Recent commercial deal in Hobart

Discussion in 'Commercial Property' started by Whiteman, 7th Sep, 2016.

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  1. Jammer

    Jammer New Member

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    Late to the party on this discussion however that was a really helpful example Whiteman, Thanx
    I went close to buying some shops a couple of years ago in Sandy Bay.
    Love Hobart and would be very keen on an older shop with dwelling upstairs in that area.
     
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  2. RickProp

    RickProp Well-Known Member

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    @Whiteman and @Beano seem to both be in favor of x-coll. All brokers immediately shoot this down. Dazz in the old SS days also favored this approach. I understand the benefits of not being x-coll and having options but I do sense there are benefits to going the x-coll route. Of what I have read the benefits seem to be:

    1) Possible ability to grow quicker and make more purchases (Dazz believed this and still said he would have done the same thing again once he was unwinding things)
    2) Banks having more security (2x titles) and therefore may lend on less desirable CIPs which they would not lend on normally

    Basically I have ready pages and pages of the negatives of x-coll from many brokers so I am interested in the pros. If Dazz and @Beano have attained the impressive size CIP portfolios worth tens of $ms and they have used x-coll, surely there must be benefits to using it. @Whitman is putting his PPOR on the line so banks must take a favorable view of this.
     
  3. Beano

    Beano Well-Known Member

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    The advantage of x-coll is ease of borrowing small sums from the bank with no or little documentation ..all done with just a phone call ! (Last yr deal the bank offered finance for $17m before i had even looked at the property...subject to only one valuation...if i had multiple banks i would have had to make multi submissions, multi valuations ...the bank had looked at my portfolio and calculated internally how much they could lend then looked for a deal for me..no NP (negative pledges) required either!)
    Brokers may well be correct on x-coll with large deals but for small deals x-coll save me a lot of cost and bother!
     
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  4. RickProp

    RickProp Well-Known Member

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    Thanks, you have done incredibly well @Beano. I am trying to formulate a plan going forward to acquire PPOR and then several CIPs in the coming years so looking for the best way forward.

    Would you acquire PPOR in cash and then use that as security for CIP in x-coll or simply use separate loans as advised by brokers?

    I also assume if PPOR is mortgaged to release funds, this will then count against one for serviceability. Is this a benefit of x-coll then as well i.e. it improves serviceability calcs for a CIP purchase?
     
  5. Beano

    Beano Well-Known Member

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    Yes acquire PPOR for cash then borrow against it for an investment.
    Easy said than done
    It took till I was 21 before i could completely pay off my PPOR.
     
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  6. Beano

    Beano Well-Known Member

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    The numbers for borrowing are the same whether X-coll or not
    It just the ease of borrowing
    They have all your financial information on tap ..so they are keen to lend to you (financial climate permitting of course)
    When my numbers become big i will update you on x-coll
     
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  7. RickProp

    RickProp Well-Known Member

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    I am sure most of PC would agree your numbers are already pretty big.

    It will be good if @Whiteman or any others can comment on their use of x-coll and why they chose to use it.
     
  8. Beano

    Beano Well-Known Member

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    Great detail you have shared with us
    Great yield of 6.48%
    I would take off the depreciation cost in many of my investment properties would bring my yield down by an average of 0.5%.
    This net yield is gross of course before interest and taxation.
    But with interest only about 4.3% we still get a healthy gross profit before taxation
     
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  9. MorganHB

    MorganHB Well-Known Member

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    In this scenario, it's probably best not to tell your financier this. Any home lender top ups that are ultimately used for commercial use can be deemed a breach of NCCP (By some majors)....But i do agree, does save money can keeps it simple if thats the goal.