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To help with things stop putting extra into redraw and have an offset account instead. If you’re paying principal and interest turn the loan into interest only.
I won’t comment on the tax specifics but if you redraw money to go towards IP purchasing costs it gets very messy – get tax advice on this. End goal may be to leave the $121k in there and draw on the equity via a loan and not redraw.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
There is a $15k FHOG for new homes in NSW. As of 1st Jan 2016 it will be reduced to $10k.
http://www.osr.nsw.gov.au/grants/fhogNCC, when you say you want to leverage the FHOG towards your purchase are you meaning you want it to form part of your deposit or you’re just wanting to take advantage of it?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
That insurance is cheap or in par for FNQ. I’m paying about $2600 for my PPOR at Cairns northern beaches.
If the insurance review ever happens it may get cheaper but I’m not holding my breath for it.
North Queensland is starting to get a bit of focus of late (more so Cairns and Townsville) again so it may spill on to Port Douglas but as far as the market goes it doesn’t have a lot more to offer diversity wise other than being a tourist town.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Being a tourist destination can you holiday let it through a company that specialises in that arrangement? Would there be a demand for your property?
It may not necessarily be money down the drain if you’re getting capital growth with the property.
How much is the insurance on the place?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
They’re eager though to lend if there’s more security and I actually have a property in mind.
Just make sure they don’t cross collateralise you properties.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
80% is ideal but even 90% would be better and more achievable than a 95% lend.
If the money has been sitting in your account untouched for a period of at least 3 months some banks will accept this as genuine savings.
A guide to closing costs is 3-4% of the purchase price.
Eg
Property Price: $300,000
Deposit (5%): $15,000
Closing costs: ??
Potential Loan amount: $330,000?? – is it 95% on this amount? (depending on my borrowing capacity)The loan amount is against the valuation of the security and not your borrowing capacity or property price + buying costs (if I’m reading your example correctly) so (in almost all instances) you won’t be able to get a loan more than the value of the property.
So using a basic 95% LVR example your loan would be $285k against a $300k purchase/valuation price. But, there’s other factors to be taken into consideration too.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Do the other properties comparable to yours in the area have dishwashers? May not get more rent but may give your place a slight advantage above others. So making it more rentable. What’s the rental market like in your area?
*touch wood* I have or have put dishwashers in all my rentals and haven’t had an issue. I can’t imagine a tenant BYO dishwasher but I’m sure it’s been done before!
If it doesn’t cost much to fix the existing one I would fix it and leave it there. Downside is if it does pack it in you have to fix / replace it again as the property was tenanted on the basis of having a functioning dishwasher.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
It’s a tricky one with a few things not working in your favour. There’s some non mainstream lenders that *may* look at this but your interest rate wouldn’t be as competitive as you may like it to be. Are you the only one applying for the loan or is there a second applicant?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Ahhh, Sunshine Coast…. For some reason I was thinking inner-ish Brisbane. Sunny coast, or parts of, is starting to get a bit of attention which is good – seems to be entering the recovery period now.
Good that you have a bit of time to play with and firm up a bit of a plan. I find that setting your end goal and working back from there works. So you say you want to retire in 12-15 years – how much income do you want to retire on? For arguments sake, say it’s $80k so what kind of, and how many, purchases do you need to make to achieve that? What CG and rental income/CF will you need to ensure you will be receiving an $80k equivalent in 15 years? Reverse engineering is good! Your team will be able to sit down with you and help nut it all out all the details too.
Enjoy your sleep.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Breathing is good! I think even I held my breath while reading your post!
I’m assuming you’ve had some good CG while you’ve had your IP too? (As an aside, do you have a depreciation schedule for your IP? If not, worth getting one to help with tax).
There’s two schools of thought on rent vs buy. It can be seen as dead money, but it can also be seen as you living somewhere where you can necessarily afford or want to buy in. While you rent, you can also build your portfolio and maximise your deductions as opposed to having undeductible debt. But, you could buy in an area for a PPOR with good CG and have the PPOR exemption when you sell. It’s what you’re most comfortable with and suits your strategy.
One of the accountants on the forum would be able to comment on the CGT exemption status on your IP.
Regarding probation – you’ll be surprised what some lenders will allow, is the new job in the same industry or are you performing a similar role? You would have more lender options available to you if you wanted until your probation finished, but you’re not excluded from lending by being on probation.
If there’s one thing I’ve learnt, it’s to trust your gut. I made a post about this in another thread. Essentially, if you’re looking at engaging the services of someone via a forum have a read through their threads and posts to get a feel for them and if you like what they say or how they interact. Also, search their name to see what others may have said.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi MissyMiner, first of all, breathe! You’re doing well to have essentially what is an unencumbered IP. Defined goals is a good thing and looks like that is a little muddy for you at the moment. Are you happy renting? Did you want a PPOR or buy IP’s or both? What sort of time frame are you wanting to work with – ie in how many years do you want to retire? What are your priorities?
I won’t comment too much on the tax side of things but if you were to draw on the equity of your IP and wanted maximise the tax effectiveness then those funds would be best served purchasing IP’s. Is your existing IP a good investment? You say it’s a good renter which is great, but what is the return like based on it’s value?
I think you should talk to most of the above :) Get a good team on your side – accountant, solicitor/conveyancer, broker for sure and a financial advisor for insurance would be help too to make sure you have all areas covered.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Ruk – some figures would help such as you income, what sort of IP, proposed rental of IP? Are you heavily rent reliant? When you say assets is that with no mortgage attached or are they leveraged?
Have you approached a bank and they said ‘no’ or have you spoken with a broker?
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This reply was modified 10 years, 1 month ago by
Kinnon Bell.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Pre-approval is an indication that the bank *may* lend you money and roughly how much. But not really worth the paper it’s printed on. The loan can still be declined after a pre-approval such as the valuation not stacking up.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
A bit of a late reply from me too sorry – still figuring out how to use this forum ie find out when a thread has been updated. One cool thing I did discover the other day is you can tag users in your posts and, at least for me, when that happened I got an email telling me someone had mentioned me. Anyway, slightly OT….
I won’t comment on your broker mate – if you trust him with you $$$ then that is one of the main things. Just educate yourself so if something is not being done or could be done better you’re aware. But then again – you don’t know what you don’t know! Two of my biggest tips are avoid x-coll and if you’re looking at building a sizable portfolio use the lenders that have the stingiest serviceability first then when you start hitting the serviceability walls go to the ones who have a more generous serviceability model.
With investing in Sydney – I think the horse has bolted with that one. How much steam has the market got left in it? I don’t know, but I think there’s other markets with more go in it now.
How does the LOC against PPOR work? is that the same as extracting the equity and using it as cash on a new PI? and if so doesnt that mean you would be putting up your PPOR as cross collateral?
Yes, you’re extracting equity into a stand alone loan with your PPOR as the secuity/collateral but in the sense of the word it wouldn’t be x-coll. You have your PPOR and then secured against it is the mortgage and then the LOC but this is not considered x-coll as there’s only one security. On the other hand, if you had a LOC with PPOR and IP1 secured against it, then this would be x-coll. Are you concerned if something were to go wrong you could lose your PPOR?
Which other property buyers agents would you recommend? Ive heard good things about BInvested. I will def look into the one you have suggested and im keen to attend their meetings esp since they are quite close to me.
I have never dealt with binevested but do a search on the other property investing forum (has SS as the initials…) and there’s some interesting comments and people sharing their experiences on there.
On another note: as iam looking for properties with good rental cash flow and room for capital growth, how should i start researching these areas? which tools do i need? Ive heard about RP data, is that a good starting point or are there other research tools needed? thanks.
I am sure there is a better way, but what I do when I’m looking to start investigate a new area is purchase the property investing magazines (a lot cheaper than a RP Data subscription) and at the back they have all the suburb/town info listed. So I search within my parameters – such as 5% avg CG, median of below $400k, rental vacancy below 2%, rental return of at least 6% and then I find which areas fit those parameters and use that as a starting point. I then look at the demographics, planning websites to see what’s under way and what’s planned (gentrification) as well as the housing stats like days on market, discounting that kind of thing to get an indication of where it’s at in the cycle.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Great thanks for the replies everyone. I thought this may be the case that i had to go interstate which doesnt really worry me. Where can i read up/look at peoples recommendations then?
I want to select a team now that i dont need to change for many years, do it right the first time!
Cheers
PageyWhat I did a few years ago when I was looking for a couple of people to add to my team (as I had to ‘fire’ a couple, but that’s another story!) was mainly based around the forums and I just read through their posts to get a feel for them then did a name search to see what other people had commented on. I also called up a few locals for a chat too.
One of the biggest things I learnt though was to trust my gut. I went with someone for a service who came highly recommended but my gut was telling me to stay away – that something wasn’t right and I didn’t listen to my gut and as a result nearly got burnt, but it was a good learning experience….
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Thanks for your response.
The numbers are not for any specific area; they are approximate numbers to draw up how much bank can lend me, they will change once a definite IP has been selected.
I don’t want to negative gear; I am looking at having minimum deficit, positively geared would be ideal. Reason for this consideration is that I don’t want further expenses as it could potentially impact further IPs I might consider.
Not a problem. Sounds like you have a plan, which is good. As Jamie mentioned though, those repayments don’t look quite right. For a P&I repayment on $375k it would roughly be around $1990p/m and IO would be around $1531p/m so a bit of a difference. This may help with doing the feasibility of potential investments you look at, but in saying that, you do also need to factor in for when interests rates eventually do rise and the holding of the investment for when they’re around 7-8% as you don’t want to be in a world of hurt when that happens, however many years down the track.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Sachin, that $1600 rent equates to an approx 5% return if the purchase price is $375k which isn’t too bad if you’re getting a fair bit of capital growth. With that $600 deficit there would be other considerations (holding costs) which would make the gap a bit larger but there are tax concessions too.
The purchase price and rental figures you quoted, are they from a particular source such as an area you’re looking at investing in? If so, why that area? Would that -$600 per month be covered by capital growth? Is there anything to make the holding costs worth while to you? Do you want to negative gear?
Taking a step back – what are you wanting to achieve by investing in property? If you’re uncomfortable with there being a $600 difference between mortgage repayments and rent received is there amount you are comfortable with? Do you want your property earning you money? Some defined goals might help with the figures and recommendations a bit more.
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This reply was modified 10 years, 1 month ago by Kinnon Bell.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Pagey, can’t recommend anyone local to Tas for you sorry, though with many professionals they don’t necessarily need to be in the same city or state as you though. What you’ve identified already though is what you do need – a great team around you to help you succeed.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Johhny,
Great work to begin with. What’s your end goal? Retire by the age of 40? Have 10 properties by the time you’re 30? What prompted you to buy the units where they are now? Cash flow, capital growth, close to home, know the market?
I too am a goal oriented person and need goals to work towards. What I found works best for me is to have the end goal but also trackable and achievable goals along the way to help keep me motivated. As corny as it is I find the SMART goals the way to go. So, Specific, Measurable, Achievable, Realistic and Time bound so I set my goals to that.
So you say you want to start saving again for the next property but not sure where? So, let’s say for arguments sake you want to save $20k and that will take you 12 months to do it so set the aim of $20k in savings by August 2015 and as a side task during that time identify what and where your next investment will be so by the time you reach your savings target you will be ready to go and hopefully in the mean time you’ve had some capital growth too.
But also during that time, figure out your strategy too so seeing as though you reno’d your current unit I take it you’re handy so do you want to keep doing reno’s to generate equity or buy ready to go properties? What do you enjoy doing to keep you motivated?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Rob,
Well done having the discipline in paying the PPoR debt down. As you’re still in 2 minds on what to do with the unit I would stop paying the principal down ASAP and set up an offset account if possible so if it does become an IP you haven’t reduced too much more of your principal.
Benny made some good points above – you can sell your apartment without CGT so then you will have that cash which would could use to leverage several properties.
Take a step back – if you were looking at your apartment now to buy as an investment, would you?
What’s your end goal? If it’s to buy properties as quickly as possible then do you need to buy and move into the $650k house in the burbs sooner rather than later? If you continue living in the apartment for a few more years then you could still draw on the equity and use that to fund deposits on investment properties which would then maximise your tax deductions a bit more as well as setting up your portfolio.
You’re definitely on the right track though. You just need to firm up your plan and your goals and like you alluded to – get a team of experts around you that can guide you with your journey. And read. Read as much as you can. I find forums likes these to be an amazing source of knowledge.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
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This reply was modified 10 years, 1 month ago by
