I only have enough deposit for 1 house, what do I do after I complete my first purchase in order to keep buying more positive cash flow properties? How will the bank loan you money for the others? Do you need deposits for all of them? Do I take out 30 yr loans if I’m intending to reno and resell after a few months?
Hi Nathan
I assume that the first property you are looking to purchase is an IP rather than a PPOR and if you intend to renovate and onsell you are away of the costs in doing so and the relevant taxes payable.
I also assume that you have established the entity in which you intend to purchase these properties i.e Pty Ltd Company / Trust.
If you intend to sell within a few months then you maybe better off to consider a P & I loan rather than an IO loan as the LMI will be cheaper and if you are borrowing a high LVR it will make a few $$$ difference.
In saying this you need to get your broker to check out the DEF or early repayment costs charged by many institutions for paying out the loan which includes variable rate loan products.
If you intend to only do 1 property at a time then try and avoid LMI by putting down a higher deposit as whilst it is a cost of borrowing if you can avoid paying it then all well and good.
For multiple properties with a limited deposit you will need to try and obtain a high LVR 95% + on all of the properties and see whether the LMI can be capitilised to reduce your upfront costs.
Add value to the properties means that you can get them revalued and increase your borrowing in order to provide further deposits for the next couple of deals.
Start slowly and your portfolio will grow. Patience is a virtue as they say and there is no reason why you cannot end up with a dozen or so unencumbered properties in 5-7 years time structured properly.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
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Yes, you will need deposits if you wish to keep buying. You will either have to save it and/or wait for the existing home(s) to increase in value.
The banks will lend you money for more if you can demonstrate serviceability. ie can prove you can service the loan using you income and rents.
I would suggest you take a 30 year loan even if going to sell as you may change you mind and keep it.
Terryw
Discover Home Loans
Parramatta
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You have been given some good advice by the others I will add though, if you are new at this it may pay you to do some research into what will add value to the property. This may vary in different locations so it may be beneficial to discuss with the local real estate agent.
The market has slowed somewhat, so it would not be as easy to do as say a couple of years ago but with out some indepth research who knows what you can pull off. I agree with Terry with the 30 year loan as repayements would be less as well less burdensome
Not sure if you have considered buying your first home and collecting the first home owners grant as well as saving on stamp duty. However you can still do this down the track after buying an investment property if you qualify
Wayne Skewes
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