Forum Replies Created
RHG currently has extremely high interest rates and their exit fees are exceptionally high if you wish to re-finance within the first 4 years.
What you need to look at is the cost differential between the Interest Rate savings if you re-finance and their exit fees.
Hi Andrew,
That is my pleasure, I am glad that the information that I provided you was of some assistance.
As you suggested what you would have to do with your first property is move into it for 6 months to take advantage of FHOG and get it to a stage where you will receive a rental income of $350 per week. Then start saving for your second property. It can often be a good idea to move back in with your parents while your saving for your second property. Depending upon whether or not you have equity within your first property you may be able to take out a second loan to fund the deposit for your next property.
In regards to the second property, a lot of people will move into it while they are renovating it (Provided that you can live in the mess) and then look at renting it out once it's completed or onselling it for a profit. Some of my clients have done exactly that, though they have taken the decision to rent the property out rather than selling it as the rent that they were receiving covered the mortgage payment.
The financial side of things can get a little bit more complicated as banks will assess your full debt level that you currently have (I.e. Home Loan, Credit Cards, Car Loans etc) They will also use the rental income that you are receiving for your Investment Property (However they will generally only use 80% of this to service your loan)
There are various different loan structures that you can look at. What you need to do is to talk with an expert to ensure that the loan that you obtain for your second property is structured in the appropriate manner so it will continue to meet your needs not only now but into the future.
What state do you currently live in?
If you like you can send me a PM with more details so we can discuss it further.
I hope this helps you out.
Cheers
Hi Andrew,
Its always a good time to start thinking about investing in another property, provided that you have the income to support it.
The key things that you need to remember when investing in a new property and with your example your looking to renovate the property and sell it for a profit.
You will first of all need to have a deposit to purchase the new property. Some of our clients will pull the equity that they have out of their existing properties and use this as a deposit.
You will need to allow for Stamp Duty to be paid for on the new property purchase, as well as other incidentals such as legals, pest and building inspections etc.
Another thing that you will need to consider if your renovating the property is that this property will not be earning an income while you are renovating it. As a result you will have your existing Home Loan plus the new loan to repay.
Do you currently have the funds to renovate the new Investment Property?
In regards to the potential profit that you may make from the property you need to consider the following costs:
– Purchase Price Plus Costs
– Interest on your Loan
– Renovation Costs (Clients will usually allow for 10% in additional cost overruns)
– Selling costs
– You will be required to pay Capital Gains Tax on any profit that you make on this propertyThese are just a couple of things that you will need to consider.
You will need to talk with your accountant about any Capital Gains Tax you are required to pay on the property once you sell it.
I hope this gives you a good starting point.
Hi Badger 101,
You need to chose your Mortgage Broker wisely, some brokers will push the products that will pay them a higher commission, however a Mortgage Broker should be offering you a choice of products and the banks that they deal with. When they make a recommendation to you, it should be based on your what you need or want in a loan. (Everyones needs and wants will vary) Mortgage Brokers are required to disclose to you what commissions they are going to be paid by each bank.
You should also look for a Mortgage Broker that is a member of an industry body such as the Mortgage Finance Association of Australia (MFAA) they should also be a member of an external dispute resolution scheme such as Credit Ombudsman Service Limited (COSL)
A Mortgage Broker shouldn't charge you a fee for their service, and they should be happy to work with you to find the right product that will meet your needs. They should also be happy to meet with you at a time and location that will fit in with you.
I hope this assists you.
Jazz,
The banks would also want to see your Business Financials, there are certain add backs that they may be able to look at such as Interest Paid, Depreciation etc that are included in your P&L.
When you run an SME it's not always black and white as to the income streams for serviceability of your loan. As you would be aware they would also take into account your existing debt levels that you currently have as well as your rental income for your IP.
I agree with Michael, you need to get an accountant to give you advise on how to best structure your income levels and your accountant should be aware that your intending on borrowing money in the short term period.
I hope this helps out a little.
CBA & Westpac will also still look at 95% if you have an existing CC with them that is in order.
Cheers
Hi Jadlak,
That could be true, that is why I would always recommend talking with your accountant prior to making any decisions on tax deducatable debt. Everyone has a different scenario for their individual needs.
Hi Jadlak,
If you have debt levels against your IP of $295,000.00 with the Market Values of the IP of $535,000.00 @ 80% the banks would lend $428,000.00 aginst these properties. This would give you an additional $133,000.00 to borrow against your IP's which from my calculations should be able to pay off your PPOR (This is taking into account your offset amount of $109,000.00)
A line of credit can be a great way to get some equity out of your property for future investment purposes. (I.e. Placing down the further 20% deposit plus cost on an additional IP) A lot of clients have lines of credits in place for future investment purposes. The good thing about a line of credit is that you can draw down on it as you need.
Before making any decision on whether or not a loan is Tax Deductable, its best to consult your accountant prior to making any decision.
I hope this helps.
There are still some very competitive banks out there that will lend on a Commercial Property.
As Richard advised most lenders will only lend a maximum of 70% against the commercial property, and you will need to come up with the remaining 30% deposit yourself plus costs.
Some clients will look at taking out a line of credit / investment property loan against their residential property to cover this shortfall of 30% (If they have the equity and serviceability to do so)
Some of the key components that you need to look at when investing in a Commercial Property is the tennant that will be renting the property from you. You need to look at the strength of that tennant and what type of industry are they in. As well as this the term of the lease. Is it a 2 Year lease without any options, or is it a 5 Year lease with two 5 Year Options etc. All of these components will take away some of the risk from investing into the property.
Your concerns that you may receive a similar return on your investment through another investment stream in comparison to the rental yields. I guess the thing that you need to consider is that over time you should receive a capital growth on your commercial property.
The two major down sides in investing in commercial properties is the initial capital upfront that you need to place into the purchase and the risk that the property may remain vacant for a longer period of time than say a residential property.
At this present stage there are some banks out there in the market that could lend money at around 6.00% variable which is an extremely competitive rate.
Hope this helps you out a little.
Hi Rudiga,
Westpac & the CBA will also do 95% of the Market Value of the property, this will often depend upon whether or not you are an existing client of theirs that has a lending product for 6 months (I.e. Credit Card, Car Loan, Home Loan etc) Though you do need genuine savings.
There maybe some limits as to what you can borrow though.
Hope this helps.
