Hi – I am very new to everything investing. I read and read and read and I think I know where to start, but not sure.
I want to buy my first IP. I have basic financial knowledge. I have many hours reading under my belt.
I have decided to buy/reno/hold with the goal of doing this a few times, to eventually pay off my mortgage on PPoR. I am more interested in capital growth than positive cash flow (i think?). Having said that I dont think I will have much spare cash to service a loan if it is too far negitavely geared.
Joint gross income of $160,000
Mortgage $320,000
PPoR value $500,000 (very conservative)
Access to about $30,000 cash from parent
No savingsSo, do I first go to an accountant to seek advise on my financial situation and guide me to what to do?
Or do I go to a mortgage broker to see what my borrowing capacity is?
Or, somewhere, someone else?
I find these forums very valuable, but very subjective. I am confused and would very much appreciate some hand holding, or a push in the right direction.
I have been one of those 'gonna' invest soon people and see that the market is ripe for intesting now, and would like to get going.
I live in Brisbane. I would very much appreciate a mentor. Anyone here able to assist my push along the road?
Please help.
Thanks
Hi Danny
Welcome to the forum.
You're sitting in a pretty good position.
You're on reasonable incomes and you have a bit of equity in your PPOR to get started.
Obviously this is going to sound biased but your first port of call, in my opinion, should be a decent broker who has experience with IP lending.
Someone you can discuss your goals with, look at the longer term and devise a plan from that.
If it were me – I'd be tapping into the equity in the PPOR and using it as a deposit to purchase the first IP (or two) and avoid using the folks cash. The reason being twofold – firstly, using the equity means the deposit for your IP will be deductible. Secondly, it keeps family out of the picture (which I believe is important when building a portfolio).
Again, welcome aboard.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
If your unsure where you stand, its best to start from the basic;
1. Speak to any accountant about how a IP will suit your overall financial/tax return ie what is the expected tax advantage if any ( depending on your tax bracket etc…)
2. Have a chat with family and friends
3. Speak to a broker or banker to work out how much you can afford and what the best loan structure/ lender would be.
4. Do some home work and start shopping
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks Jamie and Michael – I see you both are very active here. I was hoping to attract some solid advise.
A couple more questions please…..
Is it better to use cash as a deposit or save it for reno costs?
Can you include the reno budget in the borrowing of the property?
If I was to borrow 100% what are the risks?
I have read that you should buy a property that requires no more than 10% of purchase price as a reno budget. How true is this?
I am cautious as a first timer, and was thinking of embarking on only cosmetic renovations for my first purchase. Such things as paint, garden make over, carpet, tiling, door knobs, bench tops, basic appliance upgrade (oven,stove, air con). Is this really worth it?
ok – that was more than a couple!
Hi Denny Crane,
“Is it better to use cash as a deposit or save it for reno costs?”
Save it for reno costs, in my opinion. And also, speaking as an experienced property investor, I’d highly recommend that you have a decent additional, cash buffer for contingencies – minimum 3 months mortgage/expenses.
“Can you include the reno budget in the borrowing of the property?” Not exactly – banks will usually only lend max 80% of a property’s unimproved value. If you have additional equity/capacity in your PPoR, you could draw that down.
Going by what you say, if your PPor is valued at roughly $500k, then the max 80% lending against that property is $400k, but you only already have $320k loan, so only an extra $80K available (without Lenders Mortgage Insurance – LMII). Check with a broker how much additional capacity you have based on your salary/financial circumstances.
Yes, basic renos can be worth it, depending…how good are your skills? You got any builder/carpenter friends in the family? Or will you be paying tradies to do everything?
Congratulations on starting the property investing journey!
Cheers
Swampy30
Using cheap materials you can do a cosmetic reno of a 3 bed 1 bath house for no more than $20k. I have completed 2 of these for less that $15k.
Thanks
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
Denny Crane wrote:I have read that you should buy a property that requires no more than 10% of purchase price as a reno budget. How true is this?I am cautious as a first timer, and was thinking of embarking on only cosmetic renovations for my first purchase. Such things as paint, garden make over, carpet, tiling, door knobs, bench tops, basic appliance upgrade (oven,stove, air con). Is this really worth it?
ok – that was more than a couple!
Hi again
I've never heard of this rule – but there are thousands of different rules kicking around by thousands of different property investors….
I'm all about cosmetic renos. They are affordable – you can often carry out most of the work yourself if you choose (I actually like doing that sort of stuff when I have a spare moment) and they add value as well as increase the rental yield.
My wife and I recently carried out some cosmetic renos on a house in Canberra – we spent $7k on internal renos including new carpet, paint, refaced kitchen, window fittings and other bits and pieces.
It's being rendered this w/end and we'll spend the rest of spring tidying up the landscaping.
All in all, we would have spent around $13k on this house once it's done. It was purchased for $415k and should be worth quite a bit more once it's all done.
At that point, we'll get it revalued, tap into some equity and purchase the next.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Look at what similar un-reno'd places sell for in the target suburb, and what reno'd places will sell for. If you're doing a flip, you need to look at stamp duties, selling costs, agent fees and solicitors too. All this will give you an idea of the max you could spend on a place before you make a loss.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Only initial advice I can give you is to read, then read some more, and when you’ve finished, don’t forget to read. Oh, and then, before you’re ready, jump into the market with something close to cf+
Thanks for the great advise. I am a little confused about borrowing deposit from PPOR. How does this work?
Is it – I borrow 80% of IP value + draw on PPOR for 20%? Could I draw on PPOR more to include some reno costs or mortgage repayments whilst it is untennanted? Or is this unwise?
Off to hound the real estate agents and check out open houses this weekend to get a feel for the market in the area. Can't wait!
Another scenario – I have a friend who has just left his wife and is looking at temporary accommodation whilst he sorts out his finances and settles into his own place. If he lives in my IP for very cheap rent in exchange for me accessing property to reno, would the banks need to know that? Could it just be 'cash'?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
