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The sub prime market in America caused all sorts of problems for the lending marker world wide, raising the cost of lending for lenders and of course increasing interest rates for the average borrower.
But the low doc market in Australia did not cause the same issues locally as the sub prime market did in the US. Why?
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In short the Australian Reserve Bank knew about the American sub prime market and long prior to banks being able to offer low doc loans was able to put a watch on the market and keep it under control.
“The term ‘Low Doc’ came about because borrowers need fewer documents to apply for a loan. Rather than provide payslips or tax returns, a borrower can simply state what their income is, a process called “self-verification”. Low-doc loans are primarily for self-employed people with limited records of their income.”
One of the controls over the low doc market has been the Australian Taxation Office. Unlike the IRS in America, the ATO has been watching the low doc market for people who understate the income on tax records for tax purposes and then ’self determine’ their income to be higher for the lender. With this stand over tactic the low doc market has not had the same free reign.
Back around 2005-7 when the low doc market was booming the Reserve Bank was more concerned about borrowers who used low-doc loans to overstate their income and get their hands on more money.
“In its biannual Financial Stability Review, early 2005, the Reserve put low-doc lending on its watch list, citing it then as a potential threat to the banking system.” This action perhaps protected many Australian property investors and home owners from the credit crunch that took hold from late 2008.
The rural / regional banks in Australia, perhaps desperate to increase their market share, were the major protagonists of low doc lending. Banks such as the Adelaide Bank was at one stage lending over 30% on low doc with Suncorp around 10% with the majors staying somewhat in single digits.
Today, in Australia, to be able to apply for a low doc loan you must be able to secure 20% of the equity yourself. Banks will no longer lend above this amount on a low doc loan giving the borrower and the lender a healthy buffer against loss. If you look on the Portfolios Property site you will see in each of our property deals we supply both low doc and full doc scenarios with lenders requiring 20% or more equity for low doc.
The lenders also manage the risk by requiring mortgagees to take out lenders insurance. Mortgage insurance protects the lender from default and can cost over $10,000 on an average loan.
The financial difficulty and bankruptcy clauses in the US has allowed them to become a nation of entrpreneurs, but has also made it too easy to default. The ‘get out’ clauses in Australia are much tougher than in the US. While lenders here went on a spending spree in similar proportions to America, the regulatory constraints of getting out of your debt in Australia is much tougher than overseas. In America lenders in many instances were simply walking away from the properties leaving the keys in the door and sometimes within months were back in another mortgage again.
Having a glut of properties worth nothing, with hge mortgages over them, and no one to buy them stung the American, and world financial system hard. This situation hasnt been and is unlikely to be repeated in Australia with tighter controls.
We recommend you review your loan types with Portfolios – low doc loans are still available and in the right conditions can be very profitable.
Contact Portfolios for more information.

The sub prime market in America caused all sorts of problems for the lending marker world wide, raising the cost of lending for lenders and of course increasing interest rates for the average borrower. We examined this in our last article on the sub prime market.

But the low doc market in Australia did not cause the same issues locally as the sub prime market did in the US.

Why?

Headline> Are You Paying Too Much Tax?
Welcome to the end of the 09/10 Financial Year.
Paying tax is something we all need to do but none of us like to do.
Next tax time you could be adopting legitimate tax minimisation strategies reducing your tax burden whilst building a strong investment property portfolio.
Find out how…
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Before reading this article you should always seek proper, independent financial advice before making any investment decision.
With tax time looming we will all be doing our tax returns and probably realising one thing – we are paying too much tax.
Tax is not a bad thing – someone has to pay for our roads, schools and other infrastructure, but there are legitimate ways to reduce your tax by using the money for something more worthwhile like building an investment property portfolio.
We get questions all the time – how can you own a property for under $30 per week? Why so little?
Well one strategy is Negative Gearing.
<sub head> What Is Negative Gearing?
Negative gearing strategy in Australia is motivated by our tax regime, which allows deduction of ongoing losses against taxed income. This is further offset by taxing capital gains at a lower rate.
This might sound complicated but in reality it isnt.
<Sub Head> How It Works!
You purchase a property and incur costs on that property – these costs include third party expenses, loan interest and set up costs.
If the costs on the property are greater than the (rental) income generated you will technically be incurring a loss on that investment.
But the story continues…
<sub head> You Earn An Income? This Is How It works
In Australia the losses made on property are able to be weighted against your taxable income.
You will need to have a clear picture of your costs versus income to know your losses – costs include depreciation, setup costs, mortgage costs and interest, ongoing maintenance and property costs such as rates. Just like your personal income – you can claim anything that contributes to the generation of income in your property.
All Portfolios properties come to you with a clear understanding of the costs involved so you make an educated decision on the potential for negative gearing of the property before purchasing.
Your capacity to cover the loss is an important factor in determining the right deal.
<sub head> So If It Is  A Loss Why Do It?
There are a number of reasons why people consider negative gearing as an option for their property investment strategy from straight tax minimisaton through to the great investment returns to be made on the property.
Many of the Portfolios properties are expected to return in excess of 250% return on investment giving you some of the best returns in any market.
Property is a great investment, but like any investment there is risk and you should seek proper independent financial advice.
Talk to Portfolios and see how we can help you make those steps to a future in property investment.

Welcome to the end of the 09/10 Financial Year.

Paying tax is something we all need to do but none of us like to do.

Next tax time you could be adopting legitimate tax minimisation strategies reducing your tax burden whilst building a strong investment property portfolio.

Find out how…

Renovating an investment property for income gains, if done well, is one of the single most satisfying and financially rewarding things you could achieve in property investment.

In this second article we give you further insight into making property renovation a great opportunity for you.

<Headline> Remember Investment Property Being This Cheap?
<Sub Head> You can have it all from $7 per week in Kingaroy
Kingaroy is still offering a great entry into the property investment market with the potential for fantastic returns both in rental and capital gains.
Find out how to purchase an investment property for under $280,000, costing you from $7 per week depending on your financial situation.
Kingaroy is a busy, and popular little town located in the northern Darling Downs positioned as a regional centre with a strong and diverse economy.
The town is located approximately two hours North West of Brisbane and just 90 minutes from the burgeoning Sunshine Coast.
Over the past ten years the region has had an average capital growth in excess of 12%  with forecast growth of 8% being predicted over the next ten. Like all areas of the Darling Downs there is a predicted strong growth over the coming years as new industry moves into the region including coal mining, wind-farming and a 400 MW power station, alone in the immediate proximity.
With rentals fetching $260 per week this property might cost you as little as $7 per week, depending on your tax situation.
Portfolios is offering turn key investment properties in this region including 3 bedrooms, 2 bathrooms, double lock up garage and air conditioning.
You can purchase a property in Kingaroy through Portfolios for as little as $260,000  for a brand new 3 bedroom home on a large block.
For more information have a look at the properties at www.portfoliosproperty.com.au or follow the link directly to the property.

You can have it all from $7 per week in Kingaroy

July Property Of The Month, Kingaroy, is still offering a great entry into the property investment market with the potential for fantastic returns both in rental and capital gains.

Renovating For Profit
You’ve watched the lifestyle shows, dreamed of buying the do-upable dump and making a good return out of it.
All over the world people take on projects to renovate and make money from property. It is contagious, both challenging and rewarding.
But what happened to making the dream a reality?
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Portfolios is proud to be associated with Cherie Barber and Stephen Tolle and the Renovating For Profit team. It is a unique community of people that buy houses, do them up and sell them – for a living. The amazing thing about this community is it is made up of ordinary Australians like you and me. There are some who wouldn’t dare put a lick of paint on a wall or pretend to be the carpet layer, tiler, sparky and plumber all in one.
In fact most of these people are simply great project managers, I will come back to that later.
Renovating property is a rewarding experience that, given the right tools, structure, strategy and financial platform, will give you a very fulfilling career or some extra income.
I personally complete 2 -3 projects per year, look after the Portfolios group businesses and along with meeting our wonderful clients that is my plan. Business will give you a lifestyle, your deals will give you your financial wealth.
(sub headline) So how can I help?
When looking into renovation project there are plenty of aspects to consider.
The main 3 are: Structure, Strategy and Finance, other fine print considerations for you could be:
1. What is your exit strategy?
Are you going to renovate and hold or renovate and sell?
Always be prepared when you have to hang onto the property that you have the capacity to hold via income or equity.
2. What is your costs and profit margin?
Understand the kind of gains you can make and manage your improvements accordingly. Knowing your numbers for buy, renovation and end sales price are critical to success.
4. What improvements/ works do you need to make?
Are you just making cosmetic changes or major structrual or even extending the property?
Firstly make sure you can make the changes you want to – check with council and look at similar properties.
Your due diligence is your chosen area will make sure you know what is desired and the end sale price for delivering that to the market.
As you make more an more deals this job will get easier because you will be able to estimate better yourself. But in the mean time surround yourself with professionals. Dont be afraid you will be helping their businesses too.
5. What is your contingency?
I see too many developers, renovators and property investors that come in with a conservative estimate on improvement works and do not consider an contingencies.
Lets face it there are many and varied factors to property projects, allow in your plan to cater for these.
6. Become A Project Manager
Project management 101 – manage your project closely – watch your progress, scope and budgets.
Timing is also critical so use a program to manage day to day activities who is where when – what needs to be completed to allow other works to take place on site. And like your contingency build buffers into your program – rain delays, holidays, slack contractors.
7.  With each deal it gets easier
When I started out – like all of us – I made mistakes but in each case I have learnt far more from them,now I have the privilege of helping people avoid the mistakes I made, saving them valuable time and money.
There are aspects of this business that you will always rely on others to solve for you but increasingly you will be able to take on aspects of the deal yourself based on your growing knowledge – you will become more astute and will see potential everywhere.
(sub headline) Financing The Deal
So the deal looks good and you have done your due diligence, what now.
Make the time to work with the Portfolios Team on your plan, whats possible, the project, structure, strategy and then we can work on finance options.
We can even show you strategies how to finance the deal using other people’s money and time.
First things first complete our Portfolio Review and we will work with you through the steps to becoming that Professional Property person.
Make It Happen – you’ll love it.
Paul Pritchett

You’ve watched the lifestyle shows, dreamed of buying the do-upable dump and making a good return out of it.

All over the world people take on projects to renovate and make money from property. It is contagious, both challenging and rewarding.

But what happened to making the dream a reality?