Hi Andy

With a $100K 'cash', you're in a very good position.  Problem is grappling with the options and your view of risk and comfort zone.  The trick is probably just to get into the marketplace as soon as you can with a low risk plan first.

As a 1st-time investor, maybe you could consider a low-entry level investment for your first (until you build up some experience and confidence) in a regional area such as a two bedroom unit.  Looking at something about 300km out, you could look at Albury/Wodonga or somewhere in the Latrobe Valley.  Aiming for something as close to positive or neutral as possible would set the platform for future portfolio purchases:
 – a track record with a lender of being an investor (before you go for your next one);
– not severely negatively geared so it doesn't impact on your serviceability too much (to go for further loans);
– some spread of risk with other unit owners under a body corporate;
– if you make a 'mistake', have a period of vacancy; or some other issue; an initially smaller mortgage will be easier to service;
– the learning experience inclusive of developing your 'property investment team' both for purchases and for ongoing maintenance.

Best of luck

Odenska

If you can afford the 20% deposit, why would you consider going 105%?

Think about what your long term strategy is?

If this is your first IP, from the point of view of banks/lenders profiling you as a credit risk, I'd go with the more cautious approach (if you can afford the 20% deposit).  Later on when you purchase other IPs, this will probably look more attractive.  Going 105% first up may suggest you've got no further capacity (unless you had an equally huge income to service the loan).

At an 80% lend, you might be able to refinance later and take it up further in overall LVR, if it's required for your next IP, plus you will be on a bank/lender's books with a credit rating towards having an IP mortgage that is fairly low risk.

In summary if you intend having 3 or more properties over the next couple of years, this first decision could be one factor in a critical platform in your capability for future mortgages.  Get's back to what your overall strategy and goal is?  One property or many?

Hi Dan

You probably have enough to buy now if you were looking to go out into regional Vic or NSW and start off with something modest such as a small 2 bedroom unit in a small complex where your risk is also spread with a body corporate of a few other owners.

However, a good starting point might be to think about a few other questions first:<
-how long did it take you to save your $13K?  (For example saving $13K a year might indicate what sort of loan/property running costs you could afford to comfortably meet)
-how much can you continue to save each week in a regular disciplined fashion?

The answer to these questions might indicate how committed and financially prepared you are to service a loan (in the worst case scenario) of no rent or vacancy for a period of time.  Without a diciplined savingshabit, it might be difficult to service any loan yet.<

There are several mortgage brokers on this forum who could probably help in terms of  the "which lender to go with" question.  I don't think that this is as relevant as the other questions I've posed.

I always think commercial would be something you might consider with more experience rather than as a first timer.  However, with your funds you might be able to afford some storage units as a commercial investment.

Best of luck

Hi Carl

Sometime ago, Richard Taylor put up a post on shared equity loans/mortgages. This may offer you another option for your situation.

Hopefully he can respond to your situation with some insights.

While there were mixed feelings about the pros & cons of these arrangements, I think it’s important to consider critically whether it suits your needs and might allow you to enter the market if that’s your major goal.

Gary
Author of “Property Millionaire, The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
http://www.888abundance.com

Hi

For a young guy, sounds like your partner and you’re already doing very well with property investing. Good work so far.

In terms of your ‘lending strategy” to borrow up to 80% against your investment properties (and access $400K plus saving up $100K) to access the deposit, you may be wrong in your thinking.

“Saving” $100K in one year will be an amazing achievement. What is your secret?[shades2]. If you can do that, you would probably not need to draw on your equity from your IPs to get a mortgage for your PPOR. I suspect you will have a lot of negotiating leverage with lenders given your property portfolio.

The tax deduction for ‘interest’ on investment properties depends on the purpose of the loan, rather than the security it is borrowed against. In summary, borrowing/accessing extra money from your investment properties to fund the purchase of your PPOR residence will mean that the interest against the $400K will NOT be tax deductible as the purchase of a PPOR is not an investment purpose as defined by the ATO.

There are a number of mortgage brokers on this forum who could probably come up with several good ways to proceed. I am not a MB, but an investor myself. However, if you would like to discuss this in more detail with me, drop me a line at [email protected] .

Gary
Author of “Property Millionaire, The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
http://www.888abundance.com

Hi Casey

Might depend on what your medium term goal is:

Either:
(1) Continue investing now that you have established your portfolio, and grow your assets; or

(2) Take all your profits, own your new PPOR outright with some cash left over after capital gains tax on your IP.

Or, which one allows both you & your partner to have peace of mind, without stressing (eg about interest rates, tenancy vacancies, etc.).

Gary
Author of “Property Millionaire, The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
http://www.888abundance.com

Hi Jxf

You’ve has some very good input (particularly from Simon).

However, as he intimated given all the feedback you’ve been given, only you can make the best decision for you; and that depends on what your final goal is. This might be a better starting point to create your investment strategy.

For example, if you wanted to own your own place rather than becoming an investor then P&I might serve you well. Apart from what we know about good debt and bad debt, ownership and therefore paying loans down fast was very important to the previous generation. Their goals may have been based on ownership rather than investment.

On another tangent, do you have a plan that goes beyond your lifetime – ie your children, or nephews/nieces, etc. Who will you be leaving your ‘property empire’ to? If you never own these properties, and you leave it to the next generation, what capital gains tax liability could you be imposing upon them when they sell?

We have history to tell us that we think a lot differently in terms of investments and debt, than our parents did. It would not be unusual for the next generation to react as we may have done.

One final thought. This is not a for or against interest only loans but just a ‘devil’s advocate’ position. “Interest only” is the traditional wisdom for today, but some investors will argue that fortunes can also be made by not following the ‘herd’. Also you may optimise your capacity to buy more properties with IO, but if you are geared to the hilt and interest rates increases impact you further, you may wish you still had the safety net. Having said that, I think someone has already spoken about IO with an offset account/potential to pay principle sums anyway.

Gary
Author of “Property Millionaire, The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
http://www.888abundance.com

Hi

Sent most of you a PM.

You can contact me at [email protected] or view http://www.888abundance.com/forum for the Y@H PI group (in Canberra).

Cheers, Gary
http://www.888abundance.com
Author of “Property Millionaire, the Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – the Boardgame”

Hi All

A number of you have enquiries from different parts of the country.

I’ve PM’d some of you. Others I’ve yet to respond to.

I’ve just come back from Brisbane where the Young@Heart PI Community – SE Qld met for the 2nd time. A number of the other states are also meeting or preparing to meet now.

To bring you all up to speed rather than PM-ing you individually, I’ll provide a new post shortly with each of the contacts in each state.

Regards

Gary
[email protected]
http://www.888abundance.com
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
Founder of The Young@Heart PI Community

Hi Mark

I’ve sent you a PM in regard to your query. Otherwise you can contact me directly on [email protected] .

Regards

Gary
http://www.888abundance.com
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame