase costs

Picture This

1. A friend of yours wants a loan from you.
2. You ask them to insure your money against the risk of you not being able to return it or pay it back.
3. They don’t repay the loan.
4. You claim your insurance on the funds you lent them and the insurance company pays you the cash.

That is what mortgage lenders do everyday to ensure their money is lent ‘Fully Insured’. They get to make money, fully insured, sounds like a great business! Read the Rest.

Earlier this month the reserve bank increased official interest rates which caused many investors and homeowners to re-consider their mortgages. This poses two great questions.

1. What will the cost of changing loans be?
2. When will the costs of changing loans be paid off?

Read the Rest.

You are able to act on your own behalf when purchasing a property, however, the documentation and settlement process can be quite complicated and includes many legal issues.

Buying a home is often the biggest purchase you will ever make and it is strongly recommended that you commission the services of a solicitor or conveyancer, who are experts in this area, to ensure that everything runs smoothly and is done correctly.

Solicitor or conveyancer’s charges vary from state to state and in accordance with the amount of time and work required. They usually cost between $750 -$2000 for their services. They arrange the title, council and any outstanding searches. They attend settlement and will interact with your bank to make sure things go smoothly when you are buying property. Read the Rest.

The idea of coming up for deposits every time you buy is a real worry for most investors, and it is in fact why most are not able to buy more than 2-3 properties over their investing career.

I have found an investor who is very willing to sell the house he has had as an investment for a number of years. He only needs 80% of the sale price, and wants to go into another deal of a commercial nature. He only listed the property at the higher price because he thought that he would get close to what the agent said he would sell it for. The property has performed well for him and has increased over 40% in the past few years.

He needs the cash to get into another transaction, I want the property so we are all getting what we want. Read the Rest.

Choosing the right mortgage is not just important for your needs, but could make the difference of thousands of dollars in the long term. There are so many products from so many financial institutions, all with differing interest rates and a huge range of features and fees.

Below are things to consider-

The Purpose of the Loan
Most home owners who plan to buy one home only, but possibly may like to sell and go to another house, require just a basic no frills loan. Some people may like to go out and get a loan with features like Read the Rest.

When buying property hopefully all investors know that they are up for closing costs or fees attached to buying property. The exception is that some things off the plan are eligible for a concession. The rule of thumb is usually around 5-7% of the purchase price is run up in fees, duties and charges, all of which need to be paid for at, or just after, settlement.

One of the biggest things to overcome is the stamp or transfer duty, which is the state tax related to both the purchase and registration of the property. It was introduced to obviously create revenue, but if you do not pay it you will not be able to register yourself as the title holder or new property owner.

Now when stamp duty is tallied up over the life of an investor buying multiple properties, you could run into the hundred of thousands of dollars. So, why not ask someone else to pay? Let’s ask the vendor. I did and was very surprised that they agreed to pay. Read the Rest.

It seems everyone I speak with about property has trouble finding great deals, but after a few weeks or months in the market, people always seem to be able to find a bargain. The next problem people have is finding the money, both with the deposit and the finances to complete the purchase. With what’s happening in the marketplace in regards to loans and lending I suspect that the emphasis will be on bigger deposits to mitigate risk for the lenders.

I have always found the first $10,000 -15,000 of any deposit savings plan is the hardest goal to get past. Once you get past this point the interest really adds up per month and your money compounds really fast.

Below are some tips I have used in the past to save money, these can be used for a deposit or anything worth saving for:

• Write a budget and stick to it. There are some awesome ones for free online.
• You will surprised at the value of your unused items. Sporting gear, surfboards, skis, bikes and other stuff can be sold to a second hand shop or EBay.
• Cash in or sell your unproductive assets, shares, bonds, bank deposits.
• Move your savings online and get a massive 6.8% with online banks, e.g., Bankwest or ING Bank.
• Really simple things like eating at home more, buying a jar of coffee for the office rather than a caffe latte on the way to work each day.
• Make your lunch before work or the night before, instead of going to the sandwich bar each day. This one alone saves a minimum of $1500 if you are spending $7 per lunch on Sandwiches.
• If you can realistically work from home, ask your boss if you can do so , maybe only staying at home for a day per week. This will cut down transport costs and time involved with getting into the office each day.
• I know people who are confident at teaching something they are passionate about, being paid to do it as a form of pocket money. You may be able to do this too in your chosen field.
• Get a “Pay as you Go” mobile phone plan rather than a contracted plan over 48 months.
• Use shopper dockets when you go out, if you need to go out for birthdays and celebrations.

Use direct debits to take money directly from your salary each and every week or month. I have been doing this for years and after a while you don’t see it therefore you are less likely to spend it.

Make getting a house a priority and have faith that you will get there.

Don Christie

Following on from yesterday’s post about researching areas. What about another avenue. Buyers Agents and Bird Dogs. Funny names, but seriously its a great way to leverage your time and effort and fits into the 80/20 rule.

I have never had to use a buyer’s agent as I have either found the property I am interested in or been able to Joint Venture with someone who can inspect the property on my behalf.

From what I can see from various Buyers’ Agent’s websites they basically find, negotiate and close property transactions on behalf of investors and home owners who for one reason or the other cannot, do not or are not confident in the buying of a house process.

I do however have no hesitation in using one as the time and effort in going to and from property after property can start to drive even the most motivated of us investors up the wall.

The recent WA boom which by all accounts went almost exactly like the one we had here on the east coast in 2003-2005, it would have been a great time to use a buyer’s agent as the travel, time and knowledge would have proved to be invaluable.

I have heard mixed reports of the buyers agents not really doing much more than ringing up from ads in the paper or on www.RealEstate.com.au and charging 1-4% of the purchase price. For those kinds of fees I would want the Stamp Duty Paid as i have spoken about before or a longer settlement that suited me.

I find the thrill of hunting down the property and the agent one of the reasons for investing; as you do never really know what you’re going to get until the phone rings and the seller states their case. Read the Rest.

You will only be in this position once and it will take the wind out of your sails. You get the contracts together and run all over town to find someone who will give you money to buy that house. Only to find that its not the lenders who are not willing to write a new loan for you its the Mortgage Insurers or the LMI providers as they are known. In other words the banks do not like the risk that you are not putting enough money into the deal or they think you have too many loans for your salary or a combination of all three.

When buying houses you do not always have to run off down to the bank to get the money. If you are wealthy enough you just pay cash and its yours. Meanwhile if you do not have the cash available why not get aligned with a few private investors? These guys have cash sitting around all day long and will lend you whatever you want secured by real estate.

I have a few gents who were from mortgage or real estate agent backgrounds, who did well and know the rules and the game very well. They want to help sometimes and other times be very silent. These guys disappear to Europe and just check their statements from me on a quarterly basis. They are hesitant at first with lending, but after doing what you say your going to do. They are like gold in your pocket. Read the Rest.

Long known as the ultimate investment in Property Investor Circles.

The concept is fairly simple and can be looked upon as a very speculative area of property investing. You find a suitable property that you believe has a chance of being ‘re zoned’ in the future and you are prepared to hold onto it until someone wants it for that development potential.

We plan to buy into more land as we have seen first hand what can be done when the right situation presents itself. The land we saw years ago was on the fringes of the Gold Coast. We were blinded by our own strategy that we missed this opportunity altogether. We were in the Upper Coomera Area and saw all this land for sale as a large parcel. Now a few things have happened over the last 4 years but for memory the land was on sale for close to 2 million dollars.

The land size was going to be big enough for 356 lots. Now knowing what I do now that was something like $6,000 per lot. Considering that the holding costs would of been massive, you can see that most lots being sold now are worth $250,000 each now. But before you go running for your calculators, your ideal situation would of been to sell to a developer at a third of the retail price.

So for those of you wondering the numbers

Purchase Price $2,000,000. Interest is in the vicinity of $150,000 per year at 7.5%.

Sell the holding for 1/3 of the retail sales price, so in this case its retail per site is $80,000.

Multiply this by the number of sites and you get your sales price to the greedy developers. So $80,000 times 356 sites is $28,480,000.

So you can see the possibility of doing things others are not is the best way to get ahead of the game and money in your pocket. Ok the money involved with this type of finance expensive, but there is a great deal of cash still left in the deal if you think 5 years down the track. The interest cost will add up, but if you were to revalue it on each anniversary you will be sure to keep refinancing to cover those payments.

Peter Spann calls this strategy “higher and best use” and thats exactly what you want to sell when its time for you to cash in on your exit. I think you will agree that you only really need to do one or two per decade to live comfortably.

Now what if you do not have $2 Million? Well I am sure most people could save enough for a deposit for one property, then when next door comes up. Buy it too. Offer the others on your block a little bit extra to buy their property too. Soon enough you will have a block to build a townhouse on or a small 3 story walk up, or some nice apartments.

Even if you bought your block and waited until a developer came by to buy it from you, your capital growth will be worth a small fortune!

Banking not only money, but land too.

Don Christie