About halfway through Steve’s book and I have a question which might be easily answered.
If you go by the strategy of accumulating as many as possible positive cashflow properties, how do you go about getting finance (on a 26k-35k salary)? As I’ve read in other books (most had negative gearing strategies), with regards to rental income, they said that most lenders heavily discount or sometimes don’t take it into account at all.
If you buy 1, 2 or 3 cheap houses and the lender heavily discounts or doesn’t take into account your rental income, how will you go about borrowing more to finance the houses?
I’m a newbie so don’t scold me if I’ve missed something basic!
Also, is there any sort of insurance you can purchase like rent insurance or something for when your property doesn’t have a tenant?
Hey Brizza. No such insurance for no tenant but you can get insurance for loss of rent, damage by tenants.
As to the discounted rental income. Sometimes it can be as simple as finding a lender that will do the deal. It may take time to find them but it is worth it. Most lenders have different criteria and a good broker should be able to help you out.
Maybe Stuart will put his thought in here.
As to being scolded hopefully that will not happen. Most people here are about helping each other win. The only other competitors in your race are you and yourself.
Keep on asking questions and welcome to the forum.
(Don’t forget to use the search function).Enjoy
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(Andrew)“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
Leverage your time – use a mortgage broker
…Beware of the dreamtakers…
Hi Brizza
You have asked a very good question (and one that many people are probably wondering about).
I think my article which will appear in API magazine in Oct/Nov issue will answer your question. It’s titled Unlimited Finance and explains how banks assess loans and how the properties you purchase affect your borrowing capacity.
Its 2,000 words so probably too long to reproduce in this forum. In addition, API has exclusive use of it. Sorry, I’m not really helping.
Essentially the answer comes down to rental yield. If you finance properties at 80% then your yield needs to be over 8.8% for the property not to affect your borrowing capacity (and if you finance at 100% your yield needs to be over 11%). Therefore, if your average yield is over 11% you could purchase unlimited property (only from a serviceability perspective – obviously you need equity to secure the loans). Is this possible? Yes, I have a client that owns 19 properties and her yield is over 11%.
If you can’t wait for the article then you can email me for a more detailed answer ([email protected]).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auThanks STU…
Very informative….gets me thinking…
Its good to know these things when you go to ‘market’ your property to financiers….
Pete
…Beware of the dreamtakers…
Thanks everyone for your replies.
Stuart, I’m about to subscribe to API so I can wait for the article as I’m not ready to jump into it yet anyway.
Thanks for your help guys, it cleared it up in my head.
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