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I am wanting to purchase my first investment property or hopefully properties. I have $300.000 equity in my home, which will also bring in $12480 per annum positive cash flow, when I rent out the self contained flat on the property and two of the rooms in the main house. I have my own business but would like to eventually not have to work. At this time I have no savings as I have put all spare funds into freeing my morgage. Can you give me some advice on the best way to get the most amount of finance to do this.
Thanks BernadetBernadet welcome,
This sounds like a job for a financail planner, scan down the subject list and look for Crashy, he is offering non profesional advise on such financial structures to gain exposure or experience.
More info may be required before you get the right answer, such as which state you are in as this may have a diferent bearing on rent yield.
Looking at Finance, a lender will make a two tier assessment
1) Capacity to repay debt
2) LVR approx 80%Having your own business I will assue you have a strong cash flow, as you have demonstarted a capacity to repay your original loan. As such with $300k equity you would be eligible to borrow $240k
The extra income from your PPOR rental will assist in debt repayment, but it is equity at this early stage that will be the primary driver.
Once you have sevral proerties the driver will shift to capacity to repay.
I would apply some caution on how you manage rental of your PPOR as you may expose yourself to capital gains tax when you finally sell.
Good luck
Slow boy
Hi Bernadet,
The diffuculty may be getting the lender to believe that your ppor has a rental return – unless you have lease agreements set up – usually no the case when you rent out bedrooms.
So you might like to explore lo-doc loans, where you simply sign a stat. dec declaring your income, and the lenders take that figure for their calculations. This is good if you can’t prove your income. So you can include all income you get including that rent you recieve. I know that if you have $250K in net assets then some lenders does not penalise you in interest rates for a lo-doc loan. All you need to do is have worked for 2 years S/E. I got this loan and it is 6.47% interest only. Check that out. You can borrow up to 80% of the value of the security properties you are offering. Also I know that others lenders will also lend up to 80% on lo-doc loans and their interest rate starts at 6.8% then reverts progressively over 3 years to 6%. Depends on your strategy – beware of break fees on lo-doc loan though if you plan to sell short-term. I almost got caught.
If you want more information just email me
Hope this helps
Cameron
[email protected]Bernadet,
The equity you have built up in your own home is a good starting point. But alot more information would be needed to assess what can be done in your position.
I work for Investment Partners Australia Limited. We offer a free service which can assess your financial position and Investment capacity as well as reseaches to locate high growth properties.
If you wish to email me at [email protected] we can go through your situation in more detail.Rick
[email protected]Just like to add ofcourse that the amount of money you can borrow is dependant on the bank’s value of your current property. For example if your property is valued at $500K and you owe $200K then you can purchase new properties for at least $800K. So your new loan size including original loan, purchase costs and purchase price would be just over 1 mill which is 77-78% of the value of your properties at say $1.3mill. Your mortgage broker would probably have to split the loans and securities with a number of lenders to get that loan size approved with lo-doc loans (if you need to include the rent income you outlined to service that loan size). You really need to see a broker to get the most finance possible.[
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CameronThanks guys for your quick response and great advice. I’ve learnt a lot by reading through the forum boards so far, to hear about what you are all doing is very inspiring so I’m looking forward to purchasing my first investment property
cheers Bernadet
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