smsf loan

3 Things to Consider Before Applying for SMSF Loans

smsf loanThere are few things more vexing than having your Superannuation fund barely growing when some well placed real estate investments could enable you to retire much earlier.  Self Managed Superfund Loans (SMSF) can help you tap into that retirement fund even if your credit rating is less than perfect.  As good as this may sound, there are three important factors to consider before you begin the application process.

Your Age and Proximity to Retirement

If you are interested in investing, then you know that Australia is a star in many areas of the economy.  On the other hand, people in their 50’s and 60’s that lost everything during the 2007 Recession in the United States can tell you that there are no guarantees when it comes to investment.  Therefore if you are within 10 – 15 years of retirement, try to avoid putting more than 20% of your Super at risk.  An SMSF may still be a viable option at this stage if you can live on 80% or less of your total retirement fund.

Current and 5 Year Projected Value of Potential Real Estate Investments

Foreign citizens and business owners are more eager than ever to tap Australian markets, open shopping centres, and engage in other wealth promoting activities.  From that perspective, having one or two key real estate investments in your retirement portfolio can ensure a wealthy retirement with plenty left for the next generation.  When appraising the value of any given property:

  • ask local business owners about other companies that may be interested in moving to your area
  • take a survey of the local people and find out which products and services they are interested in
  • find out which businesses offer these services and find out how soon they can build in your area

What Limits Will You Set for Property Management?

Regardless of your age, property ownership will also come with a range of expenses.  This includes taxes, building maintenance, and interest on any loans taken using the property as collateral.  Once you know the current and 5 Year projected value of the property, it is time to decide how much money you are willing to spend before leasing or even selling the property.  If you miscalculate the projected value, or wind up taking more loans to maintain the property, you will have to sell it at a loss in order to prevent further financial problems.  At the very least, if you have a target number in mind, making that decision will be a bit easier when and if the time comes.

SMSF loans are a tool you can use to generate increased wealth.  While Australia’s economy may be strong, keeping these three key things in mind can help you protect your investment and ensure that you get the most out of each investment.  As an added bonus, when you start doing basic real estate research, you are sure to find out all kinds of fascinating things that may lead to other money making opportunities.

Contact one of our lending experts to discuss your options and tailor a comprehensive Loan Proposal suited to your specific lending needs.

Off the plan loan

Off the Plan – Are you Bear Grylls or Pee-Wee Herman?

Off the plan

Off the Plan Construction &  Real Estate Investing

If you have the heart and soul of a gambler or love extreme sports and activities such as skydiving or bungee jumping then you may be the ideal candidate for off-the-plan real estate investing. Off the plan construction profits are often among the highest in the industry. At the same time so are the risks. You will find the greatest highs and lows that can be found in the field of real estate investing lie beneath the umbrella of off-the-plan profits and many of the big names we know so well in the real estate investing field have made much of their fortunes through speculation and off-the-plan sales.

Before I go any further, one word of caution. While the potential for profits in this particular corner of the real estate market are often high the risks are also abundant. This is speculative real estate at its very best and as we have all learned in the past, when the bubble bursts in a specific market those who have the most invested are the ones who often loose most heavily.

As far as what off-the-plan real estate is there are a few interpretations. The first is also the most obvious. You are buying real estate at some point before construction is complete. In hot markets you will often need to purchase the units before ground has broken on the project in order to get the lowest price for your investment and highest potential pay off for your pockets. Once you’ve purchased the unit or units you plan to sell you then begin seeking buyers for those units. In markets that are on fire it is not exactly uncommon for a property to change hands and have several owners before the unit is complete. Each one will take a little something home from the table for their efforts with those who get in earliest often taking the largest piece of the pie home with them.

You may be wondering why this occurs and the answer really is simple. When the contractors attempt to get funding for their buildings in these large complexes they often need to have a certain percentage of the units “pre sold” in order to convince the banks that there is an adequate market and to garner some of the revenue that is needed to get the venture up and running, so to speak. So real estate investors buy these units at rock bottom prices because essentially they are paying for the idea of the unit (which hasn’t at this time been built and isn’t yet approved to be built in many cases) rather than a brick and mortar property. As the project draws closer to completion, particularly in markets where real estate is in high demand, the value of the property rises dramatically ending in ridiculous profits for those who have managed to hang on.

The risks however are many. There are any number of things that can go wrong on a project such as this not the least of which is that the demand for housing will be met before the unit is actually built. This has happened and continues to happen. Also recessions, business closings, economies collapsing, and tragedies in the vicinity can occur before the property is complete leaving everyone who has invested heavily in the project holding a little bit of the bag and losing their profits and, quite possibly, their investment. These projects generally take a great deal of time to complete which makes the risks that much greater and the anticipation of these events a little more difficult to map out ahead of time. If you can manage to make it through however many investors see large per cent returns on their investment making off the plan a popular type of investment among many despite the rather large risks involved.

Contact one of our specialist lending providers to see if you qualify for an off the plan loan today.

low doc loans

Low Doc Loans-Solutions for the Self-Employed

Low Doc Loans - Solutions for the Self-employed


ABN: What Is It, Should You Get One and How Is It Used For Home Loans

If you’re going to become a self-employed person, you need to have an ABN (or Australian Business Number). If not, the companies you do business with can hold 46.5 percent of payments that you’re owed for tax reasons.

 

This number will also help you to attain a low-doc home or commercial loan. Thus, registering for one is extremely important.

What is an ABN?

It’s actually a unique 11-digit number that identifies your business and is used when interacting with customers, other companies and businesses.  You’ll have to put the ABN number on sales-related documents and invoices. It also be used with governmental agencies like the Australian Tax Office (ATO). And, although it’s not necessary, you can use it to register for the GST.

Is getting an ABN worth it to you? If you want to start  your own business, it’s certainly a requirement you shouldn’t overlook.

In What Others Ways Is The ABN Used?

  • Simplify your business activity statement
  • Claim energy grant credits
  • Claim GST creditslow doc loans
  • Purchase an Australian domain name
  • Avoid pay-as-you-go tax instalments on monies you receive

How Can You Apply For The ABN?

You have three options in which to apply for your ABN

  • Fill out an online application on the Australian Business Register website
  • Paper applications documents can be downloaded through the ATO website
  • Tax agent who can complete the application for you online

Make sure that you fill the information out as clearly and correctly as you can. Mistakes, whether accidental or on purpose, can cost you severely. If you falsify information, you could get hit with a $10,000 fine. A mistake on the ABN application could cost you more than $3,000.

How Self-Employed People Can Get  Low Doc Loans For Their Home Purchase

Self-employed people have an array of benefits when it comes to using low doc loans to effectively finance their home purchase. However, there are some common misconceptions that go along with self-employed finance.

Low Doc Loans: What Are They?

In simple terms, low doc loans are an easier mortgage finance answer to people who run their own business. These borrowers have the income and assets but cannot give the necessary tax returns or financial statements when due at application time. These loans are generally granted on the basis the applicant self-declares their business income. It’s called a self-certification of income or low doc declaration.

Why Should You Use A Low Doc Loan?

The majority of self-employed people are often too busy and constantly running around and trying to grow their business – than to deal with the financial paperwork necessary for a loan. A good number of business owners have  good cash flow and assets to justify getting the money, but they don’t have current paperwork such as financial statements and tax returns that demonstrate their present financial standing.

In many cases, people who are in business for themselves have fairly complex financial affairs that are geared at decreasing their tax standing. For them, it’s generally much easier for them to attain a low doc home loan.

If you are self-employed then low doc loans may be the solution you are looking for to secure finance. Contact one of our Specialist Lending Managers to discuss your low doc lending options.

Bad Credit Home Loans

Who can secure a Bad Credit Loan?

Who Can Secure A Bad Credit Loan?

People with a black mark on the credit report, due to job loss, divorce, business failure, injury, or a multitude of other reasons  – can still secure finance and attain a bad credit home loan. Traditional Lenders, like the major banks, are generally extremely wary of borrowers who have defaults or who constantly have credit issues. This is where non-conforming lenders step in with a more flexible set of loan qualifying criteria. Some of this criteria includes:

Small Paid Default

  • If your default is under $500 and was paid over six months ago, a bad credit loan lender can assist you in borrowing up to 90 percent with a bad credit loan; sometimes 95 percent LVR for a home’s property value.

2 or More Small Paid Defaults

  • If your paid defaults are under $1000 from financial institutions (banks) and you have less than $500 from the non-financial institutions (phone company), you could receive 85 to 90 percent of the home’s property value.

Moderate Paid Defaults

  • If you have $3,000 in paid defaults, you can attain up to 80 percent of a home’s property value using a prime lender, 90 percent using a specialist lender who provides a bad credit loan or the complete property value amount so long as your parents provide a security guarantee.

Large Paid Defaults

The largest paid defaults, ranging from $3,000 to $50,000, are usually looked at on a case-by-case basis and using a good explanation that can be backed by evidence. Loans of up to 90 percent of the property value can be given with a specialist lender’s help.

Unpaid Defaults

If there are any unpaid default a loans, a non-conforming lender will only permit up to 90 percent of the property value. Most lenders demand that defaults are paid before loan approval.

Court Writs/Judgements

Should you have any court writs or judgments against you, you can potentially get a non-conforming lender to provide you a bad credit loan with up to 90 percent of the home’s property value.

Part IX Agreement

  • The Part IX Debt Agreement is an alternative to filing for bankruptcy. This kind of agreement is generally more flexible and has an array of options like:
  1. Agreement with creditors to pay less than the debt’s full amount
  2. Agreed upon system of payments set an affordable level
  3. Transference of some property you own to a creditor  to meet some or all debt payment
  4. Organizing of temporary suspension on debt payments

It is possible to attain a home loan after you’ve completed the Part IX agreement. Here’s what you can expect:

  • The borrowing of up to 90 percent of the home’s property value
  • Requirement of at least 16 percent of the home’s purchase price for the deposit
  • Larger deposits can qualify you for the standard bank interest rates

Special Note: If still paying on the Part IX Agreement, you cannot attain a home loan.

Bankruptcy and Loans

A lender will look at bankruptcy issues based on your particular situation and the size of the deposit you’re willing to put up.

Discharged Bankruptcy – If your bankruptcy was discharged, you can borrow up to 90 percent of home’s purchase price. However, you must have between 14 and 16 percent of the purchase price yourself to ensure the deposit, stamp duty and Lenders Risk Fee will be covered. You can be discharged for as little as one day to qualify.

Undischarged Bankruptcy – If you’re currently in bankruptcy, you are not allowed to attain a home loan, as this is illegal.

bad credit loan

“Thank you so much for helping me get my refinances done. I can finally move ahead now that I no longer am burdened by defaults. I also admire the efficiency and professionalism with which you got the job done. Rest assured that I will recommend your services to all my family, friends and colleagues.”

– Bill Jackson, VIC

bad credit loan

“Adam and I would like to thank you for assisting us in securing a new home. Even though our circumstances were very complex, you were able to guide us to the best possible product for our situation. Nothing was too hard for you to respond to and we are grateful that you never kept us waiting for an update.”

– Sarah Walker, ACT

bad credit loan

“Dear Melanie, Thank you so very much for all of your help in securing my mortgage and your expert advice. I sincerely appreciate all you have done for me – when I thought I had exhausted all my options you proved me wrong and for that I am grateful”.

– Jodie Oconnell, VIC

home loans australia

100% Non-Resident Home Loans

Non-Resident Guarantor Home Loans - How to borrow 100% of the purchase price

Non-Resident Guarantor Home Loans

Despite what you may have heard, it is possible to obtain a non resident home loan that finances 100% of your purchase price even if you are an Australian non-resident.

Loans of this kind are called Non-Resident Guarantor Home Loans, and if you are eligible for them, then you won’t have to pay a single penny as deposit. Read on for more information:-

What is a Guarantor Home Loan?

Guarantor non resident home loans are loans where relatives of the borrower (most commonly parents) agree to be the guarantor for 20% of the purchase price. They can either mortgage their home or pay cash (also called a term deposit) for the same.

Who is a Non-resident? (*only for the purposes of this home loan article)

A non-resident can be either of the following:-

  1. A foreign national living in Australia on a temporary visa, like the 457 work visa.
  2. An Australian citizen living and working overseas (Australian expats).

What is the eligibility criteria for a non-resident guarantor home loan?

The following criteria need to be satisfied to be eligible for a non-resident guarantor home loan:-

  1. A good credit history with either no credit defaults or defaults that have already been paid off.
  2. Good employment history outside of the probation period. And if under probation, then the individual must have former experience in a similar position.
  3. Assets greater than liabilities, also known as Positive Asset Position.
  4. Income that is sufficient to cover the repayment of the loan.
  5. Both the property being purchased and the guarantor’s property must be regular residential houses or units.

Who is an eligible guarantor?

The following candidate(s) are eligible as guarantors:-

  1. Immediate family members such as parents or siblings. Cousins and friends are not eligible.
  2. Guarantor has their own property in Australia and has sufficient equity in the property.
  3. Guarantor has a clean credit history.
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low doc loans

Home Loan Options for the Self Employed – Low Doc Loans

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low doc loans

Low Doc Loans - Why you need a Broker

Being self-employed has many perks, but securing loans often isn’t one of them.

Regardless of the success and standing of your business, if you are self-employed, then there is a high chance that your home loan application will not be approved through the traditional mortgaging route.

But don’t be disheartened yet. Read on to know all the options available for you:-

Self-employed Home Loans

The current lending landscape is very different from how it used to be decades ago. That’s why it is very important to talk to a broker before submitting a loan application.

While most lenders tend to offer loans only through conventional routes, which involves a lot of paperwork that a self-employed person may not have, your broker can direct you to a specialist lender who offers self-employed home loans.

Traditional lenders always ask for documents that prove a steady source of income, like payslips or employments contracts, loans specifically for self-employed people do not require these. Low doc loans are one such type, which can be obtained through submitting business activity statements or financial declarations signed by your accountant.

Make Your Broker Your Friend

Many times self-employed borrowers will not be upfront about their credit history because they may have defaulted on a few payments in the past. But this can actually hamper your chances of securing a loan instead of boosting them. (This is particularly true of low doc loans as these lenders already perceive you as a higher risk borrower.)

This is because everything will come to light as soon as your lender has a look at your credit report. Therefore, be honest with your broker even if you feel certain aspects of your credit history is not up to the mark. This will not only enable them to advise you more accurately about your options, but will also help them to direct you to the best lender based on your financial position.

If you are self-employed and lack the current financial documents required for a traditional home loan, contact one of our lending specialists today to discuss sourcing low doc loans as an alternative to your lending needs.

interest rates

How Do I Save Money on My Mortgage? (It’s not all about Interest Rates!)

save money

If you are looking at buying a home or refinancing your existing home, you have probably been having a lot of conversations about interest rates. If you enjoy talking about interest rates, fine, go ahead. It’s like talking about the weather: it won’t make any difference, but it gives you something to talk about.

The simple truth is that the variance in interest rates on standard home loans from one lending institution to another is so small that it will not make a big difference in the total cost of your mortgage.

As a matter of fact, the average difference is only about .06%, which is a saving of $240 per year on a $400,000 mortgage.

With all the emphasis lately on credit scores and credit ratings, it is surprising that a lot of people still believe that shopping around for the best rate will make such a big difference. Credit scores are based on a consumer’s credit worthiness: whether you pay your bills on time, if you have ever defaulted on a loan, whether other lenders have been willing to lend to you, etc.  So apart from a few points difference, all the banks are going to quote the same or very similar rate for one applicant if they present the same as another. Lets’ look at that interest rate savings of $240 per year. If you look around for more than a day, you are paying yourself only $10 per hour for your time.

The only way to have a real savings on your mortgage is to have an overall mortgage strategy. There are many types of mortgages being offered, and the combinations of benchmark rate used, terms of payment and duration of loan can have a great overall impact on the loan over time. This is what is more important to look at. Finding the mortgage expert who will discuss more than just the interest rate, but instead will understand the economic markets and examine your financial situation and longer term plans will achieve much more savings on your mortgage. Choosing the right mortgage strategy can save you tens of thousands of dollars, as compared to the $240 cited above that can be saved on a lower interest rate.

How can you find out the best strategy? Working with a mortgage consultant who understands the economic markets, who works closely with you, who understands your needs and particular circumstances, and who combines this knowledge and information with the best rates available is the secret to finding the right mortgage strategy. Understanding this concept can save you tens of thousands of dollars in home loan costs, rather than tens of dollars.

Not convinced? You can get more details and understand how this is true by having a brief, no obligation, chat with one of our lending specialists today.

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Click here to request a free no obligation quote from one of our specialist lending advisers to see just how much you could be saving on your loan!

low doc loans

What are Low Doc Loans and How to Get One

What are Low Doc Loans and How to Get One

The process of getting a home loan involves a lot of paperwork. And although this requisite differs from lender to lender, it is mandatory to submit employment or income proof before your loan can be approved.

Unfortunately, there are many instances when this might be a problem for you.

Enter low doc loans.

A low doc loan is a type of loan that requires very little paperwork. The following are the two most common types of borrowers of such loans:-

Small Business Owners

Financing a small business can be difficult. Most conventional lenders need you to provide documents that prove the consistency of your income, which may not be possible to provide in the early stages of a business. Self-employed loans can help you out in such situations.

To obtain one, you need to have a registered Australian Business Number, a minimum deposit against the loan, and documents that verify your business activity, either in the form of a signed letter from your accountant, BAS Statements or the bank statements of your business.

Contractors

Independent contractors, also known as seasonal workers, are at a distinct disadvantage when it comes to loans because they are unable to provide documents that show a consistent source of income (since they only work on short-term or fixed-term basis).

If you are an independent contractor, then low doc loans are your best option because you can easily verify your income by providing the contract of your most recent employment.

Low doc loans in general have the same features as a regular home loan. Therefore, you have the freedom of choice depending on your financial situation.

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Bad Credit home loans

Selling Your Home? Five Things that could Decrease the Value

If you are thinking of selling your home somewhere down the road, there are a couple of things that the experts suggest that you NOT do because it could actually decrease the value of your home and make it less appealing to potential home buyers.

I wanted to share some of them with you.

  1. Bold Paint Colours – When buyers view your home, bold colours may stick out like a sore thumb and they may look at it as an extra expense to have the walls repainted. If you decide to use a bolder colour, it’s recommended that you use it on an accent wall with lighter shades.

 

  1. Over-Renovated Kitchens – It’s one of the most important rooms in your home. There is a point where it can be overly done and doesn’t fit with the rest of your home.  It’s suggested that you don’t go overboard—renovate so it matches the style and design of the rest of your home.

 

  1. Landscaping – It’s the first impression that makes them want to walk in the door. Get rid of overgrown shrubs and plant new ones.  If you have weeds growing in your lawn, apply a good weed killer.  Fertilise the grass to make it look greener.  Get rid of junk and toys in both the back and front yards.

 

  1. Unfinished Projects – You may be doing them yourself or have hired a contractor who has not yet finished an improvement project. Make sure it’s complete before listing your home for sale. Buyers may view it as costing them money or may not be able to imagine the finished project.

 

  1. Wasted Space – Do you have a spare bedroom that has turned into a storage area? Or a family room or office that is now an exercise area?  Potential buyers want to visualise how every square metre can be used—especially if home prices in your area are somewhat tied to the size of your home.

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Low Doc Loans – What Lenders Look For

low doc home loans, low doc loans, low doc loan

Low Doc Loans are an ideal lending solution for people who are self-employed and struggling to secure traditional finance. If you are in the market for a Low Doc Loan, there are several key criteria that lenders look at when assessing your application for approval.

Below is a brief list of these key criteria.

Deposit

As a general rule a minimum 20 per cent deposit is required to secure a low doc loan for residential purposes.  However at Sherlock we have options for low doc loans up to 85% even 90%  – meaning the minimum required would reduce to a 15% or 10% deposit.

Self-employed history

Your ABN is a key component that lenders look at in determining how long you have been in self-employment. Normally a minimum 12-month ABN is required, however the longer you have been self-employed the more agreeable the lender will be.

Assets

If you can show that you hold significant equity in assets that you hold, lenders tend to view your low doc loan application more favourably.

Existing loan repayment history

Lenders will often ask to look at statements on other loan facilities you currently hold to ensure you have a consistent repayment history.

Maximum loan amount/exposure

Low doc home loan lenders will limit the amount of overall lending they will advance to a low doc borrower.  As a general rule this limit is $1 million.  However at Sherlock Holmes we have access to some niche low doc loans that will advance funds in excess of this minimum.

Contact the team at Sherlock Holmes Lending Solutions to find out more about low doc loans and how the options available can be tailored to your needs.

Flipping Real Estate – Calculating Costs

I know, I know – how obnoxiously American a term – ‘flipping’ real estate! However it works – and whatever we chose to call it Down Under – we still do it (and probably better than the Yanks anyway 😉 )

If you’ve been in the real estate investing business, or more specifically been flipping real estate, for more than a few days, you’ve inevitably gotten an email that reads something like this:

“Investor’s Dream. This property will go QUICK.

– Property Address: 1234 Main Street

– Asking Price: $400,000 (Add or subtract zeros!)

– After Repair Value: $500,000

– Repairs: $25,000

– Profit: $75,000

– Details: Needs paint, carpet, tile, new kitchen, update bathroom, some roof damage.

STOP! Before you read on… Take a guess at what you think the “real” profit’s going to be on this real estate investment…

If you haven’t ever gotten an email or fax broadcast like this, then rest assured, you will! I’m about to probably tick off all of the late night infomercials and pitchmen out there! Sure, I understand that when you’ve got 30 minutes (or 90 minutes, for that matter), that you’ve got to sell what’s sexy… not what’s real!

Now it’s my turn to expose the real deal on real estate investing! This goes for flipping real estate itself (i.e. properties) or simply flipping the contract (also known as assigning the contract). When you’re flipping real estate, you need to be able to calculate the “real” bottom line and if your assigning the contract, you need to know your numbers so you don’t get blacklisted by investors! This one piece of information will keep you from getting into trouble because of any “real estate bubble”!

Purchase Costs

Here goes… Have you EVER purchased and sold a piece of real estate for FREE? If you’re not sure what the answer is… It’s an emphatic NO… You are going to have costs to buy, costs to hold and costs to sell. This holds true even if you are buying a property for all cash. (Think stamp duty, titles office fees, conveyancing  fees, etc.)

If you’re not getting a mortgage, your purchase costs are obviously much lower, but nonetheless, there are costs associated with any real estate transaction. Plus, more than likely, if you’re relatively new, you’re probably not paying all cash for property anyway. You’re probably going to be using a home loan/mortgage for your initial real estate investing financing! (As a general rule I expect you would be using loans and mortgages for most if not all of your investments in real estate).

For a quick calculation, you can estimate anywhere between 3% – 5% for settlement costs to just acquire the property. That’s 3%-5% of the purchase price.

Holding Costs

How much is it going to cost you each and every day to own this piece of real estate? See, if you’re making money in real estate, you’d better believe that there are a lot of other people that are going to expect to get paid and they get paid in the form of mortgage interest, council rates, utilities (unless it is rented), property insurance, etc. Each of these is an expense each and every day that you own the property. Here’s an example… A home loan on a bread and butter type piece of real estate might run you 5%. Let’s say you got the property for $400,000. Every month, you are paying $1,666 in interest alone. Let’s say that taxes and insurance are another $200/month and then utilities at $200. Right there, the property is costing you $2066/month – or roughly $68/day. See, why it’s important to know not only your holding costs on a real estate investment, but also how long it’s going to be on the market before you can flip the property.

Selling Costs

Here’s the third part of the real estate investing puzzle. When you want to turn around and sell this piece of real estate, it’s going to cost you yet again! Are you going to use a real estate agent and pay a commission or 1.5-3.5% or even more? On $500,000, that’s anywhere from $7,500 to $17,500 chopped of the top.

If you can remember this… and apply what you’ve just learned to each and every real estate deal that you do, you’ll be safe flipping real estate in any market. You see, if it’s a hot market, you can calculate less time for holding cost. But, in a slower market, make your offer based on 6 months or 9 months of holding costs. It’s really simple mathematics! And real estate really is a numbers game…

5 House Flipping Do’s

1) Do put everything to pen and paper and plan it out carefully before you begin.

2) Do establish a budget for the entire project.

3) Do have an inspection.

4) Do know the neighbourhood and plan your flip according to the needs of the area rather than your personal tastes and needs in a home.

5) Do remember that you are in the market to make money not waste money when it comes to establishing an asking price for the property.

5 House Flipping Don’ts

1) Don’t forget to check out the neighbourhood before you buy.

2) Don’t blow your budget without just cause. Your budget is what you used to determine whether or not the house would be a profitable venture.

3) Don’t forget to set daily goals and hold yourself accountable to those goals.

4) Don’t neglect the exterior. Curbside appeal is what brings buyers into the property.

5) Don’t spend money you don’t need to spend. While it would be great to put in granite countertops and gourmet kitchens into every home it isn’t always practical.

The Importance of Mortgage Protection Insurance

 

Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but in some cases that is exactly what happens. Whether through the loss of employment or the death of a family member, it is an unfortunate fact that many people find themselves in situations that keep them from being able to keep up with their home loan payments.

Importance of Mortgage Protection Insurance

For many families, making mortgage payments would become difficult or even impossible in the event of the death of one or more members of the household. Before investing in a home, it is important to stop and think about how the house payments could be made if a major source of household income were to become permanently unavailable as the result of an unanticipated death.

While no one wants to think that their family will ever face a worst case scenario, it’s necessary to make contingency plans for every possible situation. Mortgages are such a large expense that it is important to consider how one’s family would be able to avoid the threat of foreclosure, in addition to losing a loved one, if such a situation were to arise. Fortunately, it is possible to protect your family from having to face the possibility of such a situation by investing in mortgage protection insurance.

Simply put, mortgage protection insurance is a life insurance policy that will pay off your mortgage following the death of one or more covered individuals. The primary purpose of this type of coverage is to reduce the financial burden placed on surviving family members following the death of a loved one. Homeowners who invest in this type of insurance coverage are making an important commitment to their families. This type of coverage can ensure that one’s family will never be forced out of its home as the result of income loss following the death of a family member.

Who Needs Mortgage Protection Insurance?

In single income households, or families in which one partner earns the majority of the money, many people think that the only covered life needs to be that of the primary breadwinner. However, it is likely that the death of a non-working spouse, or one who works part time, can also have a serious impact on a family’s ability to continue to afford to make mortgage loan payments.

Many people make the mistake of focusing only on income loss following death. They neglect to think about the expenses that will increase if either adult household member is no longer around. For example, if the non-working spouse is staying home with young children, the family does not have to pay for full-time child care. However, if that parent were no longer there, the working parent would have to pay for child care, which is a significant expense, in order to continue working.

Where to Get Mortgage Protection Insurance

There are a number of different options for making sure that your family remains financially able to stay in its home following the unexpected death of one or more members of the household. Many banks and other lenders offer mortgage protection insurance policies that can be purchased at the time you settle on your home loan.

These types of policies are specific to one’s mortgage, and proceeds are disbursed to pay off the remaining loan balance upon the occurrence of a covered event. It is also possible that the company who carries your homeowners’ coverage offers a mortgage protection policy. Payments for these types of polices can generally be included in the ongoing payments for homeowners insurance that are included in your monthly loan payment.

No matter which coverage option you select, the important thing is to make sure that your family is protected even under the worst possible circumstances. When you think about the alternative, the cost of mortgage protection insurance really seems to be quite small. When you purchase mortgage insurance protection, you are investing in peace of mind for yourself and for your family.

At Sherlock we have a solid partnership with a major Mortgage Protection Insurance Provider and can assist you with securing a policy today. Contact the team at Sherlock Holmes Lending Solutions to discuss your mortgage protection insurance options.

  Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but…

Selling Your Home – Don’t Be A Victim

Selling your home can be a complex process. If you make mistakes, you may be unable to sell your home or have seller’s remorse. There’s no need for this if you keep in mind the following.

Overpricing Your Home

It’s important to be realistic about the value of your home. Sellers should insist their real estate agents present them with objective criteria for pricing. Comparative information is the most critical in getting a house priced properly. If you ask for too much, it’s hard to ask for less later on in the process.

Not Displaying  Curb-side Appeal (I know – an American term – but it works!)

You don’t have to invest thousands of dollars into redecorating your home. But there some basic steps you must take to present your house in the most positive light.

Overdoing Home Improvements

Don’t go overboard staging your home. It should feel warm and inviting. Lawns should be freshly cut, plant some flowers, organise the home’s interior, rid the home of foul smells and apply new coats of paint to all walls and doors.

Not Understanding The Buyer’s Offer

Carefully reviewing and understanding the offer or purchase contract is imperative. Here are a few things to look for:

1. Has the buyer agreed to pay down a significant deposit?

2. Is the offer contingent upon the owner selling his or her present home? If so, how is the selling process transpiring?

Home Inspection/Open Houses

Have general inspections done in advance. Even though buyers will often have the house inspected again, it’s best to prepare for any potential problems.

Withholding Information

While it is tempting to hide or fail to mention the snafus of a home for example, it’s a hotel for cockroaches or termites, located in an area that’s prone to floods or fires, it is best to give buyers full disclosure. This kind of information can greatly affect the value or desirability of the property.

Be Objective:

While you may think your pink walls or roman columns are fabulous, it is best to keep that opinion to yourself.

Poor Real Estate Agent Communication

Sellers should take a pro-active approach to the selling process and not rely completely on the agent. Sellers should insist upon regular updates about the house and never assume the agent has taken care of everything. It is the seller’s responsibility to ensure everything is running smoothly.

Investigate Buyers

Once you have an offer on the table, it is imperative to secure confirmation of loan approval from the buyers (or their conveyancer/lawyer). Many do not ask about this – you are well within your rights to do so – and generally the buyer will have a finance clause in the contract that they must adhere to (unless you sell at auction and that is another article entirely!).

If you follow these steps, you will go a long way towards avoiding being a victim in the home selling process.

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Three Character Attributes Every Successful Commercial Real Estate Investor Must Have

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times.

Although we know he has extremely creative financial and investment strategies, and expert legal advice from people such as George Ross, he has more than just the average investor. There are other investors who probably know as much as Donald does, or more. However, they do not have the successful qualities that allow them to create such wealth from commercial real estate and accomplish the goals Donald has.

Donald has three successful qualities that you need to possess to truly create the quality of deals and wealth he is known for. These qualities are his ability to build relationships with everyone he works with, his ability to sell the big picture, and strong, overpowering charisma that takes a room by storm.

Almost any deal can work to your advantage if you work on and develop these skills. You may have strength for one or another. However, in order to have this industry at your fingertips, you must master each one. Success is delivered through the relationship between these characteristics, as one is not as good without the other or by itself.

Being able to build relationships with everyone that you work with is absolutely critical in the commercial real estate industry. You want to rub elbows with the decision makers in your city; those who are in charge of council zoning and planning committees at every level of the city. Get past the gate keepers and speak to the core people asking for their advice and become close acquaintances on a first name basis. These relationships can be implemented before you even think about doing a deal where their influence may be necessary. Relationships will not only get you insider information, but will give way for special favours and a good word to others who may influence your accomplishments.

Charisma is the ability to ignite passion and motivation among all those who are in an ear’s reach of the person. Charisma allows everyone to breakthrough barriers that otherwise would remain standing. Those who are charismatic can make even opposing forces agree on a common goal and move forward ambivalently. Donald can do just this – igniting passion and excitement that lines people up to follow in his direction. He becomes a true leader that others happily follow because they believe in him and his message. This characteristic will let you bring people on board that otherwise wouldn’t even think about working in your favour. It is a very helpful and powerful characteristic to possess.

The final characteristic is selling everyone on the big picture – everyone who is influenced by the value created in the deal. The community, the city, builders, developers, banks and even businesses around the location in which the project is growing all need to understand what is not there currently. As you know, these projects that were once old, dilapidated buildings that did absolutely nothing but bring the city or suburb down, can be turned into multi-million dollar establishments that can change the value of the entire city.

Do you have these qualities? Do you see yourself having the same effect on others as Donald Trump has had on the many people he has worked for? Everyone can master these abilities with a little focus and practice. Study others who are successful and possess these qualities. And remember that they are most effective when working together, not standing alone.

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times. Although we know he has extremely creative financial and investment…

Demystifying mortgages – 12 myths about lending every first home buyer should know.

Myth #1
You need at least 20% deposit to get a mortgage         
In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans.  Borrowers can often borrow up to 95% of the purchase price which is a tempting offer for any first time home buyer wishing to get into the property market. A low deposit home loan may often attract higher interest rates or more stringent policy restrictions but if you are confident you can afford the repayments then you can achieve the dream of owning your first home with a minimal deposit.

Myth #2
Fixing your rate is safer than a variable rate
When interest rates are high, many are tempted to fix their rate to protect against further hikes.  All is well with the world and as a borrower, you feel incredibly happy that you are not affected by the next huge rate increase.  The problem here is that if rates fall, you end up paying a higher interest rate compared to the variable rate.  Fixed rate home loans do offer some security in an uncertain market, and also allow borrowers to know exactly what their mortgage repayments will be for the next one, three or seven years. Everyone is different and has varying financial requirements so talking through your options with a mortgage broker is recommended.

Myth #3
A bad credit history means you won’t get a home loan
Let’s get one thing clear.  A bad credit history is not good.  Any missed or default payments on credit cards or mobile phones are recorded.  Even if the amount was small or years ago, it affects your credit rating.  However, not all is lost.  Lenders will consult your credit history and feed this into their own credit scoring system.  If it turns out there are issues, the lender may take a closer look and may still approve a home loan if you meet the requirements.  Similarly, non-conforming lenders provide an alternative option for borrowers who have been refused finance by traditional lenders.  Non conforming lenders are an ever expanding avenue and offer in many cases quite competitive products providing opportunities which were once deemed impossible.

Myth #4
I can still get a home loan even though no income, because I have several assets
Yes, you may have a collection of stamps from the 1920’s to be proud of, but it’s not going to convince a bank to lend you $400,000.  Assets aren’t the same as income, and it’s your regular income that lenders get excited about.  Lenders will only lend as much as people can afford to repay, and a first time home loan is a big commitment. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.

Myth #5
Get the lowest rate possible
Be cautious with low interest rates.  A cheap rate is attractive, especially to first home buyers, but take note because these low rates often come with less features on the home loan, reduced flexibility and higher fees. They may only be an introductory rate and once that honeymoon period is over you could find yourself paying a much higher rate.  Often a loan with a slightly higher rate but more features will save you money over the life of the loan.

Myth #6
Credit cards are okay if I pay them off.
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.  Often it’s the credit card limit, not the balance that counts.  So even if you pay off all your credit card debts, if you still have a high limit this can affect your servicing and chances of approval.

Myth #7
I can roll my personal debts into my mortgage
So you have a car loan and credit card debts, and you want to roll all of these into your home loan?  Makes sense, as the interest rate on your mortgage will be lower than your current rate.  But, first home buyers are not usually able to just throw all their debts together like this.  Usually you have to build up equity in the property and then use this equity to service the additional debt.

Myth #8
A low-deposit home loan means you don’t need any savings.
This one is most certainly not true.  First home buyers get excited and tend to think that a 95% per cent loan means that they do not have to pay much money upfront.  But, a 95 per cent home loan only covers most of the cost of the property, and not all the purchase costs such as stamp duty, legal fees, property inspection fees and lenders mortgage insurance (LMI).  You will still need some savings to cover these costs as well as the 5% deposit.

Myth #9
Start by paying just the minimum amount
Many first home owners pay only the minimum monthly repayment, as they adjust to the new financial commitment.  However, at the start of the loan you are really only paying interest so by paying more than the minimum, you quickly reduce the amount of interest and principle on the loan.  As interest is calculated daily, repaying twice a month instead of once per month can also save you thousands in interest.

Myth #10
Mortgage insurance protects the borrower
Lenders Mortgage Insurance (LMI) protects the lender, not the borrower.  Borrowers who can put down a 20% deposit should not need to pay LMI but borrowers with any less than this will pay LMI to the lender.  The less deposit you have, the higher the premium.

Myth #11
Offset accounts save you money
Home loan offset accounts are a great idea, but only for those borrowers who are responsible with their money and have a regular income. If you have a shoe addiction or tend to buy all your mates extra rounds at the pub, you may want to think twice about offset accounts.  Your income goes straight into your home loan account, pays your mortgage repayment and then you can use the extra funds for other expenses.  However, if you have bad spending habits you could end up spending more.  Be careful not to end up in negative equity because you didn’t monitor your spending.

Myth #12
Refinancing saves you money
Perhaps you have just bought your first home, and you are enjoying all the benefits of your own home.  Your first time mortgage is going well, but perhaps you fixed your rate six months ago and now rates are coming down, or maybe you want to switch to a different lender.  Refinancing sometimes costs money. In the way of exit fees for existing home loans, and settlement fees for the new loan.  However, the market is quite competitive currently and some lenders are giving all the power to the home owner.  Shopping around and refinancing your home loan can save you thousands over the life of you loan, but can also end up costing you more, so talk your possible choices through with a mortgage broker before making your decision.

Author: Melanie Burns

To discuss this article or anything to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Myth #1 You need at least 20% deposit to get a mortgage          In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans. …

Timing the market: how the cycles affect your portfolio

Having a thorough understanding of the real estate cycle enables you to time your move accurately and maximize your returns.

Most real estate investors face many challenges in building a profitable real estate portfolio. Determining whether to purchase or liquidate, raise or lower rents, or deciding which sector of real estate to participate in can be determined more easily and profitably by understanding the real estate cycle and the important attributes of its behavior.

It is tough to be at the beginning of a trend. People tend to follow the crowd (or the media) and consequently buy yesterday’s deals. It is much easier to profit when you are buying at the beginning or even in the middle of a cycle. If you can accurately time a rising market, you can benefit from higher rental income due to higher occupancy which results in upward pressure on property values and conversely liquidate when the opposite is evident.

Fortunately for real estate investors, the movements of real estate prices are slower and more predictable than the stock market due to the slow response to promising or discouraging economic movement.  The real estate cycle displays different characteristics based on whether the property is a free-standing house, a high density unit or a commercial property. Property values in office buildings are generally more susceptible to swings in a cycle than industrial buildings, retail buildings, apartment buildings and residential.

Demand drives each of these sectors. In the case of office buildings, the demand for office space is tied in directly to employment and the financial sector. Demand for industrial space is powered by manufacturing, transportation and the need for warehouse space.  Demand for retail space and apartment units is stimulated by population and growth of income.

All cycles are local

The real estate cycle can vary significantly from city to city and even down to suburb, compared to aggregate national statistics. A local real estate cycle can react differently based on economic demand for housing and can have longer or shorter peaks or troughs than the national cycle and nationally reported statistics.

It is important to understand the local real estate cycle wherever you decide to invest in order to make decisions that will be profitable. Being able to predict what will be happening in your local market based on specific key indicators will allow you to analyze expected returns, forecast property income and potential value increases or decreases. This can also aid in buy or sell triggers in your portfolio based on over or undersupply in the market.

Stages of the real estate cycle

There are typically four stages to each real estate cycle. In order to properly analyse, you need local data describing historic appreciation or depreciation which ultimately boils down to supply and demand.  For instance, demand for office space increases as a result of higher employment which in turn stimulates retail and residential demand. Conversely, demand for office space decreases as the value of market rents goes up. This factor spills over to retail and residential.

One must be aware of other indicators that are prevalent in each of the four stages of “top”, “down”, “bottom” and “up” of the cycle, specifically pertaining to residential properties.

1. Top of the market

Many Australian metropolitan cities today have been touted as being at the bottom of their market whereas others are on their way back up, some are booming and yet others remain stagnant. Historically cycles last from seven to 10 years, which allows us to learn from the past and better prepare for what and when our next move should be.

There are key indicators that are indicative of any real estate cycle. At the top of a market, prices are high. This sounds like an obvious statement, but what contributes to factors driving prices up?

Typically when there is high demand, the price goes up. This is usually triggered by employment opportunities, an enticing lifestyle or a retirement destination.

To properly analyse a residential market, you need to know the if the number of sales are increasing month to month, the number of days on the market it takes for a property to sell, if multiple offers on properties are becoming common – this drives property prices up even higher.

Other indicators can be observed just by driving around observing the construction industry. If stock is low and demand is high, people are generally very optimistic.

Vacancy rates will be lower so there will be less “For Rent” signs evident.

Your game plan

  1. If you can raise your rents, now is definitely the time.  Renew leases. With low vacancy and high migration to the area, there is high demand for properties. However, if interest rates are low, renters may be jumping into new homes.
  2. Once over-building is evident, you may consider liquidating one or more of your properties, particularly any underperforming properties, which may sell for a great price.
  3. Buy-reno-sell strategies can work well at the beginning of this phase provided the property is acquired under fair market value.
  4. You may consider selling later in this cycle.

2. A down market

A downward trending market happens after the top of a cycle. This move can be subtle at first. Many inexperienced investors can “get caught” during this shift, resulting in potential losses.

This can result from maintaining a selling price higher than the market will bear rather than anticipating the downward trend and unloading the property with good pricing or speculating in preconstruction.

A downward trending market occurs when new construction exceeds demand and/or prices hit maximum affordability. Once this happens, prices begin leveling off, demand slows down, and public optimism becomes uncertain.

When a market has too much inventory, sales decrease, ultimately triggering the amount of listings to increase.  This causes the average “days on the market” (DOM) of each property to increase, naturally triggering a downward pressure in prices. The market ultimately dictates when the decline will stop and what prices are reasonable.

Vacancy rates begin increasing as tenants have more choice of units and landlords begin offering discounted rents or move in specials.

Your game plan

  1. If you missed selling at the top of the market, sell fast and don’t hold out for top dollar.
  2. You may need to decrease rents or offer incentives to attract or keep tenants.
  3. Many landlords will have higher vacancies and may be highly negotiable on price (wait until later in the cycle).
  4. If you don’t sell now, hold your existing properties until the market corrects.

3. The bottom

At the bottom of a market, general public perception of the economic outlook is negative. Higher unemployment prevails and the banks’ lending criteria becomes more stringent. Prices tend to decline and it is not until prices ultimately begin to increase and vacancies begin to decrease that you will know where the bottom is (or was). Foreclosures or power of sales become more frequent and economic pessimism prevails as demand continues to slow.

New construction during this time drops. However, new builds already underway still come on line. Many contractors either become renovators or get out of the business.

Your game plan

  1. Take buying slowly but start buying distressed properties later in the cycle.
  2. Holding and waiting for the “up market” indicators if you are looking to ultimately sell.
  3. Provide furnished rentals to keep your unit rents up.
  4. Approach builders who have unsold inventory and purchase one, several or all of their unsold inventory at a discount or with a purchase option.

4. The Up Market

During this time falling housing prices have bottomed out and are stabilizing and demand is slow. New inventory is down as new construction is almost at a standstill. However, as the cycle continues and demand becomes more evident, new construction begins as does pre- construction speculation.

In an “up” market prices will begin to increase based on stimulation of the local economy, thus increasing demand. With less property available, there are less listings, the days on market decrease and multiple offers on property become prevalent.

From a rental perspective, this creates a diminishing supply of units, which triggers lower vacancy and higher rents.

Your game plan

  1. Buy for bargain prices from other investors who still haven’t realised a new cycle has begun.
  2. Increase rents.
  3. Buy, reno and sell.
  4. Refinance existing properties to buy more.
  5. Sell if you can move the equity into a more valuable property.

The public is usually driven by the media who are usually trailing the middle or even the end of a wave. This gives those who are studying the key market indicators a distinct advantage. However, acting when no one else has acted takes knowledge, courage and sometimes trusting your gut.

To discuss this article or anything to do with your finances, please call our office today or contact us via email and we will be happy to assist you.

Having a thorough understanding of the real estate cycle enables you to time your move accurately and maximize your returns. Most real estate investors face many challenges in building a profitable real estate portfolio. Determining whether to purchase or liquidate, raise or lower rents, or deciding which sector of real estate to participate in can…

Buying A Home With Bad Credit – A few key tips to keep in mind

You can buy a home with a bad credit history; you just need to find the right mortgage financing package. Before you sign up with the first company that offers you a loan, remember to research offers to be assured you are getting a fair deal.
Know Your Credit Rating
Your credit report/history is one of the biggest factors in determining the interest rate you will pay for your loan and the features (or lack thereof) of the loan that will be available to you.  Lenders will require a deposit of generally between 10-20% if their are impairments on your credit file.  The more severe the impairments – the greater the deposit. It is always a good idea to obtain a copy of your credit file prior to applying for finance. This is a good time to make sure all the information is correct. Any discrepancies should be checked out and corrected before applying for a loan.

 

Know The Fees

Arm yourself with information so you will know what are reasonable fees for your type of loan. Mortgage brokers are paid for their work through points paid up front or through the lifetime of the loan by the lender. Lenders also make money through points.It is reasonable to expect to pay up to 2-4% above normal variable interest rates for credit impaired mortgage, but any higher and you should be wary. There are always exceptions to this, so use your best judgment and compare.

Read The Fine Print

Once you get an offer from a broker, make sure you read the fine print. Interest rates are easy to compare, but you should also look over the fees that are involved which can add up to thousands of dollars. Also, be sure to understand any fees for late or missed payments.To discuss your mortgage options please feel free to contact us and we can review your options and provide you with a free comprehensive loan assessment.