Self-Liquidating Loans - Fact or Fiction?

Written by Dave Laforge


Continued from page 1

A better term for a "self liquidating loan" would be a Roll Over Loan, Roll Program or a Compensating Balance Loan.

What is a Roll Over Loan?

Simply put - a roll over loan is a security-based loan that starts out with a security such as a CD, zero coupon bonds, government savings bonds, debentures, bank notes, etc. as collateral forrepparttar loan and as final payment forrepparttar 112774 loan.

These can be purchased at a fraction of their end value and can be used as collateral for a loan.

Example 1a:

An example would be Government Zero Coupon Bonds. These bonds can be bought at a discount of normally 33% ofrepparttar 112775 face value. A $1,000 face value bond could be bought for around $330. The government guarantees you a return of $1,000 or a $770 profit. Offering this secured financial instrument to a financial institution as a compensating balance for your loan creates a form of a self-liquidating loan. Borrow $1,000 and receive $770.

Example 1b:

Another example would be life insurance or annuity. If you have an annuity that pays a fixed or variable amount it would be possible to instruct this financial instrument to be used as a compensating balance forrepparttar 112776 loan you want to take out. In fact many timesrepparttar 112777 insurance company could be in a position to arrange this form of a self-liquidating loan via an annuity.

Example 2:

You will need to find an investment group that functions in an offshore environment. (An offshore environment provides you with higher interest rates and higher returns on your money along with lower lending rates.) Use this group to leverage your money, thus creating a compensating balance. This creates, in effect, a "self liquidating" situation. In this example you not only receive a "loan" but you will receive a residual income besides!

Final Note.

Remember, if there is no security placed up front, NO lender will even consider providing a loan under these conditions. However, there are places where you can find information on how to create a roll program! You just have to find one that you can trust.



Dave Laforge webmaster@valtechservices.com Webmaster of the Valtech Services Group If you are interested in finding out more on how you can create your own roll program, a good place to get the information you will need is at: http://www.valtechservices.com


The Criteria That Determines Your Property Investment Success

Written by Chris Lang


Continued from page 1

5. Passing Yield & Zoning

If your Passing Yield (ie:repparttar current income for an existing investment) is derived from rentals that are "above market", it means that you're unlikely to receive any increases from your initial market reviews. And if your future reviews are fixed, incremental reviews (or tied to CPI), then you'll only be adding to (and deferring) your problem untilrepparttar 112773 lease expires.

Onrepparttar 112774 other hand, your Passing Yield may be at (or below) market rentals. And this should mean you'll be able to enjoy an improving cashflow; and maybe, even some Super Growth - if you've seen an opportunity which other investors may have overlooked.

6. Zoning relates to your property's present and potential future uses.

Sometimes a property can have a Non-conforming Use Permit which could allow a residential property to be used as an office. While it can be used now for offices, it may only ever be able to be developed for residential purposes.

If (historically) there has been a large number of these types of non-conforming properties in a given locality, some inner-city municipalities have been introducing "mixed use" zoning to legitimise, and actually encourage,repparttar 112775 co-existence of such a rich diversity of uses.

It's something you need to be on top of, as there are specific zoning and density changes occurring on a regular basis. And you can often make windfall gains if you're astute.

7. Title Options & Vendor Motivation

If (with little expense) you are able to subdividerepparttar 112776 Title for a parcel of land, or an entire building, you are then able to significantly enhance your property's value AND, therefore, it's marketability.

You may still choose to sellrepparttar 112777 property as a whole. But any new purchaser is attracted byrepparttar 112778 flexibility of being able to sell off a portion ofrepparttar 112779 property, shouldrepparttar 112780 need arise. And people will pay you a handsome premium for that flexibility - well in excess of your cost of creating it.

Vendor Motivation is important; but ought not be your principal reason for buying a specific property. Having assessed allrepparttar 112781 fundamentals, and satisfied your earlier Criteria, a motivated vendor will invariably provide you with some additional interesting benefits. And these can range from: leaving some money inrepparttar 112782 property at a low rate, on second mortgage; to allowing you to up-value allrepparttar 112783 Plant and Articles, so that you can depreciate them from a much higher base.

With a motivated vendor, your prime focus quickly moves away fromrepparttar 112784 price and starts concentrating on how to structurerepparttar 112785 most attractive contract terms.



Chris Lang is the Managing Director of Gardner and Lang, a leading Melbourne-based Commercial Property firm, Gardner + Lang. Visit www.gal.com.au to find numerous articles on property investment selection criteria, trends and case studies. Chris has also produced a FREE E-book entitled "Negotiating Your Way to Success". For a FREE copy, visit: http://www.gal.com.au/rsl/private/negotiating.html.


    <Back to Page 1
 
ImproveHomeLife.com © 2005
Terms of Use