Hi all,
First time poster here. Extremely keen to get back into the investment property market. Had an investment property about 8 years ago but had to sell to build our current PPoR. I'm not sure if the timing is right in our current situation, so I'm seeking any advice or strategies from other members.
In summary, our situation is as follows:
- I earn approx 74k
- my wife earns approx 15k
- we have 3 kids under 3
- our PPoR is worth about 400k
- the loan on our PPoR is currently 340k
One of the things I have come across in the past is that the bank must see that we can service the investment loan as if the property wasn't producing income. Is this right? If it is, I don't think the banks would lend us any money for investment purposes.
Happy for any advice. Thanks in advance!!
Hi Mikand
Welcome aboard.
3 kids under 3 – how have you got time to post this question!
All lenders will take into account the rental income of the property that you're purchasing. Most will take somewhere between 75% – 80% of the gross rent into account for borrowing capacity calculations.
Your borrowing capacity may be a bit tight – but could possibly be improved depending on the way your current PPOR loan is set up and whether or not you have any other liabilities.
There's also not a lot of equity available in your PPOR at present. If you were to access equity, you'd probably be looking at a max release of about $20k to go towards the deposit/costs on your first IP. That might get you an IP in the sub $200k bracket but without knowing the finer details of your situation it's difficult to provide accurate advice.
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]
Hi Mikand
Firstly welcome to the forum and hope you enjoy your time with us.
Lenders will certainly take into consideration the current or potential rental income when assessing serviceability so that is not an issue.
You will however need to provide equity or cash deposit (not recommended) to cover the acquisition costs and balance of purchase price.
Your equity is fairly marginal so you might to look at a 100% standalone investment loan.
Certainly out of the question but will be fairly tight depending on your current PPOR valuation.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Jamie M wrote:3 kids under 3 – how have you got time to post this question!
Jamie
Thanks for your reply. Very difficult to find any time these days. Add working full time and studying to that as well!!
Jamie M wrote:Your borrowing capacity may be a bit tight – but could possibly be improved depending on the way your current PPOR loan is set up and whether or not you have any other liabilities.
Jamie
The current PPOR loan is on a fixed rate and interest only. As far as other liabilities, we have a car lease, and a credit card for interest free purchases with a limit of 10k.
Unfortunately, I think I need to be a bit more patient, and wait until my PPOR value increases or pay off more of the principal.
Qlds007 wrote:Your equity is fairly marginal so you might to look at a 100% standalone investment loan.
Thank you for your reply. Are there many lenders out there these days that would offer a 100% standalone investment loan?
Mikand wrote:Unfortunately, I think I need to be a bit more patient, and wait until my PPOR value increases or pay off more of the principal.
You have a $400k property with only $60k of equity after 8 years. If you took entry costs, holding costs and exit costs (if sold) then you are probably underwater on this place
If you're going to go for an IP you definitely do not want to repeat that performance or you're on a hiding to nowhere.
Hi Mikand,
You are in a difficult position as previous replies have pointed out.
In my humble opinion, if I was in your situation and wanted to get back into the market I'd be looking at a regional area with good fundamentals that doesn't rely on 1 industry (like mining), where the yields are high and will provide positive cashflow
There are areas in NSW and QLD where sub $200k properties are yielding 8%+ and there are some reasonable growth prospects, not what you would achieve in the metro areas, but still reasonable.
Good Luck
Regards
Glenn
Freckle wrote:Mikand wrote:Unfortunately, I think I need to be a bit more patient, and wait until my PPOR value increases or pay off more of the principal.
You have a $400k property with only $60k of equity after 8 years. If you took entry costs, holding costs and exit costs (if sold) then you are probably underwater on this place
If you're going to go for an IP you definitely do not want to repeat that performance or you're on a hiding to nowhere.
Hi Freckle,
Just to clarify, we didn't build this house 8 years ago. We actually built it just under 4 years ago. I probably wasn't clear with the investment property we had 8 years ago. To further explain, we built our first PPOR 8 years ago, lived in it for 2 years, then rented it out. We then had to sell to build our current PPOR 4 or so years ago.
Apologies for the confusion.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
