Calvin and John Young Case Study - Accounting and Finance Assignment Help

Assignment Task :

Role Play Case study — Calvin and John Young

Background

You are a broker at XYZ Brokers and have received a referral from a local solicitor to talk to two brothers, Calvin and John Young who wish to jointly purchase two apartments in the same building. They want to purchase them as rental properties. The building has 12 apartments. The units have 75% permanent tenants in place and the remaining 25% 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.
It is also important to note that these brothers have financed investment properties in the past but their level of financial literacy, in relation to legislative obligations of a lender, is limited.
They would like you to put together two loan structure options:
• a joint investment loan with an 80% LVR with the balance of contribution to come from their savings
• a joint investment loan but also using the equity in their existing homes to permit borrowing 100% of purchase price plus costs.

When delivering the two recommendations, you should cover the following:
1. Who are the parties to the two types of loan structures?
2. 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.
3. What instruction to provide to clients in regard to the most appropriate structure to use?
4. Create a summary of the applicable fees and charges — including those for setup and those of the lender.
5. Identify the potential risks involved in these purchases for each loan structure, including ownership/title issues.
6. Explain what documents you will need to provide to clients to comply with consumer legislation; and how they will be able to assist the clients in making their decision.
7. Identify the client responsibilities and any remaining documentation needed to continue the application process. You can make any reasonable assumptions here.
8. Outline the next steps to get through to settlement, as well as your ongoing services.
9. Ask for questions and obtain written agreement to proceed with selected structure. You should request the volunteer to ‘fake sign’ a piece of paper.

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