Hi
We have zero experience in property investing, but are very keen to invest in positively geared properties. We’re currently renting and have never owned a property in Aus. We live and work in Sydney.
Today I visited an ANZ mortgage specialist to see if I can arrange pre-approval for $1m worth of property in NZ and Aus. Her first reaction was that ANZ Aus will not lend me money for NZ properties. I’ll need to arrange that with a NZ bank, but they would like to see equity in Aus property as security(which we obviously don’t have).
Question 1 is: How can I get a NZ loan? Or should we focus on Aus first to build a track record?
Next she advised that I should first buy my own home for about $500k as the costs (interest + rates) would approx equal our current rental payments. (Therefore we would be no worse off except for the $100k which is now tied up in the deposit.) This has two advantages:
a) The big advantage is that we can get the NSW First Home Owners Grant (FHOG) & zero stamp duty, equalling $27,000 from the NSW govt.
b) The second advantage is that I can throw all the cash into the home loan, which will enable me to get 100+% loans for the extra $500k worth of investment properties. (They will view the deals as a whole and I just need to maintain a loan to value ratio of 80% of the value of all the properties.)The rationale is that interest in the home loan is after tax and the interest in the investment properties is pre-tax. Thus a 48.5% saving on that portion of the interest.We’re now contemplating buying a home, which has development opportunity (renovation, subdivision or sub-leasing potential).
The problem is it has to be in Sydney, and we have to like it if we want to live in it.
So question 2 is: What do you think? Should we sacrifice the $27k FHOG and the opportunity to leverage the home equity to gain a tax benefit; and put all the cash into investment properties?
According to my calculations, for a $206k cash investment the home-buy option will deliver $1m in assets, while the rent option will deliver $910k in assets, but the home-buy option will cost $2,500 pa more, assuming a rental yield of 10%.
Cheers,
hernus & marinda
Hernus,
What she has told you is all true enough but I question the need to spend $500K. You could do the same with a cheaper home and buy the IP’s sooner.
You can buy an IP and not lose everything. Whilst you will lose the SD exemption the FHOG will still be available when you do buy a home.
If you use ANZ then I recommend the Break Free product. But you can get the same deal through a broker at the same cost with the added comfort of knowing he has compared many loans to the ANZ one for you first.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Here’s my impressions:
1. you say on $500k your payemnts (interest and rates) would be the same as you are now paying rent. Sounds good but that will onyl work is you buy positively geared properties (good luck) then you dont have to add your won money to may mortage. Otherwise if you canot do that you will have to rejig your strategy as you will be paying from your own pocket to cover the payments. Do some figures for both scenarios just to ensure that in case rent/tenants fall trhough or you have a lag time, you can still afford payments. Nowadays my feeling is that to get a postively geared property you will have to do some reno’s (hard to find one just ready to get tenants in unless you’ve found a bargain). That costs time and money where you will have to cover ALL costs until its ready to be rented out. can you do that on the amount you are speaking of???
Snowflake
Hi Hernus and Merinda,
There are a couple of Australian lenders who will accept New Zealand property as security, so you do not necessarily need to go to a NZ bank. I would also have a look around (or contact a good broker) before going with ANZ as they are generally do not have the best rates for loans around $500k.
Regards,
Cameron Perry
Finance Consultant
F.R. Perry & Associates
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044The free stamp duty in NSW for under $500K is a lot of money to forego. $18K to be precise. If you are in the highest MTR, its about $37K pre-tax you need to earn. Can you make a quick $18K in this environment in Oz? If so, then the decision has been made for you. Like Simon said, if you never move into your IP, you will always have that benefot of FHOG. Then again, when will the govt pull the plug on that? It won’t be around forever. Advice is buy something in NSW, bite the bullet, move into it for 6 mths to comply, do the renos, then move out if rents still cheaper and continue with IP investment. In my mind, $18K you get from the govt is $36K you don’t have to earn! Plus you get $7K for FHOGs. The rest of Oz is fairly well priced now in terms of property. The markets not screaming out “bargains” everywhere.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
