48 - Making Money Lazy

Up until lately we’ve been on a roll: a few years back the equity loan was approved against our family home—putting that “lazy money” to work for us, and we were approved for and built our first two investment properties using the bank’s money.

But things are tight these days in the banking and credit sector and, with only one income, our ability to service additional loans is viewed as risky by the big lenders. Which of course sucks because we have a sizeable “rainy day” fund, the wife is in a well-paid job, and we have a very strong history of paying our bills on time and saving.

In other words, we still have income coming in but no option (currently) to invest it in additional properties without tying up our own funds. Our mortgage broker said “no” :’(

This situation leads to the holding pattern which is Plan B: reducing interest payable on the investment property loans. In other words, we’ve started stashing our spare cash in the offset accounts attached to the interest-only investment loans. This cash is therefore fluid—it can be withdrawn at any moment—and, because we’re using the offset accounts instead of paying down the loan as principal and interest (or paying into redraw), interest on the full loan amount remains deductible if and when we do withdrawn cash in the future.

While I’d prefer to be building our property portfolio (the median house price moves forever upwards) using the bank’s money and tax-deductible debt to achieve long-term growth, at least we’re saving interest. In fact this is the exact strategy we adopted with our PPOR—but of course, interest on that debt was not not tax-deductible and there were different variables at work there.

The biggest problem I have now is our money could be working harder. Although it could be said we’re retiring debt (sort of), this is good debt and I don’t want to retire it… I want to use our money to borrow other people’s money so it can be put to work for us! Interest rates are low and likely to stay that way for the near-term and if we could buy again now, at today’s median house price or just below, we could achieve cheap capital growth over the next few years.

We’ll review things again in six month intervals—both serviceability but also capital growth of our existing investment properties, which may allow us to leverage that equity to fund a larger deposit for IP #3. But that’s not how I’d prefer to do it.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I’m not selling anything and I do not receive any form of commission or incentive payments for any companies or individuals I endorse. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

43 - Recapping the IP#2 land purchase

What a roller coaster ride we’ve had “just” to buy a plot of land over the last six months! We’re nearly there now and I wanted to briefly highlight some of the issues we encountered in securing the block of land and finance. In summary, the land titles have registered and we’re finally approaching settlement.

If you’re interested in the details, I’ve linked to earlier posts below.

Step 1: Difficult finance pre-approval

We kicked off towards the end of 2015 when I asked our mortgage broker to look into finance pre-approval following my return to work several months prior. Although the wife was on maternity leave, I’d nonetheless been tinkering with the idea of a second investment build. The broker deemed our bank-appointed credit assessor to be unreasonably pernickety but finance was provisionally approved on the basis of servicing via my income alone.

I then needed to convince dear wife a second investment build is a good idea and gave Open Corp the okay to proceed once we reached agreement.

Step 2: Property selection do-over

All was looking rosy with the first property selected for us by Open Corp until the vendor mysteriously sat on the signed land contract for some weeks. It turned out we’d been gazumped by a large buyer who apparently bought out all remaining blocks in the release—including those blocks with unexecuted contracts.

By this point, our bank pre-approval was due to expire but Open Corp quickly found us a similar, alternate property in a neighbouring estate. It was slightly larger, with a correspondingly larger price tag. In the interest of time, we nominated Open Corp to purchase the property on our behalf.

Step 3: Short valuation

The Valex-appointed valuation company contracted by the bank to value this second block came back with an ill-considered short valuation. We were told by Open Corp and otherwise of the view the property value was in line with the contract price. Appeals to the valuer (Peter Jones from Lee Property) and the bank to review or reconsider a similar valuation that came in at cost for a similar property in the same estate fell on deaf ears. In brief, the valuer considered an inappropriate set of comparable properties and didn’t do his job. Unfortunately, there would be no getting around this and we’ll need to contribute the shortfall from our equity loan.

Step 4: Finance do-over

Throughout the valuation shenanigans, the contract I was on at work came to an abrupt end and left us as a no income, two kids (NITK—my acronym?) household—not all that appealing to a lender when it comes to their evaluation of a client’s ability to make loan repayments. The wife was still on maternity leave and, although she had a contract to resume work (and was actually on leave—maternity leave), the initial finance application was based on my income alone because our mortgage broker didn’t think her potential income would be considered. With my last pay stub showing the drop off in hours, it was difficult to prove to the bank we could afford this loan. For good measure, my overarching head contract also ran out!

Meanwhile, our deadline for finance approval with the land vendor was due to expire. A one-week extension was approved, provided the deposit was paid in full by the original due date. I wasn’t terribly comfortable paying the deposit until finance was unconditional but both Open Corp and our (independent) mortgage broker confirmed it was fully refundable.

Through a tip from another mortgage broker, I persuaded our broker to approach the bank about taking into account the wife’s signed work contract, commencing on her return to work from maternity leave and well before settlement. I’d been told the bank we were working with had recently softened their stance on maternity leave. Of course we first had to find the wife’s contract, which was buried in her work emails as an attachment she couldn’t access remotely. Her maternity leave had also been paid upfront so she had no recent pay slips.

The final hurdle was the build contract, signed by nomination, which the bank wouldn’t accept. A new contract was couriered out to us and signed in a hurry before being couriered back to be executed anew by the builder.

With the build contract sorted, the maternity leave strategy delivered and finance was finally approved.

Step 5: Deposits

Although the Open Corp land deposit is normally $2,000, our land contract stipulated the typical 5% deposit. As mentioned above, the extension required us to pay the balance before finance was unconditionally approved.

The builder’s deposit (5% of the build price) also came due just after finance approval and the balance of Open Corp’s fee was also payable.

It’s at this point—when significant amounts of money are moving out of the account—that it all starts to get real. Of course land titles haven’t yet registered and settlement hasn’t yet come about. Perhaps more importantly, in terms of getting a paying tenant through the doors, construction hasn’t yet started.

Step 6: Finance re-do over

A final twist to the finance saw our request for an LMI waiver come through shortly after signing the first loan documents, which necessitated the inconvenience having the loan documents signed again. We weren’t sure how this was going to play out before this point so it was a happy surprise, at least.

Step 7: Certified ID

As a final poke in the eye, I heard from Open Corp—two days before our anticipated settlement date—to say the solicitor needed a certified copy of our ID. On very short notice, the wife was fortunately able to find a Justice of the Peace at the hospital who could certify her ID… the head pharmacist, he was paged and materialised from a sterile room in a full biohazard suit to help her out!

Subject to the bank, settlement is scheduled this week.

Update (bonus Step 8!)

Wow, we’ll never cut a break with this one!

We settled on Thursday morning at midday but first had a call from our Eastern states solicitor at 7am to say the bank wanted a $25,000 owner contribution (the day before it was $0). That amount was not only more than I could transfer online given our daily transfer limit but it was also more than the bank’s first-line call centre rep could manage for us.

I asked to speak with the rep’s supervisor and, after going through some additional identification questions and a nuclear launch sequence involving call backs and temporary passcodes, I was able to make the transfer.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I’m not selling anything and I do not receive any form of commission or incentive payments for any companies or individuals I endorse. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

41 – Why bother reviewing your bank interest rate

I write constantly here about reviewing your interest rates (and insurance premiums, etc) but that’s because I’m constantly astounded by how willing large organisations are to take us all for a ride with very subtle interest rate movements and other fees.

I recently noticed the interest rate advertised online for our PPOR and line of credit were a little way from the actual interest rates we’ve been paying. I thought the interest rates on these products would keep pace with both RBA rate changes and changes to the original product but of course that’s not always the case with RBA rate and perhaps not so much the case regarding changes to the loan product.

So I contacted the bank and, after chatting with a representative from the retention department, the rate on our PPOR loan was reduced by .20% (they couldn’t move the LOC rate).

It’s worth noting the rate advertised online is for new loans and the rep I spoke with told me they can’t “match” that rate as our loan was established at a certain point in time when interest rates were likely higher (i.e. when the bank “bought” the money they lent to us). I was told we’d have to refinance to achieve the lower rate.

The rep also mentioned the interest rate isn’t adjusted automatically as the product itself changes and it’s best to review the interest rate every twelve months or so and give the bank a call if necessary—good advice.

So what does .20% actually mean to us in dollar terms, I wondered? Is it $10 per annum and hardly worth bothering about or is $1000 (or more) per annum? I don’t like to wonder these things, I like to know with certainty so I put together a spreadsheet to multiply a given daily interest rate (or part thereof) by a specified amount for a specific timeframe (i.e. 30 days, 1 year, 2 years, etc).

Working off a principal amount of $500,000 (let’s call that the national medium house price, roughly speaking), I was surprised at the results.

For example, let’s say I’m comparing two loan products with an interest rate of 4% and 4.5% p.a. respectively. How much does that extra 0.5% cost per year? From my table (below), intersect the 0.5% column and the 365 (days) row and you can see the answer is $2,500. That’s a lot of money to unburden yourself of every year for no benefit. If you’re capitalising that charge it’s also going to compound in the bank’s favour!

The table shows two sets of columns. The first set with the dark headings shows part percentages up to 1%; the right-most columns with the lighter shading show a range of current rates, increasing at 0.5% intervals.

Have a look and compare the rates on your loans and then talk to your bank—or refinance if you have to (talk to a mortgage broker).

Click the image to see a a full-size version of the table.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I’m not selling anything and I do not receive any form of commission or incentive payments for any companies or individuals I endorse. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

32 - Preparing for the Second Build

It’s been a little quiet here but for good reason: I’ve been back to work after a few years as a stay-at-home dad. In other words, Gemma is on maternity leave following the birth of our second child and her paid leave recently ran out.

Now if you’re a bank or lender, you’d probably worry about loan serviceability with neither of us working, two dependent children, a PPOR loan, and an investment loan to repay. According to our mortgage broker, Nathan, women on maternity leave statistically don’t always go back to work. So to keep things ticking over I’m back to the bad ol’ 9-5.

Of course serviceability only matters if we were to apply for another loan. The existing loans are already in place (and being repaid) so the banks don’t care what we get up to.

And that point naturally leads to the announcement that we’re looking at a second investment build. Having now been back at work full time for a few months, we may even be eligible to borrow again sooner rather than later, which is great.

As with the first IP, we’ve got unused or “lazy” equity in our PPOR. What that means is the value of our family home is worth more than what we owe the bank, thanks in part to appreciating property prices and the fact we’ve gone to great lengths to pay down the loan and thereby save on interest charges. That equity can now be used to fund the deposit and costs on an investment property through a line of credit secured against our family home.

Rounding up, we used around $70k of this equity to cover the 10% deposit and other costs for IP #1, meaning we didn’t pay lender’s mortgage insurance on the 90% main loan. I’ve got a pessimistic spreadsheet showing me, worst case, how much it costs to hold this property with tenants in place and that works out to around $4k/year for the first few years; I’m meanwhile looking at the actuals and so far the costs versus incoming rent are more or less balancing out. Open Corp suggests holding costs are typically around $50-60/week.

Of course with Gemma not working this year (IP #1 is in her name) we’ll have to defer any tax benefits so it’s hard to get a true picture of holding costs.

Nonetheless, with the IP#1 build behind us, tenants installed, and actual holding cost data now available, I’m feeling comfortable about repeating the process.

Because the first build with Open Corp was so smooth and because I’m working full-time and have little time to spare researching the market, area, and property, I’m planning on going through Open Corp again despite the costs. At the moment we’re looking at a build in Melbourne and Mortgage Choice tells me we should be able to borrow what we need. I’m planning on using the same team, with state-specific replacements for certain roles of course (e.g. settlement).

I’ll note my intention at this stage is not to own a dozen properties, as some firms may suggest. I’ll do what we can afford to do and can do comfortably. Open Corp suggests five or six properties may generate the cash flow and create the equity needed to live comfortably in retirement but even that will come in time as the equity in IP#1 (and IP#2) grows and becomes accessible.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

19 – Bank Error

When our last progress payment came due for the frame stage, our mortgage broker (Mortgage Choice) sent us a form to be signed, authorising the bank to draw down against our mortgage for the amount of that invoice. This was the first construction invoice paid by the bank as they asked us to pay the first invoice for the base stage.

Our invoices to date have come through on a Thursday and payment is due within seven days. Our builder has previously returned a receipt to us within a day of payment so I became suspicious something had gone awry when I hadn’t received a receipt by Tuesday.

After following up with Mortgage Choice, I was informed the bank (one of the big four) had paid the builder, in a single payment, both the amount for the frame stage invoice and the builder’s 5% deposit. This would have been great if we were still back in December when the deposit was due but, as we’re now in May and I’d already paid the deposit myself from our line of credit, I raised an eyebrow.

Specifically, why did the bank pay an invoice we hadn’t authorised them to pay? That invoice was issued before land settlement and before this mortgage was finalised.

In speaking with the builder, they confirmed they weren’t sure what to do with this extra money, hence the delay with the receipt, and we agreed it would be credited against the next stage invoice. This plan was also communicated back to the bank, presumably through the builder to Open Wealth and then through Open Wealth to the mortgage broker (did anyone say “Chinese whispers”?).

And then it dawned on me: would the bank—one of the big four Australian banks, as mentioned, with annual profits in the billions and who charged me interest when they overdrew our transaction account during the land settlement process—reimburse the interest charged on the amount that was paid in error?

Simple question.

I put this one to Mortgage Choice and their initial response was ‘no’. Obviously I wasn’t happy with that answer and asked them to please explain.

They followed up with the bank and [after a few days passed] I was informed there will be an adjustment to compensate for this error once the next invoice is been paid.

The math is simple and the funds are not significant but it’s the principle of the matter, gosh darn it! And I hate it when banks steal my money!!

• 5% builder’s deposit = ~$11k
• Annual interest rate = ~5%
• Annual interest = $550 ($45/month)
• Estimated time to next invoice: 1-2 months
• Money that’s better in my pocket: yes

I’ve written in the past about keeping an eye on your banks and insurance companies. Here’s yet another example to reinforce the point. Hopefully future progress payments run more smoothly.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,


Michael

16 – Base Stage Invoice

In my last post I mentioned the slab for our first investment property had been poured and we were now at the ‘base stage complete’ milestone. I also wrote that it was time to pay the base stage invoice of $22k to the builder. Our mortgage broker forwarded a copy of the invoice for signing to authorise payment by the bank (from our main loan).

That would have been great as I’d prefer not to pay anything more than I have to from our line of credit due to its higher interest.

Naturally, things didn’t work out as intended. The bank asked that we pay this first invoice in full as part of our contribution so we had to pay the full amount from the LOC.

Again, not a biggie as it’s there for a reason but it’s amazing how random this process seems—would it not be sensible to expect the bank to provide some sort of payment plan or schedule so we can know what we’ll need to pay and when? Cash flow isn’t a problem thanks to the LOC but I can only imagine it would be for some customers. We had seven days to pay this invoice and I got the invoice paid across two payments with a day to spare, thanks to the bank stuffing around.

Open Wealth mentioned late payments are taken into account should they need to pay the build guarantee or rental guarantee and that’s apart from the fact I do not like being late with payments.

Hopefully the next one will go more smoothly.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

15 – Progress Update: Base Stage Complete

Well that happened quickly! We have a slab (and a corresponding invoice for the base stage of around $22k). It suddenly feels like progress is moving quickly—at long last. Looking back, I see the approvals came through around mid-April so it’s not that speedy but I’m happy given the weather.

I should note I’ve been very impressed with our Mortgage Broker this time around. As I’ve no doubt mentioned previously, we used Mortgage Choice when we bought our PPOR (land and build). They were involved then to the finance approval stage but I don’t recall interacting with them beyond that point for progress payments on the build.

This time, we received a copy of the builder’s invoice for the base stage from Open Wealth and that very same day, Mortgage Choice sent me the same invoice to approve for payment by the bank. It’s only a little thing but it’s nice knowing the broker is still involved to grease the wheels between us, the bank—and Open Wealth too for that matter. In theory, this means this invoice and future invoices should get paid on time and help us avoid any penalties for late payment.

As we’ve not yet seen the block and live on the other side of the country from Brisbane, it occurred to me it might be time to enquire to Open Wealth about how I go about approving payment for $20k of works when I haven’t seen the slab and have received no other reports as to quality, correctness, etc. Admittedly I should have asked this question before committing to the build with Open Wealth but I wasn’t thinking along those lines at that point.

I was happy with the answer from our Open Wealth Client Liaison Manager, however, and it turns out there are several inspections which occur throughout and after the build. She emailed me this helpful response:

“The builder employs a Certifier who conducts multiple inspections. The Certifier is governed by the council and legislation.

Here is a list of the certifier and other inspections:

1. Prior to the slab being poured the plumbing, and then the slab form, is inspected by the Certifier. In particular the drainage and sub-drainage; the piers and slab are inspected for form.
2. Once the frame is up, the inspector checks the carpentry is to code, Australian standard.
3. After the frame, the inspector also inspects: the plumbing pipe work, this is referred to as the rough-in inspection. There is also a plumbing inspection by the certifier at the final stage.
4. At completion stage of the build the Certifier produces the Form 21, which is to assure that the build is complete and meets Australian standards. This form is sent to the bank to release the final payment.
5. After Form 21 is received by the bank, the bank sends out a valuer with a copy of the plans and specifications to make sure that the builder has constructed your property to plan and included all specifications.
6. Open Wealth then organises two independent inspections; we employ a company in Queensland to go out and check the quality of the work. This is mainly for finishes to paint, craftsmanship and visible defects – it is very thorough. 
7. During the property manager’s first inspection any additional visible faults are identified.
8. At the property manager’s six-month inspection, any outstanding faults identified are to be fixed under the builder’s warranty. Because your house is made from natural materials and as your house settles, there are always a few adjustments to doors, towel rails that need to be tightened, etc and is at no cost to you.”

When we built in Perth in 2007 through a “project builder” we had only the word of the site manager to go on (at practical completion) and we commissioned an independent inspection at a cost of $500. I’m sure the bank had a look in some shape or form but this was never made evident to us. Despite living in this house for nearly eight years, we’re still dealing with issues from the build (long story for another day…). Perhaps it’s all smoke and mirrors but from what I’ve seen so far the level of rigour in Queensland in 2015 seems greater than that in WA in 2007/08.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

11 - Bank Deals

Here we go again! I recently posted about the improved deal I got on our house insurance just by phoning up and asking for a better price. Almost to prove my point, I called up the lender who holds the mortgage on our PPOR, asked for a better rate, and they were able to pretty much instantly knock off .05% (pending new paperwork to sign).

Not a vast improvement but nothing to sneeze at either—that works out to about $50/year for every $100,000 owing (.0005 x 100,000). Since this is the mortgage for our PPOR, we can’t tax deduct expenses like mortgage interest so every bit less we have to pay back is more money to us instead of the bank.

It’s worth noting we’re already on a discounted rate by virtue of having both our PPOR mortgage and IP LOC together under the one umbrella product.

The bank wasn’t, unfortunately, able or willing to improve the rate applicable to our equity loan but did suggest we could convert that loan to a fully-fledged home loan to achieve a better rate. Interesting concept but I’m not clear on the tax implications—i.e. the debt may be considered non-deductible.

We’re on a variable rate loan product and intend to stay there. I briefly considered fixing some or all of the loan before the most recent rate cut but was obviously glad I didn’t as interest rates dropped .25%. Some pundits in the media are predicting a second rate cut this year.

Michael Beresford at Open Wealth recently published a brief but informative “Wealth Workout of the Day” video on the subject of variable vs fixed and some of the implications you may not have considered, such as pulling equity out of your property. Here’s the video.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

10 – Progress Update: Survey Plan Registration

In all honesty I’m not 100% certain what this means but we received a letter from our solicitor on Friday noting “the Survey Plan relating to our purchase has registered in the Titles Office” (which seems to be the Department of Natural Resource and Mines, Queensland). We now have a settlement date of 20 March—finally!

Like I said, I don’t fully understand what this means, but I think the land developer has now completed the necessary developments for the land we’re purchasing and the rest of the development (sewerage, street lighting, paving, etc). We’ll still need building plans to go through council, which can likely start only now (or post-settlement).

The solicitor also sent a draft settlement statement, part of which caught my eye.

Specifically, the bank (that is, the bank covering the main loan for this investment property) will be advancing around $185,000 at settlement and we are required to make up the balance.

Now we’re fine to do this through the line of credit we established to cover the 10% of the purchase price and costs but my naive assumption was that our main loan would be drawn down in full for the land purchase and part of the construction costs, before we’d start drawing down the LOC.

But of course that would be too simplistic. More importantly, to the banks thinking anyway, we could theoretically run out of money to pay for the build. No build means no income, which to the bank means greater risk that we’ll default on the mortgage. The bank which holds our main loan has no idea about our LOC.

No matter, we’ll do things this way and everything will balance out in the end. It does mean we’ll have to pay a tiny bit of extra interest because the interest rate on our LOC is slightly higher than that of our main loan. At least it’s all deductible interest.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael

3 - First Steps

There are so many subtle decisions and parallel steps in the property buying process it’s hard to know where to start in describing how we went from A to B. I suppose I’ll start at the very beginning, following our decision residential property investment was the thing for us.

Selecting an Investment Advisor

I’ve written about our “A-Team” previously so won’t reiterate the contents of that post here. Suffice to say we knew we’d need to decide on an individual or company to assist us to select a market, suburb, and property. I considered the risks too high to attempt this on my own, the first time around. You might do this yourself, someone might do it for you at no cost to you, or you might pay someone to provide this service (such as a broker).

I met with a few property investment companies and ultimately decided to move forward with Open Wealth Creation. We aligned to the Open Wealth methodology because it made sense and the Open Wealth team provided a large quantity of quality educational materials at no charge (a reminder, this blog is not an advertisement or referral for any of the entities I mention in these posts).

As we evaluated Open Wealth, I was also interacting with Joyce Property (based in Perth) but I opted not to move forward with them because they also promote and sell apartments; I don’t believe apartments are a good residential investment and I believe if you’re spruiking apartments you’re not working in the interest of those who are investing with your firm. Notably, Joyce does not charge a fee for their services, whereas Open Wealth do charge a fee. Joyce are obviously a very experienced organisation (I met with Graham Joyce and he oozes professional history). 

My wife and I also met with a representative from Investmark and I attended a seminar and had a follow up meeting with IPG but neither were up to the task I set them and seemingly just wanted to shift stock onto naive investors. Their eyes widened when we first explained how much useable equity we had but neither one followed up with me, despite prompting, when I asked them to back up their claims. The free IPG seminar was more or less promising and it seemed like what they were selling was based on good research. At the end of the day, both felt very slippery, verging on dodgy.

Finally, I met with Nicheliving a few times (primarily for their mortgage brokering services but initially for their house and land packages). They’re obviously big in WA but were really pushing us towards NRAS properties and their approach seemed somewhat thick. I knew pretty quickly I wanted to be building in Queensland (Brisbane) but it was worth the discussion with Nicheliving. Nicheliving are a one stop shop, which might be a good thing (or might not!). Their advertising also shows a dude holding wads of cash so it seemed like they target the get rich quick crowd which is not what I’m about.

Getting Money

In parallel with the discussions I was having with these advisors and property development firms, I initiated contact with our current bank and with the mortgage broker we used when purchasing our PPOR.

Although I didn’t intend to send the investment property mortgage to the bank that holds the mortgage over our PPOR, I needed to understand how much equity we had in our family home and, secondarily, how much they thought we could borrow. This turned out to be a good move as the bank was able to very quickly order a full valuation at no charge to me and it turned out to be a very positive engagement in terms of learning how to to converse successfully with the bank. Importantly, because the bank ordered the valuation directly, I was able to get a copy (I wasn’t able to get a copy when our mortgage broker requested a second valuation—which also went through the bank…). 

I wasn’t as impressed with the bank’s view about our loan serviceability—and in turn how much they would lend us; this was due primarily to the fact we’re a single-income family. Nonetheless, the home loan specialist I dealt with was immensely useful in helping me to understand the value of our family home and how we might go about refinancing its corresponding mortgage and optionally financing the investment property purchase. The specialist was also able to share the valuation report with me and it was helpful to see how the valuer saw our property (interestingly, we have a four bedroom house—as per the plans I supplied to him—but he recorded and valued the property as a three bedroom house with a study…).

I didn’t want the bank which has our PPOR mortgage to also hold our IP mortgage because I didn’t want to cross-securitise the loans. I highlighted this when I spoke to our bank and was reassured it wouldn’t be a problem but I’ve read a single lender holding both mortgages will always ensure they come out best in the event of any problems. Yes, we might have secured a lower interest rate and it would have been convenient having everything in one place but I’d only consider a single bank scenario if we eventually get to the world of private banking.

Following that initial conversation with the bank I also got in touch with a mortgage broker. Broker’s are often recommended and, as mentioned, we’d had success with a broker when mortgaging our PPOR (we used Mortgage Choice). You can do your homework and check out products from each of the banks on your own but why bother when using a mortgage broker doesn’t cost you anything and they’re already familiar with countless loan products? The broker I dealt with reassured me Mortgage Choice is paid the same commission for all of the products they recommend, removing the opportunity for the broker to recommend one product above another that will earn them more money; of course I’m not sure how true that is.

Our broker told me he has a few investment properties himself and I think finding people who understand investment property is really important because they’ll have a better appreciation of the path you’re following. As some of our requirements were different to your mortgage broker’s average client requirements (more on that in a moment), I wanted to structure our loans differently than what the broker first had in mind. At the end of the day the broker was able to find the products we needed, submit the applications (he walked through every line on the application forms with me), and secure an interest rate on the main loan that is 0.02% better than what that bank would have offered had I gone to them directly.

With my wife being a doctor, it turned out she was also eligible for a partial LMI waiver (this is one of the interesting requirement I mentioned earlier). Essentially, some lenders will offer members of specific professions an LMI waiver on the basis that they present a lower risk as borrowers. Search for LMI discount or see here for examples—you may be surprised what you find. I certainly wish I’d known about this offer/wish it existed when we purchased our PPOR as we had some major cash flow problems for a little while when we first had to sort out stamp duty and then LMI (and then retaining walls)!

Both of the brokers I was dealing with (Mortgage Choice and Nicheliving) were across the major lenders offering LMI waivers (initially CBA and Westpac but now ANZ and possibly Macquarie and St Georges) and we ended up being able to borrow 90% of the IP costs without incurring LMI. Note the 10% balance was paid from the line of credit secured against the equity in our PPOR but we could have done an 80/20 split if necessary. You can take the latter approach too if you don’t qualify for an LMI waiver but don’t want to pay LMI and have sufficient equity.

Mortgage Choice submitted applications for the main IP loan and the line of credit with our existing lender. Both lenders performed their respective valuations, the first on the property we were buying and the second on our home.

After all was said and (nearly*) done, our unconditional finance approvals came through without a hitch. People get all bent out of shape about finance but I don’t let it phase me—in this case I’d done my homework and knew what to expect. In other words, I wasn’t asking for more than any reasonable person in our situation might need and the numbers were simple and made sense. I was also confident our team would get us through. Might be different next time around though!

* Land settlement is due in the next few weeks. When settlement occurs, the solicitor will meet with the bank and land developer to ensure monies are dispersed appropriately and all of the legals are taken care of.

Land and Builder (etc)

Following an initial phone consultation with Open Wealth and a bit more back and forth, the first thing we needed to do with them was have our name added to a waiting list for a property in the area (the development) they were recommending.

After looking over the property details and the house specifications, we had to sign an “Exclusive Hold Agreement”, which essentially allowed us to deliberate further, and undertake additional due diligence, while the property could not be offered to anyone else. The hold agreement also required payment of a $1,000 refundable deposit. If we chose to back out, the deposit would be refunded in full. This deposit was payable to Open Wealth and is ultimately part of their 2% fee.

With the land contracts submitted, we then had to pay a $2,000 refundable holding deposit to the land developer. This deposit is essentially part of what would be a typical 10% land deposit—there is no further deposit to pay for the land and the balance of the land price and costs are paid at land settlement. The land contracts included the Contract for House and Residential Land (REIQ) and Terms of Contract for House and Residential Land (REIQ), as well as special annexures.

Note we had no opportunity throughout this process to submit an “offer” as such and when I enquired about negotiating on price, I was told the prices are essentially non-negotiable. This is something I want to find out more about if we repeat the process again with Open Wealth.

Next, we had to pay the balance of the Open Wealth “Development Management Agreement Fee” (their fee) within seven days following unconditional approval. This fee is 2% plus GST of the total land and construction price and is tax deductible.

Finally (FINALLY!) we had the 5% builder’s deposit to pay; we were given the option of paying this before settlement so the builder could make a start before we actually owned the land (due to an arrangement between the land developer and the builder negotiated by Open Wealth). We had the option to pay this after settlement.

Note I would have paid all of these costs from our line of credit in order to tax deduct the interest but unfortunately the LOC wasn’t yet available when I paid the $1k and $2k deposits. I may still be able to claim something for these but it gets tricky as I paid both of these initial deposits from our personal transaction account and that gets messy in the eyes of the ATO; will let the accountant sort that one out come tax time! [Update: on advice from our accountant, I “refunded” the $3k to our personal account, in two separate transactions, from our LOC.]

In summary, these were our upfront costs and the timing of relevant milestones:

September

• Exclusive Hold Agreement signed and returned.

October

• Open Wealth deposit: $1,000 (of the total Development Management Fee) to Open Wealth. Refundable.
• Land contracts signed by us and returned.

November

• Land developer deposit: $2,000 (of the land price) to the land developer. Refundable. Payable once land sale contracts submitted
• Unconditional finance approval received. 
• Development Management Agreement Fee: 2% plus GST (minus $1,000 paid initially) of the land and construction costs to Open Wealth. Tax deductible.
• Construction contracts signed by us and returned.

December

• Builder’s deposit: 5% of the construction price to the builder. Tax deductible.

[Update: March

• Land settlement]

Reading and Learning

As all of these events unfolded, I was busily reading everything I could get my hands on. I’ve started a bibliography which I’ll publish soon in case you want to follow what I’ve read. Education is obviously a time consuming (and at times tiresome) activity but I feel it’s important to understand the principles of property investment inside and out—especially as I lack the repeated experiences myself.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,
Michael

2 - Choose to Live Well

New Year’s Eve approaches and I’m feeling reflective—on the year that was and the year to come. Specifically, I’m thinking a great deal about what it means to be happy, free, and self-sustaining. I look to my family for these things as they make me happy and help me (us) to be free and, eventually, self-sustaining.

As a stay-at-home dad, I made a conscious decision to put aside, if not discard, my career in IT and take on a role unfamiliar to many men. I handed financial control—at least the income generating aspects—to my wife. Rather than being the member of our family with the highest income, my raw financial contribution in dollars and cents become zero and I spend my days wiping bums and playing house. In short, as Robert Kiyosaki might say, I stopped doing what I can do best: making money as an employee.

Has this hurt us, financially? Not really. Not yet. Not in the short term. Fortunately my wife makes a decent income on her own and this year has been financially productive with her working rurally for six months. I’m not contributing to my superannuation, of course. Had I been working, most of my income would have been put towards paying down the mortgage on our family home. These are important things to think about, particularly in regards to our future financial position and our ability to retire comfortably. My time as a productive employee is limited, after all.

Do we live any less well than than we did when we both worked? No. We’ve always lived frugally. Realistically we’ve been a single family income for a while now as my wife had twelve months off when our first child was born (only a fourth months of which, roughly, was paid). We’ve become accustomed to tightly managing our available funds and resources and while we don’t scrimp and pinch pennies as much as we once did, we by no means lead a lavish lifestyle today.

We’ve essentially chosen to live well.

Our daughter would have had to go to day care, full-time, from the age of one, if I had opted to continue working. Or my wife would have had to put on hold many, many years of education and training in the medical field to stay at home (part-time work is not a real option for her today). Sure, we could have bought some more furniture and some overhead cabinets for the kitchen and maybe another big machine for my woodworking shop but all of those things can wait. In general our long-term lifestyle goals are not much different than our reality today: no flashy cars, no big house, no designer clothes; we appreciate the simple things in life.

A second income would also make us more appealing to the banks in terms of investment loans but I know what we can and cannot afford in terms of debt service so I’ll take my business to the lender who best understands that. Notably, securing funding for this first investment property has not been a problem, primarily because of the equity in our PPOR.

I’m also somewhat fatalistic and I know I won’t live forever. I’m not living it up today, in my thirties, to counterbalance that eventuality, but I despise the idea of working myself to the bone, slumped over a desk day in and day out while life and reality pass me by. My wife would like to work part-time one day in the future (when it will be easier for her to do so) and I genuinely hope she can. She does have a significant contribution to offer society as a doctor but there’s no denying the past ten years of training has been gruesome and taken a toll on our family life.

This is the reason why I’ve opted to invest in residential property. It’s the hope of achieving financial freedom, at relatively low risk, and the promise—however distant—of making a passive income legitimately. An empire of appreciating land, buttressed by the houses on that land generating income so I don’t have to, is, for me, the pinnacle of financial success and personal financial security. There are complexities. There will be hard times ahead. There are also simplicities and there will be good times ahead too.

I spent a significant amount of time this year preparing mentally, through knowledge-building, to start executing a multi-year (multi-decade) investment strategy focused exclusively on residential property. I have minimal experience in this area. There is no doubt I will make mistakes but in pushing forward I gain experience and ultimately reduce and remove risk. As a stay-at-home dad I had a bit of spare time (not much though!) to fast-track my property investment education and I’m reliant on a number of companies to help me stay on track. I like to think I’m not idle at home (beyond the twelve-hour days running the house, that is) and that I’m contributing—financially—to my family’s long-term success and our future ability to live well.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. I'm learning too and expect to make many, many mistakes along the way.

Happy new year,

Michael

1 - The A-Team

When it comes to property investing, one snippet of advice I hear repeated is to assemble your own, personal A-Team. Your team may look slightly different to ours but most A-Teams will typically include a tax account (ideally with significant experience in property investment), a mortgage broker, a solicitor or conveyancer, one or more lenders, a property manager, and one or more real estate agents, buyer’s agents, etc. You may optionally pull in or need to liaise with a financial adviser, an insurance broker, and potentially land developers, builders, and councils if you’re building new.

This is the team we ended up with as we purchased our first investment property. I’ve listed team members in rough order of importance (to my mind).

A very quick note: I do not receive any incentive to mention these companies and individuals, i.e. this is not an advertisement.

Accountant

I consider myself a numbers guy so you can imagine the accountant is going to be important to me. A good accountant will help you understand why you need to do things in a certain way to maximise your tax benefits and stay clear of any trouble with the ATO.

On recommendation from Open Wealth (see below), we’ve ended up with WSC Group and I can’t speak highly enough of them. Their customer service is above and beyond and Rainer Lamb, in particular, has been instrumental in my own learning, helping us to ensure our ownership and financial structures were correct. The introductory materials provided a detailed overview of how they recommend buying investment property and they specialise in investment property. It’s remarkably clear to me they know what they’re doing.

Interestingly, WSC are based in the Eastern states and we of course live in Perth. I was a little reluctant to leave behind our local accountant but they were not meeting my needs despite being available face-to-face. The WSC accountants do travel interstate and, as mentioned, Rainer in particular has been expedient and accurate in responding to my many, many questions via email. David Shaw, CEO has also been running some webinars of late and came over to Perth for a talk about retirement planning so they’re very engaged with their clients from the top down.

We’ll rely on WSC in the near future to prepare PAYG variations, do our tax returns, of course, and apply depreciation schedules for building and fittings. Basically, their job is to squeeze out every last dollar in tax savings as this first property will be negatively geared initially.

Mortgage Broker

You can shop around to find a good lender but why bother when using a mortgage broker doesn’t cost anything? We used Mortgage Choice when buying our family home before the GFC and although I initiated a conversation directly with our current lender (which proved immensely valuable) I knew we’d likely get a better outcome through a broker. There are a few reasons for saying this: a) I didn’t want to cross-collateralise the investment property loan against our family home b) an impartial broker will almost certainly get you a good product with a good rate from a reputable lender.

We set up a line of credit and a separate main loan for this property so there were a lot of moving parts and paperwork. I knew how I wanted to structure the loans from the get go so had to be fairly direct with Mortgage Choice on that front to get what I wanted but we got there in the end.

It was a mortgage broker who also put me on to the idea that certain low-risk professionals with high-income and/or stable careers (such as my wife—a doctor) may have access to special offerings from the banks when it comes home loans. For example, we could borrow up to 90% of the property value before lender’s mortgage insurance kicked would be required (this doesn’t really matter as we used a split loan structure—a line of credit and the main loan—so LMI shouldn’t be payable even if you don’t have a fancy job title… I’ll go into this more in a subsequent post).

Note mortgage brokers get paid a commission from the lender and don’t charge you a fee. I’m told the commissions Mortgage Choice is paid are consistent across lenders so it should be guaranteed you’ll get the right product for you rather than the product that will achieve the highest commission for the broker. Mortgage Choice told me this so how true it is I can’t say.

For many people getting finance approved is hard and awkward. We originally tried to finance our family home through Wizard Home Loans who eventually came back to us, late into the finance period while the block of land was under offer, to say they couldn’t help us (for whatever reasons—I can’t remember why). We then turned to Mortgage Choice who got us sorted with a bank before the finance deadline. As very naive first home buyers we didn’t have a clue this processes is officially painful but it all worked out in the end. This time around, once finance approvals were all in place, the various members of our team called to congratulate us and my response (not uttered) was pretty much “duh”. In other words, I knew we could achieve the financing we needed, I was confident our mortgage broker would get us there, and guess what? It all worked as it should have.

Buyer’s Agent/Project Manager

This one is optional but may help you find a better buy. You can do the legwork yourself if you’re comfortable doing so to decide which suburb you’ll buy in and which property you’ll buy but if you’re a first-timer (as we are) you might get it wrong—or not do as well as you could have. It depends on your risk appetite and individual circumstances. Some of these companies will charge a fee (percentage-based) while others won’t charge you but get paid commissions (which may or may not be fully disclosed to you) from the land developer and builder.

We elected to go with a company called Open Wealth Creation for many reasons, one of which is the quality of the educational materials they provide at no charge (Cameron McLelland’s book My Four-Year-Old The Property Investor, his booklet The Ultimate Mini Property Investors Guide, and the Wealth WODs (Workout of the Day) he and colleague Al Lewison publish most days in video format). I like that Open Wealth aren’t pushing a get rich scheme but give you a reasonable, sound process (which is fully explained in the materials and backed up by common sense). Open Wealth do charge a significant fee (2% plus GST) but for that you get two things: a) an unbiased recommendation where to buy and b) a project management wrapper around the entire process of buying a block of land, constructing a new house on that land, and renting it out. If you’re time-poor they can pretty much do it all for you, if you want, but I’m choosing to be as involved as I can and have bought in predominantly for the research and experience on offer.

Some readers may scoff at the idea of paying for this service but to me, as a first-time investor, it’s worthwhile. The materials have explained the approach, with which I am comfortable, and, unlike other firms, I’m aligned to the process and believe we’ll do better in the short-term and long-term than had we attempted to do this ourselves.

Notably this is one place to be wary of unscrupulous sharks. Open Wealth will have proven themselves to me only when the build is complete and we have a tenant but they seem—so far—like one of the few legitimate companies I’ve come across. There are all sorts of sales people out there trying to unload their stock (rather than the best property) and make a commission. Be very careful to understand the financial motivations of those you deal with and push them hard to ensure what you’re being told actually makes sense. I initiated conversations with several other companies during the selection process which eventually led us to Open Wealth and as soon as I pushed these companies on really basic matters they backed away and went quiet. It was really weird but I guess they want a pushover who’s just going to open their wallet and make it easy.

Brokers or buyers advocates I’m not familiar with but they may help you find something suitable. I have heard brokers tend to push existing real estate that’s closer to the CBD, rather than new builds in the outer ring suburbs. It’s worth understanding the benefits of building new and buying more low-cost properties over fewer expensive properties.

The Bank

Interesting things, banks. They’re big (even the small ones), operate in isolation from each other (apart from overarching legislation), and are an integral part in property investment. Although we went through a mortgage broker, I started my enquiries with our current bank and the holder of the mortgage over our PPOR. I wanted to give them the opportunity to come up with a good offering even though I didn’t want to cross-securitise an investment property and our PPOR and I therefore new it was unlikely we’d give them our business for the main IP loan.

After assessing our circumstances, a free valuation on our family home was ordered. Knowing the bank value of our home was helpful in understanding how much equity we had in the property and therefore our LVR and what we can do over the next year or two in terms of investments.

The mobile lending specialist was a great help to me in understanding what options were available to us through our current bank and was able to answer many of the questions I had as we progressed with the purchase.

If nothing else, it felt like I had insider access to the bank!

Solicitor/Conveyancer

In WA I’d refer to a conveyancer for settlement but because we bought in Queensland we’re dealing with a solicitor. Again, on recommendation from Open Wealth, we went with Blaak & Associates. A solicitor will ensure contracts are in order and ultimately work with the vendor and your lender to ensure settlement goes according to plan. Being from WA I’m not familiar with the settlement process in Queensland. For that matter I’m not particularly familiar with the process in WA! Nor do I wish to be! Conveyancing and settlement is, quite frankly, a chore I’m more than happy to pay someone to do. And the costs are really minimal—a few thousand dollars at most—and are, I believe, tax deductible (or contribute to the cost base of the property at the very least).

A solicitor can also prepare your will, which is something we’re sorting out for the first time as we move ahead. Notably, I’m using the DIY couples will kit from Australia Post… for now, anyway.

Property Manager

I’ll leave this as a placeholder to revisit once our IP is built and we’ve got a property manager on board.

Financial Advisor

For some readers, a financial advisor will be very important. For us, I know we’re forging ahead with property—pretty much exclusively—and I’ve defined our own financial goals and strategy for the short-term, medium-term, and long-term. I could pay a financial advisor to help here but for now I feel it would be wasted money (they do charge a fee). WSC Group do provide financial advice if you’re looking. WSC offer a financial planning service through a company they own called Jigsaw Financial Planning.

Insurance Broker

This listing is at the bottom as it isn’t directly related to property investment. It should probably be higher up in our case. By insurance I’m referring to life insurance, total and permanent disability (TPD), and salary continuance insurance (SCI) or income protection insurance. Although they overlap to some extent they’re all different and can be bought differently. If you’re employed and receive superannuation, you’ll likely find your super company offers basic life and SCI insurance. If you still hold super but aren’t working (like me) then double-check; in my case, I’m not insured.

Admittedly, insurance bores me to tears. More importantly, we’ve considered it too expensive to worry about to date. But with mounting debts and children—and being a single-income family—it’s something we need to consider. Once again, WSC is helping us here and we’re in the early stages of getting a solution in place that will keep us financially safe if something bad happens. I have found the premiums can be adjusted in relation to the amount of cover and, more interestingly, we can pay for some of those premiums using a partial rollover from our existing super funds. I’m not clear how this works but apparently it was introduced with recent (June 2014) legislative changes.

Odds and Ends

Other roles you may need to call on include:

• A justice of the peace to witness mortgage documents (thank you Queensland!)
• Your employer
• Your superannuation fund
• Your credit card companies
• Your car and personal loan financier
• Etc, etc…

I don’t want to suggest you need to have all of these team members in place from day one. We built this team gradually when the need arose and I hope we can reuse team members again in the future without making any changes to the line up. You may need fewer people or have the option to rely on one or two key players to facilitate multiple functions. The communication lines can get a bit complicated (and that’s one area where I’ve already seen tremendous value in Open Wealth as the central hub around which the other functions operate).

I’ll update this list when and as needed.

I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. I'm learning too and expect to make many, many mistakes along the way.

Enjoy,

Michael