Hello,
Myself and partner are currently saving for an investment property. We have 20k saved at the moment (not a great deal) but are in a position where we should comfortably have 80k before xmas. This can be repeated for the next four years with our current circumstances. Serviceability should be pretty good – we both earn around 80k each with no rent or bills to pay other than internet and foxtel.
We’re struggling with setting a budget per property and therefore number of properties to purchase in this period.
At first I was thinking of max purchase price of $250k – 30k deposit (12%) 12.5k for other costs (5%) and a bit for lmi – Roughly 40k in total. This would enable us to purchase 2 properties a year and 8 properties in total over the 4 years.
I was thinking however that this maybe a bit limiting and that focusing on properties with a max of $350k may be better suited. $42K deposit (12%) 17.5k for other costs (5%) and a bit for lmi – maybe 65k in total per property. This would enable us to purchase one property per year maybe squeezing another one in, so 5 in total.
The aim is to purchase properties with a fairly manageable cashflow preferably neutral or positive but with growth potential and then leveraging into further properties using built up equity.
I know no-one can tell us what to do, i’m curious as to what you would do however.
Thank you for your time.
Hi Chattaway
Yes nice in theory but have to remember servicing requirements for investment properties has changed considerably over the last 6 months.
There are now a number of hurdles to overcome some of which include:
1) Many lenders factor in a monthly expense for board / rent even though you maybe living at home.
2) Lenders accept between 50-80% of the gross rent of the property. If the property is still to be leased they work off their valuers assessment rather than a rental appraisal from a local agent.
3) Whilst you might be paying circa 5% for a 90% interest only investment loan lenders in the main will factor in an expense equivalent to a P & I repayment at 7.4%.The list goes on and on.
Also access equity over and above 80% has become harder and harder so you don’t want to find you have equity in the property but cannot access the funds.
A good investment mortgage broker should be able to run some numbers for you once armed with all of the facts and give you a better indication on the number of properties you could add to your portfolio.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi @specha (aka Chattaway)
As has been mentioned above by @qlds007 , the first step is speak to a broker regarding what you can borrow.
From there, remember that “growth potential” can mean that the area goes up in value (which cannot be guaranteed) or you force growth through adding value to the property. The latter is more of a controllable outcome and a favourite of mine. This can be done even in the lower priced properties, though it is important not to over-capitalize.
One at a time, get them into the portfolio and make them work for you, and remember there are different buying entities that can come into play that can help you build quicker.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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