Ever been told that you can fire proof your home from someone trying to sell you property and all the other associated products. These products will rang from advice on were to purchase, agents commission, advertising, home insurance, life insurance, mortgage insurance, the actual mortgage, how to structure the purchase, valuations, depreciation reports, body corporate, property management, property maintenance, gardening, conveyancing, tax returns, wills and what else they can think of to make money out of you.
The latest sausage I have seen, is sizzled as Fire Proofing your Home. This is when the loan you take out to purchase the investment property does not require your house to be used as security, it is also described as a low doc loan. The promoter will make more money out of this type of loan as the interest rate and establishment fees on these loans are higher than normal loans. This sounds like good advice as you are prepared to pay more money for the protection so how can it be a sizzle. On the surface it is good advice however where the sausage starts to loose its appeal is in the detail. You see the lender, as they are not in the business of losing money, will more than likely have you sign a personal guarantee for the loan. A personal guarantee will mean that if the proceeds from the sale of the investment property does not repay all the loan, anything else you own will be used to pay it. So basically you will have agreed to pay a higher interest rate and higher establishment fees for no real protection.
When you also factor in all the taxes that the state and local governments charge it makes you wonder how an investor makes any money at all. We wont if the never ending property boom stops, e.g japan.
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