OK this is very handy. I don't have an ABN – a quick internet search shows me that indeed I could get an 80% lvr loan after a day if I had an ABN, albeit at a higher interest rate. Otherwise I'd need to have had the ABN for at least 12 months. Thanks guys!! You've set me on the right path
Hi Richard and Terry – thankyou both for your responses
There is $250k equity in property I already own. I have no hassle with working along the way, but it would be annoying to have to wait a long period of time before making a start, due to having to show a certain number of months of employment. I have substantial savings to draw upon even if I should find myself unemployed. It would be unfortunate if the best any finance broker could offer would be for eg 60% lvr. It would very much slow things down.
What is the minimum number of consective months of employment (with the one employer) must be shown, and how much lvr do you suppose I'd be likely to be offered by financiers?
You don't have to have 20%. It is possible to instead pay less (eg 10%) and pay mortgage insurance. It is not a good idea to pay too little, or 0%, because you then have problems if you need to sell the property and its value has dropped to less than what you owe the bank for it.
Also notice that in Steve's book, many of the properties he bought were in regional areas (such as Ballarat in Victoria). The point is that the price of many of the properties he bought was in the order of $30k -> $50k. So it is much easier to come up with 20% for this because it is only $6k or so. Also properties that cost less are not subject to stamp duty. ( http://www.realestate.com.au/cgi-bin/rsearch?a=calc&jar=StampDuty )
I currently work in Sydney, due to relocate to Melbourne in a month or so. Weeknights are probably best for such catchups, and in that regard, city is easier for me (I'm likely to be working in the city). It's all about me hehehe. If push came to shove I'd come over to the East, but it's a mission. I suppose it depends where everyone works and what is feasible for the majority.
I'd imagine if you are just starting out, you want to have a vague idea of how much you can borrow. This will at least help you establish where you can afford to buy, and what type of property.
A good place to start is actually Microsoft Excel! Making a list of all your living costs, and working out how much money you have left in your take home pay each month for "extras and luxuries" such as property investment. You'd want to include in your spreadsheet things such as:
How much you spend per month on: Buying and cleaning work clothes Travel costs (train/bus) Car costs (registration, insurance, road tolls, parking expenses, petrol, servicing, extra things such as replacement tyres) Birthday and christmas presents Socialising (yes, you need to have a life!) Health insurance Medications Any current loans you are obliged to repay Any expenses regarding where you live (rent, council rates, water bill, electricity, gas, or perhaps board costs at mum and dad's) Food costs
Once you have worked out your monthly "What it costs to be me" figure, compare that to your take-home pay. That is not your annual gross pay divided by 12, because that is the figure before taxes and superannuation are removed. You need to look at the net figure. In other words, what your employer pays into your bank account each month. How does this figure compare with your costs figure? How much is left over? This is the amount you have to contribute towards investments each month. Ideally you also have a stash of cash already to use as a deposit. You'll probably require 10% of a property value (so $20k on something worth $200k).
There are some online calculators which can help you confirm your thoughts. If you google "how much can i borrow" you would find them.
After that, the bank can actually sit down with you and tell you how much they will loan you, and what you can afford to repay on a home/investment loan.
Personally I can't comment too much, as I don't know much about investing in NZ (this is generally an Australian forum). What I do know is: you can buy property through a company, and I don't think there is the issue of capital gains tax.
I think you'll find you cannot use the FHOG to purchase investment property. Are you looking to buy in NZ or Australia?
With regards to "what is a good price", well, you'd need to work out what the place would be worth renovated. Then you'd need to work out how much it would cost to renovate it. Then if you plan to sell, you'd need to work out what costs are associated with buying, selling, and then buying again (eg stamp duty is a killer in Australia). All things considered, you'd be aiming to make a profit. Remember that your profits will probably be taxed as capital gains tax. You wouldn't bother for a small profit (eg $5k). The risk of you getting your numbers wrong and costs blowing out when you are new to the game is high. It isn't worth the gamble for a small profit like $5k.
Yeah the annual fees sound high. And they will never go away. Beware that even though your proposed place is not a serviced apartment, its capital appreciation may well be affected by the fact that most of the rest of the building is (serviced apartments).
You could do a bit of reading on SMSFs (Self Managed Super Funds) and Discretionary trusts. There's a bit on them on the forums on this website. Basically, SMSFs can buy property. However they can't loan a great deal, so you'd either need 50% up front, or you would open your super fund, shovel money into it over a few years, and when you have enough, buy a place and rent it from your SMSF.
Other people will have further comments on such things…
You might also consider employing a property manager in the future – it'll cost you all in all about 12% of your rental return. They'd handle rent collection, inspections, chasing tenants for unpaid rent, submitting relevant eviction notices where necessary etc. That sort of thing. Saves you from finding yourself in a position of dealing face to face with tenants and having to be the bad guy asking for the cash and feeling mean. That said, you'd still need to keep an eye on your place too. Not all property managers are awesome.
Here a few spots for you to start focussing on. Look at http://www.domain.com.au or other appropriate websites to establish what the "buy" vs "rent" prices are in the area. Also use google maps to see what the neighbouring suburbs are, and research them to see what king of activity is going on there, and how this might assist you in guessing what will happen in your target suburbs in the months and years to come.
Laverton Sunshine Wyndham Vale Werribee
If you are keen to actually renovate the property, look very hard at Laverton.
West Footscray. It is in the critical radius of the city and has enjoyed some great gains. I personally wouldn't want to live there due to the nature of the township at the moment. A dear friend of mine who was living there explained that the Neighbourhood Watch newsletter was not a Microsoft Word page with two half pages detailing petty theft of coins from the ashtry of vehicles, but in fact an Excel spreadsheet printout, landscape mode, font size 8, full of stabbings, bashings with planks of wood with nails sticking out and so forth.
This sort of thing simply needs to be factored in to your investment plan to ensure you don't get burdened with such people as tennants. You also want to ensure the property is suitably insured!
I'd be suggesting you do some walking around the streets at several different times of day to get a feel for the area, which streets are good/bad etc, which streets already have problematic residents living there. That sort of thing.
I would also say be very careful regarding the manner in which floor coverings and damage to walls is covered. Damage to floor coverings can be sneakily excluded by the insurer as it supposedly falls under "normal wear and tear".