Background

As the business owner of XYZ Brokers you have received a referral from a local solicitor to talk to two brothers, Tom and Steve Broad who wish to jointly purchase two apartments in the same building. Theywant to purchase them as rental properties. The building has 12apartments. The units have 80% permanent tenants in place and the remaining 20% are used for holiday rentals. The location is in a highly sought-after area and all holiday periods are fully booked.

The brothers have invested together before and have experience in buying and selling property. They have sold all their other investment properties and the apartments will be their only investment until they can identify another opportunity. They have never had any formal agreement drawn up between them in the past. The cash at bank is mostly from the sales of other investments.

They would like you to put together two loan structure options:

? a joint loan with an 80% LVR with the balance of contribution to come from their savings

? a joint loan using the equity in their existing homes and borrowing 100% of purchase price plus costs.

Other loan requirements

? 30 year term

? premium option home loan features

? variable interest rate (for this case use 4.5% p.a.)

? proposed settlement date ? 6 weeks from exchange of contracts

? ability to make additional payments from time to time without penalty

? redraw facility

? internet banking

question: - what is Your proposal for structuring the two types of loan facilities - amount, term, repayments and the security that will be required for each type of loan structure.

The property Address: Unit 1, 92 Seaside Lane, Coastville, State> Purchase price: $350,000 $385,000 Description: 2 bedroom strata title unit on the ground 2 bedroom strata title unit on the ground floor floor Body corporate fee $2,500 per annum $2,500 per annum Proposed income Permanent rental at $450 per week Holiday rental at $45,000 per annum Agent details: Steven Allstone Steven Allstone Phone: 8282 1113 8282 1113 Mobile: 0412 880 088 0412 880 088Client Tom Broad Steve Broad Current address: Unit 12, 22 Wentworth Lane, Highville, and has lived there for eight years 23 Dury Lane, Pennant Tops and has lived there with Marie for six years. Property owned in joint names. Value $650,000 $450,000 Home phone: 9001 2121 9002 1212 Status Tom is single, no dependants Steve is married to Marie with no children Employment PAYG and has been with the same employer Self-employed tradesman operating as a sole for 10 years trader for 12 years Income $85,000 per annum $65,000 per annum for Steve $30,000 per annum for Marie Cash at bank $250,000 $150,000 Superannuation $150,000 $150,000 (Steve), $20,000 (Marie) Contents $100,000 $130,000 Motor vehicle $60,000 $30,000 (Steve), $15,000 (Marie) credit cards payment Liabilities $300,000 @ 7.2 % P E I, term 25 years $100,000 @ 7.2 % P E I, term 25 years home loan Liabilities $5,000 limit, cleared monthly, 3% min $15,000 limit, $5,000 debt, 3% min payment When calculating the fees and charges use those applicable to your state. If a servicing calculator you are using requires a postcode, select one that would represent a reasonable holiday location in your city or state. Payments on all past and current loans have been met on time and any prior loans repaid in terms of contracts. The minimum monthly commitment on each of the credit cards should be calculated at 3% of the credit limit