Browse Forums Home Finance 1 Dec 26, 2010 11:52 am HI All, I am starting to run out of options. I have recently sold my house with settlement due on the 14th of January. Cash in hand is $376000.00. I have put a deposit down on a block of land that I intended to build on which cost me $215000.00 including all other charges. This leaved me with around $160000 to build with, too easy so I thought....... About a year ago I signed up to build a rental property. As I owned my home and I didn't want to use any of my own money to fund the property I borrowed the full amount of approx. $330000 so I could have maximum tax deductions. For me to do this I had a tricky setup of loans due to my job situation earnings etc. So while I had plenty of money, banks didn't like me because I seemed a little risky. So the broker went to ANZ and we did a low doc loan. I could only borrow 60% with this type of loan and had to use my current house as security, which at the time they valued at $273000. So with %60 of my funds being secured against my current place equals to approx:$163000. The rest being against the rental property. Now what I didn't relise is that I have to pay the $163000 back to the bank due at settlement - the money that I was going to build with. The bank won't let me transfer the security to the block I bought because it is to cheap @ $205000.00, if it was valued @ $273000 then no problems. But that would leave me with not enough cash to build my home with. Another option I have is to borrow money for a new build. What I find ridiculous is that the bank will only lend me enough money to 'mostly' finish the house. So while I need around $160000 to build and then slowly save and do the finishing myself, they will only lend me approx. $200000 to finish the house completely. This means I have a small mortgage against my rental (meaning I will have to pay more tax ) and a large one against my owner occupied. Which is completely the wrong way around. I might add, I cannot afford this option anyway. Another option is to sell my rental upon completion ( late Feb early March ) which will be a loss of around $15,000 meaning I will not have enough cash to build my new place with and I will have to borrow a small amount of money to finish the build anyway. So then I build my new owner occupied, then build another rental, setting me back around 2yrs. So I get a call back from the mob I went with to help build of the rental property to see if I had any other options. 'What about private investors' I know very little about this. I was told it was completely legit and it is no different to the bank except that the interest rate is a few percent higher, but they have the foresight to see what it is that I am doing. Considering, if I have to sell I will loose $15,000 anyway and I will have NO mortgage against my owner occupied place, meaning I will have full tax deductions I think this is the best way to go. I remember a Australian Grand designs episode where I guy did this that only aired recently. If I wait a couple of years I can go back to a bank anyway. So I guess my Question is: Does anyone know of any experience with private investors that could shed some more light on the matter? Thanks Re: Anyone used private investors? 2Dec 26, 2010 1:52 pm Hi Aza, I can't quite work out your end borrowing v you total assets. Basically banks cross-collatrate your properties, meaning if you fail one mortgage they will sell all properties to recover there loss (paying all other mortgagees first of course). So all that really matters is that you have a LVR of 80% (60% for low-doc) or less and that you can make the repayments. Talk to your accountant but even if you take a mortgage on your own residence if this is purely for investment (ie a deposit on a rental) all that interest can be claimed as a tax deduction. You may need to divide your mortgage on you new place - one part to reflect moneys borrowed for investment (have this as an Interest Only loan - IO) the second part to reflect personal borrowing (IO or P and I). Calculate your LVR on all properties and try and refinance the lot - dividing the loan as discribed above. Ensure you are getting maximum tax breaks (ie Depreciation, IO on investment) and try and structure the loan to benefit your personal liabilities (ie your debt as a Line of Credit allowing rents and wages to sit against the principal on your personal mortgage for upto 45 days). Best to get a good mortgage broker and accountant and refinance and restructure the whole lot against the total value of your properties completed. Personal finance (or private lenders) are very expensive if you do go this avenue maybe do it for the minimal amount and apportion that to the rental property to try and recoup some losses from Wayne Swann. Building an Eden Brae Saville 27 http://karry327.blogspot.com/ Building thread https://forum.homeone.com.au/viewtopic.php?f=31&t=44247 Re: Anyone used private investors? 3Dec 26, 2010 2:18 pm Hi Karry327, As of 14th Feb I will owe Around $170k on my property ( if the construction is complete and fully drawn down). I will own my block of land worth $205k. At the moment Anz have valued my incomplete rental @ $280k, once finished it will probably be valued around $300k. So I will owe $170k and have around 480-500k in real estate. I own everything except for a credit card which gets paid for every month. I thought I had a good broker, but they were very busy coming up to Christmas. Maybe they put me in the too hard basket until next year. The thing is banks don't like me because I left my job with a nice redundancy package. Since I am chasing work that I might actually enjoy I have been unemployed for just over a year. My partner has just left her job and is doing the same thing. I may have a traineeship starting end of January, but ANZ don't like this -they see me as being unemployed in 2yrs time. The broker has also said that new Federal laws might mean no more low doc loans from banks. So if I have to get a traditional loan we both need to be employed for 6months just to be considered for a loan. Nothing has changed on our end. Infact we will have more money as we are living rent free with a friend until our place is built. I don't think he will put up with longer than 8 months though. It's really annoying me that I don't seem to have any options except for ones that will cost more money which I just can't bring myself too. I always live well within my means and I hate borrowing money. I think I should wait until the new year when everyone is back at work and had time to freshen up. Thanks for the reply. Re: Anyone used private investors? 4Dec 26, 2010 8:31 pm I feel for you. You have done well to get yourselves set up but banks will only look at your current situation not your past or future. I think your only chance of getting the banks to come around is to prove that your income can meet your loan repayments, and the only income you can currently claim is the rent from your investment property. Will your rental income cover your debt? Then you will need to show you can support yourselves, might be time to go on the dole - tell the bank that will provide your beer, groceries and power. And the only reason you wont be on welfare is because you are drawing a wage above the dole and that $225+ a week each is more than enough for your living expenses. Building an Eden Brae Saville 27 http://karry327.blogspot.com/ Building thread https://forum.homeone.com.au/viewtopic.php?f=31&t=44247 Re: Anyone used private investors? 5Dec 26, 2010 9:55 pm Wow I can't believe the dole pays so much, combine that with the payments we get for our little boy we would be rich - almost seems like it isn't worth working! We couldn't do it anyway but if I get desperate it gives me something else to look at! Re: Anyone used private investors? 6Mar 15, 2011 5:33 pm Well with the new laws that banks have to abide by, I have no chance of getting a loan. I am now doing a 2yr Traineeship with Telstra with a stay at home partner who is looking at getting work for three days a week. The banks have said I don't earn enough and need to be employed for at least year before they will look at me. This includes my wage, rent received from my rental and my parenting payment. I can't wait that long so I am going to put my rental on the market when it is finished in a couple of weeks. Until it sells It will be positive geared from rent received as I only have small loan on it. I am hoping something changes in the next couple of months so I can draw the money I had to pay back when I sold my owner occupied. Aaron As title suggests, looking at using the interlocking Pentablock stacked stone products to replace failing timber retaining… 0 11148 Hi everyone, Looking for some advise. We are about to build an above ground pool in our backyard. There is a private sewer line running under the pool at 1.6m… 0 7975 If you already have a contract, is the inspection cost stated in there? If not they would be forced to issue you a variation which you could of course object to. 12 22042 |