Hi Guys.. I’ve been reading stuff regarding property investing since late last year an came across this site which I think is really interesting and helpful.
I bought my first property in 2005 and currently residing there. I am very keen on buying an IP this year but I guess the fear of making the wrong decision is there ie buying in the wrong place or not having tenants. My current situation also stops me from buying an investment. My husband and I have 20k in the bank plus the equity in our house if any. Bought it for 315k and still owes 295k. We did a bit of renovation in the house before we moved in. We don’t have any other debt at the moment and currently paying $210 over our minimum repayment. My husband and I earn 100k in total. I have been in my current job for 4 years but my husband is working as a casual in the past 6 mos. as he was living overseas before. Do you think it is best for us to buy IP now OR should we just save up more money for the deposit? should we pay the minimum repayment for our mortgate thus giving us extra $210 monthly in savings? Please advise. I am thinking of buying property now that will provide cash flow or at least service the loan? another plan is to buy with my brother which will probably make my position better.. Am I in the right track.. please help need your advice.
Thank you.
You are asking yourself the right questions. But there is no right or wrong answer. It certainly sounds to me that you do not have loads of capital. This makes it trickier, but not impossible.
I would start by contacting a good MB (Mortgage Broker) to check out what your best strategy is to maximise your equity and know exactly where you stand financially.
Go to several and see what they say and how you feel with them.
Your income would certainly allow you to service a lot higher debt. The problem is more the LVR (Loan Value Ratio). But this can probably be overcome by using MI (Mortgage Insurance).
Once you know how much money you have available, you can start to narrow down your target market. Try to find a strategy that works for you. It is very hard in the current market to find cf+ (cashflow positive) properties.
Steve’s mantra is: Problem + Solution = Profit. Lots of people are either doing renos or developments. Do you research and decide what you feel comfortable with.
Another theory of Steve’s is: Management find Money. With this he means if you have a really good project, the finance will come.Good Luck
Hi,
We were in a similar position; buying our PPOR in Nov 04 though for slightly less and a slighly smaller loan, we have similar savings, though in shares, and a similar joint salary. We are now also looking for our first IP.
The best advice I can give that has made all the difference for us, is pay as much as you can on your homeloan and, depending on your loan, either put your savings into shares or onto the loan, whichever you feel most comfortable with. We have been paying twice our minimum repayments for the last year, cut back our spending on consumer rubish (though we still ensure we can enjoy ourselves), spent some money on our home that we felt would give the best ROI to the value of our house, and in that time have built up enough equity to get a loan for an IP at around the same price as our home cost when we bought it. We plan to buy the IP in the next couple of months, with a view to buying another in 12 months depending on the market.
I must admit before i started to repay additonal amounts into my home loan account I would liaise with a mortgage broker as it sounds like you have a traditional P & I style loan.
Personally I would not necessarily advocate these type of account for every client and think there are other considerations you need to make.
In essence you should try and maximise your borrowing for an investment property and purchase in an appropriate structure i.e Trust.
Remember in additional to the traditional rent you will receive from an IP there is also Depreciation and Building Write Off to be claimed.
A little time spent ensring your structure is right will pay dividends down the track.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks guys for the replies they serve as eye opener to me and I’m sure for others who are new to investing too.
With regard to qlds007’s reply :
At the moment our repayment on our homeloam covers Interest and Principal.. are you saying that it is better to pay interest only? im confused as i am a new to property investing. I am trying to gather as much info as i can at the moment. my plan to to pay homeloan quicker and at the same time save for deposit for IP.
Hi again
Yes i am an advocate of interest only loan linked to a 100% offset account even on your PPOR.
Circumstances change as you move through life and you may find down the track that you wish to move to a new PPOR although would still rather retain your current property as an IP. If the principal has been repaid you are unable to refinance and claim the interest expense as a deduction.
The alternative is to consider selling the property to a Trust which triggers a stamp duty issue and can be costly.
Utilsing an interest only loan gives you flexibility for the future as well making the same interest saving as the interest oly charged on the net difference (Total loan – amount in your offset account).
It is also cleaner and means that if you do decide to purchase an IP or indeed rent the property out in the future and buy another PPOR the deductible interest is easily identiable.
Unfortunately in saying all of this many lenders do not allow you to structure your loan in such a manner and even more will not be too accomadating in lending to a newly formed HDT.
Thankfully thats where a good MB comes into play.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
