Rick Otton and his $1 housing scheme We Buy Houses taken to court by ACCC

Posted by Henry | BUYING PROPERTY,HOME LOANS,HOME OWNERSHIP | Monday 16 March 2015 8:59 am

Has Rick Otton got a winner for home buyers & sellers here or is the ACCC right in their stand against him??

The consumer watchdog has launched a legal challenge to shut down a $1 home scheme that allegedly targets low-income customers.

The consumer watchdog has launched a legal challenge to shut down a $1 home scheme that allegedly targets low-income customers. Photo: webuyhouses.com.au

The consumer watchdog has launched a legal challenge to shut down a real estate scheme that allegedly targets vulnerable customers by outlining how they can buy a home for $1.

Property spruiking company We Buy Houses and its boss Rick Otton, a self-declared property “mentor and investor”, have been investigated by the Australian Competition and Consumer Commission for seminars and programs that preach wealth creation through housing investment.

The ACCC today announced it will confront We Buy Houses and Otton, the director, in Sydney’s Federal Court. A preliminary hearing is penciled in for early next month.

Mr Otton, a Sydney-based investment promoter, last year agreed to stop spruiking his rent-to-buy scheme in Western Australia for two years, but is operating in other states and territories.

The regulator is seeking to fine the company, force it to run corrective advertising and disqualify Otton from being the director of a company.

The ACCC alleges We Buy Houses breached consumer law with statements made in its advertising, on websites, and at customer seminars and so-called “boot camps”.

House hunters and wannabe investors paying to attend the programs were coached in strategies that pledged, according to the ACCC’s claim, to help them to buy a house for $1.

Other alleged teachings refered to in documents lodged with the Federal Court include buying real estate using little or none of their own money, and building property portfolios without a bank loan or investing their own cash.

Attending a boot camp costs from $2,997, and up to about $17,000 to be part of the mentoring program, according to the ACCC.

ACCC chairman Rod Sims said the watchdog had concerns about the financial position of people whom the adverting targets.

“The ACCC is concerned that the strategies promoted by We Buy Houses and Mr Otton target vulnerable consumers who don’t qualify for bank loans or who are having difficulties meeting their mortgage repayments,” Mr Sims said.

However, Mr Otton said he will vigorously fight the court action.

He said the title of his book, We Buy Houses For A Dollar, had been incorrectly interpreted by the ACCC.

“The ACCC is taking a literal interpretation of the title, it’s like saying the book Fifty Shades of Grey is misleading because it’s not about paint colours, or that David Niven’s memoirs, The Moon’s A Balloon, isn’t about the moon,” Mr Otton said in a statement.

“Or that a sign for a weekend garage sale is misleading because the garage is not actually for sale. Where does it stop?”

Mr Otton said his strategies are consistent with Federal Government advice to home owners.

“It seems that the ACCC thinks the public are fools, that they will take this title literally and think they only need a dollar to buy a house,” he said.

“It’s a sad day when the ACCC thinks the Australian public is that foolish that they don’t understand that the dollar is just the start of the process.

“My book gives people alternate ways of owing their own home, by changing how they can creatively buy and sell property.”

Mr Otton’s personal website says he is on a mission “to transform the way people buy and sell property to empower them with the knowledge that there is another way” and claims he is the “pioneer of creative property investing”.

In a statement, the ACCC said it will allege the scheme doesn’t allow house buyers to secure a property for $1, but rather, turns them a “middleman to facilitate property transactions between third-party sellers and third-party buyers”.

NSW Fair Trading and Western Australia’s Consumer Protection body have helped with the case, which begins with a directions hearing on April 1.

ooo

Henry Sapiecha

Illegal Parking where you live & you may be thrown out of your home

Posted by Henry | NOTICES | Wednesday 11 March 2015 4:00 am

Are your neighbours selfish parkers?

You would think, of all the  issues that plague strata dwellers,  parking would be the easiest to resolve.

After all, a spot is allocated to you (or not) and you are allowed to park in it (or not). If only …

“We have new tenants in our complex who have two or three cars parked in visitors parking and a fourth  outside their garage blocking another tenant from getting in and out of their parking area.

“I placed  the following notice on two cars parked illegally for over a week: This Car is Parked in a VISITORS PARKING SPACE. Visitor Parking spaces are for the use of VISITORS of all residents We understand that on occasion, residents use these spaces for short periods of time. Please be respectful to all units by abiding by this. Please note – Parking cars on the grass is Not Permitted.

“The notice was removed from one of the cars, which driven out and returned to the same spot an hour later.” – Sarah C, via Flat Chat Forum.

Oh dear, Sarah. I think you blew it when you said it was OK to park in visitors parking ‘on occasion’ and Forum StrataGuru Struggler  agrees.

“The problem here is that the note you left actually gives them and anyone else permission to park there – at least in their eyes,” he writes.  “‘On occasion’ and ‘short periods of time’ are all tolerated in [my] complex but just not in writing.”

Struggler is right.  You need to let them know that by parking in visitors parking or on grass verges they are:

a) in breach of by-laws and that could lead to fines of up to $550 and

b) by breaching by-laws they have also broken their lease which could lead to eviction.

Yes, they may think they are above the law but they could lose their home.

A copy of the same notice from your EC secretary should be delivered to the rental agent  or owner of the property. And let’s hope your original note is already in the trash.

ooo

Henry Sapiecha

A further $310-a-month extra on home loan shock looms

Posted by Henry | HOME LOANS,INTEREST RATES,MORTGAGES | Tuesday 10 March 2015 9:43 am

Borrowing big while mortgage rates are low could secure your dream home. But when interest payments  move off the bottom you might find you're struggling to stay afloat.

Borrowing big while mortgage rates are low could secure your dream home. But when interest payments move off the bottom you might find you’re struggling to stay afloat. Photo: Louise Kennerley

Heard the trendy social term F.O.M.O, the Fear Of Missing Out? It’s a compulsion now so rife among would-be property buyers they’re giving themselves debt hangovers that will last a lifetime. And I feel compelled to warn them (and you) about the $310 monthly repayment risk.

The apparently intoxicating facts are:

  • Property prices that seem to forge ever upwards,
  • Sky-high auction clearance rates, and;
  • Interest rates at record lows.

That’s all pushed the average loan size to an all-time high of $342,100, says the ABS, 10 per cent above that of two years ago and 7 per cent more in the past four months alone. And for many Sydneysiders or Melburnians that will seem like small change.

More are borrowing it, too.

Both Westpac and ANZ report loan applications are up since the February rate cut and for today’s cheapest lender, loans.com.au, they’ve doubled. Anecdotally, the increased demand has fuelled lender reluctance to discount

Before you join the throng, though, please realise these are abnormally low, once-in-a-lifetime interest rates. And the usual mortgage lasts for 25 years of rate cuts and – you can bet – rises.

Remember the credit crack-up of 2008 and how everything was so dire rates were “never” going up again? Barely more than a year later they rose six times in eight months.

In October, November and December 2009 and again in March, April and May 2010, the RBA raised the cash rate, by 0.25 per cent each time. In a short eight months, the official rate rose from a post GFC-low of 3 per cent to 4.5 per cent.

Were that to happen at today’s average $342,100 loan size, borrowers would need to find an extra $310 a month as their repayment leaps from $2000 to $2310 in just over half a year. That’s more than $3700 extra each year. (Based on the average discounted Big Bank rate moving from 5 per cent to 6.5 per cent.) It’s budget-breaking stuff.

If people thought the 2009, post-crisis rises were painful, the average loan at that point was 16 per cent less at $287,300 so the impact was only $272 extra a month, or $3264 a year (the average rate moved from 6 per cent to 7.5 per cent).

But a rebound all the way to pre-GFC levels would represent a doubling of rates. Today’s borrowers would need to find an extra $1110 every month, or more than $13,000 a year. (Average mortgage rates would double from 5 per cent to 10 per cent).

Loan sizes are now so high that on average two hikes requires more than $100 extra a month, $1200 a year. For each $100,000 you borrow, every rate rise means $15 more out of your pocket. If (or probably when over a 25-year period) rates go back up, could you handle the repayment shock?

Find your safe borrowing ceiling (regardless of what a lender tells you it is) with these two simple steps.

  • 1. Multiply your deposit by five This is what you can afford to pay for a property if you borrow only 80 per cent. For example, if you’ve saved $50,000 you would be looking for property priced at or below $250,000. Remember an 80 per cent loan cap not only means you avoid extortionate lenders’ mortgage insurance, but you have an equity buffer if property prices fall, a big consideration when affordability is back at all-time lows (Barclays research). Weigh up carefully the next equation if you are tempted to borrow more.
  • 2. Multiply your annual before-tax salary by 0.333, then divide by 12 months This shows the monthly repayment you should be able to afford today. Jump on Money’s borrowing power calculator, plug in 5 per cent and check what size loan this would get you. But with rates at never-to-be-repeated lows, you also need to ensure you could afford repayments should they rise. “Stress test” your repayments for eight hikes or a 7 per cent interest rate (post-crisis, mortgagees copped seven rises in just one year), and more. How would you cope?

“Helpful” people will tell you property doesn’t ever go down so it’s OK to borrow a lot – it does and it’s not. Especially at housing highs and interest-rate lows. Don’t be seduced by F.O.M.O’s crazier cousin Y.O.L.O. – You Only Live Once.

The urban dictionary defines this as “The dumbass’s excuse for something stupid that they did.”

You can’t afford this to be you.

NB for all figures I have assumed an average mortgage rate 2.75 per cent above the official rate.

Nicole Pedersen-McKinnon

ooo

Henry Sapiecha