looks interesting, but I wonder what happened to their million dollar share portfolios in the last 6 months! especially since I would imagine they were on margin. The rental figures don't stack up for me either as they haven't allowed for paying the loan on the investment property, unless they are capitalising that interest?? It looks like a highly geared strategy to me so I guess it would depend on your risk tolerance.
I put my details in, I'm curious to see more info. Did you?
Last edited by joanmc; 15-05-2009 at 02:19 PM.
You're correct they do capitalise the interest - which I guess is the part thats worrying me. I'd like to see how this works in practice ... surely there comes a point in time whereby if you're not repaying your home loan at the rate at which the plan is calculated, then the debt that is growing in terms of the investment portfolio becomes greater than the debt you originally owed on your main residence?
I'm not sold on the share idea myself and wonder how integral holding the shares is to making it work. Shares seem too much like gambling - as you've pointed out.
Can you pick any holes in any such capitalisation strategy?
I wouldn't trust the ATO with regard to allowing interest on interest! I understand that it is currently allowed (noy sure though) but it wasn't allowed earlier on. So in the current climate I would think that might be something they would maybe tighten up on?
I don't have a problem with shares as I am a trader for a living now, and I can see that writing options on your shares can be a way of increasing your returns but from what I read they are using borrowed funds and the getting margin loans....that is pretty high leverage if the market goes down again (like yesterday) and they could be getting margin calls with no funds other than more borrowings to meet them.
I can see how the strategy can ramp up your road to wealth but I can also see how it could ramp up the road to bankruptcy
Hi, our friends have been with the above for one and half years, and now have an investment property and once again advised us to see them. Just wanting to know has anyone received any further info on them. Thanks.
I have not heard of Canterbury before (I operate in Melbourne) but based on their website (fancy site but lacking any detail of who they are or directors) the finance strategy is used by many companies (including mine). I did not see anything on the site now relating to shares or margin loans (maybe they dropped that part after the Storm Financial debacle).
In essence it is a debt recycling scheme, setting up a LOC on a property, generally the PPOR, using part of that LOC to fund an IP and borrow 80 or 90% from another lender for the majority of the funds using an IO loan. You direct the rental income into your PPOR loan (or offset) to reduce your non deductible debt and you pay the IP expenses including the interest on the IO loan from your LOC. Essentially this LOC increases quickly and once you run into the limit, you redirect the rent back into the IO loan to service that debt.
It worked very well for a number of years when investors could easily use low doc loans (self declare income) to obtain further finance for the next IP or to refinance their PPOR or one of their IP's. The issue for many now is to be able to borrow again but on a full doc basis.
It now takes a lot more skill and planning to set appropriate lending facilities and limits and be able to structure loan facilities. Lenders are very reluctant to set up large LOC facilities without a whole lot of detail and documentation.
If you cannot refinance or obtain new lending and you operate too tightly, you may need to service some very large loans out of income.
I would be interested to hear anyone using Canterbury and recent experiences.
Hi Greg, I have had a meeting with Canterbury Property Services and listened to what they have to say. I feel it is quite a good process they use to build wealth.
Essentially the loan on the IP is IO and capitalised. The payments are deferred for a 2 year period. Any revenue generated from the IP is directed back into the PPOR as you say reducing your non deductable debt.
They do recommend share investment after a 12 month period and deal solely with low risk, blue chip shares. There are a number of other income generating suggestions they go into as well and the choice is solely up to the investor.
I have to stress they have not asked for any money, and have stated they will never ask for any money for their services, all their profits are generated from the recommendations to the people they deal with, ie accountants, solicitors banks etc. They are very select on properties they deal with and the people they have on their books and give certain guarantees to back up their claims and promises. They claim to work within the ATO guidelines and ensure maximum benefits to build wealth and assist you to become financially indpendant.
I believe the program to be a genuine legal tool to assist me to get to where I wish to be, not a get rich quick scheme. I have researched the founder of the company and the affiliated companies that provide services to them and can not find any bad publicity or evidence of scam artists and feel at least a little confident in moving forward with my association with this company.
Of course, I am not going to blindly leave everything to them and will do all the checks I can every step of the way and if I get any bad feeling along the way I will act on my hunches.
Finally, in saying this, as with all investments, there is an element of risk that things can go bad but that risk is prevelent with all investments no matter who you go with for advice and guidance whether it be shares, buying a business, property or even term investments and ultimately it comes down to the amount of risk you are willing to accept.
I'm a bit concerned that you family have been with Canterbury for a year and a half and have only now gotten a property. I hope I do not have to wait that long.
If you think its right for you and are prepared for the risks, wealth is about investing and using other peoples money.
I would be very careful about margin loans if any of the funds were secured against my PPOR, Storm Financial comes to mind. In good times, many people made a lot of money yet within a couple of months and margin calls, much was lost and more at risk.
From what you say of how they earn their money is a slight concern, if they are making it from referrers, the big money comes from developers selling new properties and then the mortgage mangers/brokers/lenders via commission. It has to have an influence and whether it still makes sense is a different issue.
Good luck with it and I will be interested in an update to see how it goes.
All is good, we settle on our first property on June 1st.
Although the process has taken a little longer to get in place than I thought it would, the whole array of people I have dealt with have been very helpful and knowledgable and I have not been forced or even cajoled into anything. Every thing has been done with consultation with independant lawyers and accountants viewing everything and have had no bad reports.
I thoroughly recommend this to anyone wishing to invest in property and then in reducing the total debt to set themselves up for the future.