In the last six months there has been the most extraordinary changes to bank policies. For mortgage brokers who deal with banks every day this has been challenging, but for those doing their own research I imagine that it is near impossible to keep up! This alone, I believe, is why recent surveys show that over 40% of all loans in Australia are written by mortgage brokers.

These changes are so extensive that I can't cover them in this newsletter. So I will be covering these at a special Sydney workshop later this month. See the details below.

This month I was invited by Australian Property Investor Magazine to contribute to their cover story "Safe Strategies for Stress-Free Profits". As many of you know I worked in the mining industry for over fifteen years, with the last ten years specialising in explosives. Like investing in property dealing with explosives requires careful attention and risk minimisation techniques. Over the next few weeks I will share my thoughts on how you can protect yourself in the coming years.

Just for those of you considering purchasing in the near future. Bank delays are longer than ever, please allow at least 10 days for your finance clause and cooling off period - for most lenders this is even a stretch. As a consequence of the strong first home buyers market we have seen many valuations come in low, so remember you want to have the formal bank approval, if possible, before you commit to the purchase.

Finally, it was great to see so many of you at my recent Property Investing and Renovation courses. Thank you for the great feedback. For those of you who missed out, check the website for details on upcoming courses in Sydney in Oct/Nov.

Jane

Special once only Sydney Workshop - Creative Strategies for Maximising Finance for Building your Investment Portfolio Rich Harvey, founder and Managing Director of propertybuyer, Sydney and Australia’s leading buyers agent was recently awarded the 2009 National “Buyers Agent Award for Excellence” by the Real Estate Institute of Australia. Rich has invited me to join him on the 15th September in Sydney for a special evening to discuss changes to bank policies changes and how to maximise your lending in order to expand your property portfolio. This special evening is for newsletter members and their friends only, so be quick to get your tickets at early bird rates. For anyone who thinks that the strategies they employed last year can be used in the future need to attend this special information evening. For more details and Bookings Click here

InvestKit As a Newsletter member you also have access to the InvestKit containing easy to use spreadsheets for researching and locating the right property. If you haven’t yet looked inside the Invest Kit to see what’s on offer, don’t delay because you could be missing out on something that will make a difference to your investment strategy. Copy http://www.investorschoice.com.au/investKit/investKit.html into your internet address bar or click on the active link below. This link is not active for those who are not members of the newsletter. Click here to access the Invest Kit

Low risk investing When considering risk minimisation for property investment I break down the investment into six bite size pieces and make sure I have a strategy that covers each of those steps. In the next few newsletters we will look at each of these. 1. Investment Strategy 2. Exit Strategy 3. Finding the Property 4. Property Ownership 5. Cashflow Management 6. Ongoing Portfolio Management 1. Investment Strategy Ask yourself 'how am I going to buy this property?' Are you: going to buy by yourself; in a Trust; with your spouse, and if so would the investment be in the name of the lower spouse that earns the least, or the one who earns the most?; tenants in common or joint tenancy; or with a family guarantee? These are just some of the options. Each has significant implications and should be worked through with your accountant. For instance be aware if you are buying in a Trust. Some lenders will not consider lending to this type of structure, especially the structure you may need for asset protection, ie the name on the Title being different to the name on the loan. Although some lenders will consider Trust structures they do so as a business loan and you would have to pay higher commercial interest rates. Alternatively for it to be considered a residential loan, you may be limited to a 80% or lower LVR. And that’s just the lending part - it may cost thousands every year to maintain a company structure, and you may be excluded from any land tax threshold and the list goes on. So do your research upfront. Even if you are considering borrowing with a partner/spouse/friend and you have plans to expand your personal property portfolio in the future, you may find you become limited in your borrowings due to having borrowed with someone else. For instance if you buy a property with someone else then you are directly responsible for half the debt, however by the nature of the loan agreement, you will be indirectly responsible as a guarantor for the remaining balance of the debt ie if something happens to the other person you are responsible. The biggest stumbling block I find for my clients is when they then want to borrow by themselves in the future. The new lender would consider you are responsible for the entire debt but only allows you to claim half the rent and hence you may find that one financial structure greatly impedes any future investment as your access to new funds is diminished.

How Banks Assess Risk In recent months I have had many clients find properties with great 'twists'. A 'twist' is when you can see more potential in a property than its current use eg via renovation, options to change the usage or significantly increase the rent. Unfortunately banks don't always see it that way. To understand how they consider securities allows us to understand how high a LVR we can borrow too and why they may shy away. In essence lenders want to be able to easily dispose of the property if you can not keep up with the repayments. So when looking at a property that is a boarding house, a house in a mining town or a student apartment, think of how easy these properties are going to be to on-sell then keep in mind that not only will the lender have issues off loading this property - but so will you - especially if you need a quick exit strategy. Check out my thoughts on the API Magazine Web Special How Banks Assess Risk

Further special offers I have negotiated with Australian Property Investor magazine a great saving of well over 40% off the cover price. An annual subscription is just $79. So if you are interested in taking up this offer please email me for the discount code. askus@investorschoice.com.au As you know I support and promote small businesses and this month I have an excellent offer from one of our newsletter members. Barb Hughes from Barbarella Beauty based in Frenchs Forest has a wonderful Beauty special for those of you in Sydney. Just $20 gets you eyelash and brow shape and tint, great value. Call Barb on 0422 756 939

A final comment

If there is any way the team at Investors Choice Mortgages can assist you, regardless of how big or small your query, please let me know.

Until next time, I wish you prosperous investing and happy house hunting.

Jane


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Disclaimer: You should always speak to a financial planner or accountant about your particular circumstances, the hints mentioned here are for general discussion only and do not relate to your particular circumstances