All Topics / Finance / Investment property loan, unemployed, large deposit

Viewing 20 posts - 1 through 20 (of 21 total)
  • Profile photo of MatagascarMatagascar
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    @matagascar
    Join Date: 2013
    Post Count: 6

    G'day,

    My name is Mat, I'm new to this forum and just looking for a few answers. To start off I'm looking into purchasing a small investment property (apartment) for $99,990. I've received reports about the area, incomes, employment rates, % of rentals being rented etc. and it all checks out so no issues there. I'm currently unemployed as I've just sold off my small business and have ~$30,000 in capital so I'll need a loan of ~$70,000. The ~$30,000 will be a deposit on the property. The way I'm thinking is that the rental income for this specific property is $160.00 per week and the loan repayments would be $145.00 per week. Does anyone have any experience seeing whether or not this could work? I do plan on getting a reoccuring income very soon. For what it's worth I'm 20 years old. 

    Any help would be appreciated.

    Mat.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
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    You have a few options when it comes to finance. What type of an apartment is it? i.e. is it a studio? serviced apartment? Normal 1 or 2 bedder?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
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    Profile photo of MatagascarMatagascar
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    @matagascar
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    It's a simple 2 bedroom unit, 1 car garage, 1 bathroom. Thanks in advance for your help.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
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    Ok then you shouldn't have any issues (assuming that the unit isn't any an area like broken hill). Usually there are LVR restrictions/limitations with certain securties such as studios, serviced apartments, etc.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of MatagascarMatagascar
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    @matagascar
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    So you don't think not having an income at the time of application would be an issue? 

    Profile photo of Rick staRick sta
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    @rick-sta
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    Have you taken into account purchase costs such as stamp duty, legals etc.?

    Have you taken into account body corp/strata fees, rates etc.?

    Profile photo of xdrewxdrew
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    @xdrew
    Join Date: 2010
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    I would check the bodycorp and rates to make sure your purchase remains viable. Outside from that .. if you can manage the purchase with whatever income you are receiving, most lenders will take into account any allowance paid by the government as possible income.

    I have had a cousin that couldnt borrow at all first time around and was receiving benefits from the government. However she did have an inheritance .. but nil ability to borrow.

    My suggestion at the time was to buy at 100% buying small apartments and get as many as possible. She did this .. borrowing a small amount from family (a borrowing from family whilst still a borrowing is not officially against the title). So she managed to get two apartments at 90k a piece .. returning 150 per unit (7500pa). Nine months later she used the fact she had 100% in the two properties to borrow against them and purchase two more, returning roughly the same amount and borrowing the 180k in total .. lending against ONE of the two flats she had (its all the security they needed).

    Summary .. in a year and a half .. 360k spread across four flats with one debt free should she need it .. and 31k in gross income. Not a bad deal for a two year stint with no existing previous income.

    Disadvantages? They are relatively small flats in a country town. So the growth isnt ever going to be expected to be that great. However .. 90k for a 94sqm 2BR flat with a balcony, breakfast area and carspace is mighty good value. There is definitely an upside there. The council rates is almost TWICE what i'm paying on my investments for similar in Melbourne. I'm paying just under 700pa in rates .. she's paying 1600pa. Significant differences. Body corp works out roughly the same at about 350pq

    Make sure you know your expenses and outcomes when heading into your purchase. And if you find issues with lending with no actual job .. approach vendor financing if necessary. Some people on lower investment levels may find that acceptable.

    Your lending level increases dramatically with a job. Simple as that. You'll go from being able to borrow 90k max with no job and a residual 13k from government benefits .. to around 200k+ with a job more than 30,000. Of course .. that means increased bills to support .. but also .. very much increased gains to appreciate.

    Profile photo of Jamie MooreJamie Moore
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    Post Count: 5,069
    Matagascar wrote:
    So you don't think not having an income at the time of application would be an issue? 

    Hi Mat

    Welcome aboard.

    I can't speak for other brokers but I would have an issue with it.

    We need to assess your situation and ensure that you can service the debt – if you're not generating an income, then it would be irresponsible to place you in debt.

    I know that the property you're looking to purchase will generate rent – but there are other living costs that need to be considered as well. You might also have other liabilities that need to be met.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of MatagascarMatagascar
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    Jamie M wrote:
    Matagascar wrote:
    So you don't think not having an income at the time of application would be an issue? 

    Hi Mat

    Welcome aboard.

    I can't speak for other brokers but I would have an issue with it.

    We need to assess your situation and ensure that you can service the debt – if you're not generating an income, then it would be irresponsible to place you in debt.

    I know that the property you're looking to purchase will generate rent – but there are other living costs that need to be considered as well. You might also have other liabilities that need to be met.

    Cheers

    Jamie

    Hi Jamie,

    Thanks for your reply. My current living expenses and other bills are pretty low and easily covered as I am bringing in a small income however nothing significant enough. I'm guessing the easiest option is to either find a new job or to start increasing my income.

    Profile photo of MatagascarMatagascar
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    @matagascar
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    Rick sta wrote:
    Have you taken into account purchase costs such as stamp duty, legals etc.?

    Have you taken into account body corp/strata fees, rates etc.?

    Yeah mate.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    If the loan services without the use of PAYG income then there are lenders that can accept this. If you cannot show that you can service the loan then there are other options but I don't think they would suit what you are trying to do. 

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
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    Hi Mat

    Your plan makes me very nervous.  Always best to have a bit of an emergency fund in case the place needs a repair, or it is vacant for a while.  I'd wait until you had an income stream such as a job if I were in your position.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Jamie MooreJamie Moore
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    Yep sounds like a good option.

    Even if you're living costs are low – banks will still assign a minimum living cost which they believe is suitable for a single adult (despite your costs possibly being lower).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of xdrewxdrew
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    @xdrew
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    I think the one key ingredient you leave out of the mix is flexibility (as addressed by JacM).

    The  only safety net you could really offer on that is not using the net income from the property for anything in the first couple of years aside from building up a safety bank.

    This classifies the whole deal as high risk. ANY major upsets and you are shunting for cash to supplement the deal.

    The other way to do it is to get a job and start creating your safety margin for the property.

    Either way JacM is spot on. You'll need an income to support a property, one way or the other.

    Profile photo of FreckleFreckle
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    @freckle
    Join Date: 2012
    Post Count: 1,680

    I might have this arse backwards but back of the napkin suggests $5-8K net or around 2-2.5% return on capital invested before tax.

    Where's the risk premium? Assuming $150k initial investment (inheritance) would generate on term deposit (4.7%) around $7k for no effort or risk.

    It looks like she hasn't yet recovered costs (incl potential exit costs) and won't for another few years as well.

    Given the current state of economies and the inherent risk that brings to a CG position there appears little if anything to warrant leveraging up to the neck for such a small return. Worse if adjusted for inflation.

    Profile photo of MatagascarMatagascar
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    @matagascar
    Join Date: 2013
    Post Count: 6

    Thanks guys for all of the information! The consensus seems to be that I should really look at getting an income for both a safety net and to help with the loan – I'll definitely be doing this. Something that I forgot to ask is the possibility of doing what I originally asked about though with a parent cosigning the loan. I don't think I'd ever do this but would that help possibly getting a loan and overcoming the income issue?

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Same rule – you will need to be able to show the bank you can service for your portion of the loan.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Matagascar wrote:
    Thanks guys for all of the information! The consensus seems to be that I should really look at getting an income for both a safety net and to help with the loan – I'll definitely be doing this. Something that I forgot to ask is the possibility of doing what I originally asked about though with a parent cosigning the loan. I don't think I'd ever do this but would that help possibly getting a loan and overcoming the income issue?

    It's rarely a good idea to involve the folks with investing. In any case, you still need to be able to show that you have the ability to repay the liability.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    Agreed – leave your parents out of it.  They've worked hard all their lives to pay off their home and feel comfortable.  Don't upset their applecart, you'll give them a heartattack from stress.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Vin MorganVin Morgan
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    @vin-morgan
    Join Date: 2013
    Post Count: 7

    What are your plans Matagascar with regard to generating income?

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