[
]”confused”Must be getting some analystic paralysis..or my eye’s/brains burning out from overload evaluating some deals..
Tossing up to buy in a more densely populated area, purchasing a nice IP on a good sized block ( with the thought of subdividing later and selling off, or building on it myself ) this area is still cheap and has CG potential
or
Buying a more positively geared property in a smaller rural town, which still has good population growth, though not great growth aspects i believe, again, some nice properties here..
[
] what to do…
REDWINGMaybe buy the + then finance the other off the back of the first, what do you think.. have my cake and eat it too..?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Redwing
Ultimately only you can decide this. It sounds to me as though you are not clear on what you want to achieve from investing in property, what your timeframe is and what your strategy is and hence the analysis paralysis.
Do you aim to replace your income with passive income in a short (as possible) timeframe or build a substantial asset base using gearing and retire debt by selling at a later date?Regards
SMTM
SMTM
I’m always looking at different properties, my – geared properties now achieving nuetral to positive gearing.
If i purchase rural propertiy achieving + cash flow i’ll only do so with a potential of some CG in the future, and have put some time into looking at areas of consistent ( albiet in some areas,slow) population growth over the last few years. In areas such as these i want a reasonable tenant base.
The doubt really is at this stage which will achieve a better return over the short term..
The properties in the larger area are cheap compared to nearby and larger blocks, however purchasing here will negate any further investment oppurtunities in the short term ( as i believe i will be near my loan serviceability limit, and probally my own safety limit ) the options here however would be to develop the site ( sub-divide and sell a portion- putting me back in contention, or sub-divide and use a contact in the industry who will build and sell for a portion of the realised profit )
An option i thought was possibly buy the cheaper property in a smaller area, possibly with the extra cash flow my serviceability would not be damaged and i could again purchase the property in a larger area..Eating my cake now[
]All just ideas that i’m tossing around at the moment.. i have 5 days off soon and will visit both areas, getting a better idea of the regions, i’ll also be visiting R/E agents here..
I feel i have to get the momentum happening again, have spoken to my broker, know my limits etc..
Oh.. not interested in the selling option, prefer buy ‘n’ hold
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Redwing
Old saying, “To take no action is in itself an action”.
Yes with the neg gearing one tends to run out of cashflow at some stage, but with (most of) the pos stuff you want to be putting regular money into the loan else you run out of equity. I know this has not been strictly true in recent years but I think this has been an abboration and things will revert to the mean here on in.
A lot of my wife’s clients come from the farming regions and almost all of them say that their children and the younger generations are leaving and moving to the city. If true it doesn’t bode well for some of these communities.
I remember playing sporting carnivals in a lot of these areas but I believe many of the towns no longer have sufficient players to continue.Anyhow good luck with your search.
SMTM
Originally posted by redwing:however purchasing here will negate any further investment oppurtunities in the short term ( as i believe i will be near my loan serviceability limit, and probally my own safety limit )
Redwing, as a matter of interest for my own situation, what do you see as reaching a loan serviceability “limit”? Is that 4 times your income? 5 times your income etc? What about comfort level?
If there are any broker types on here… *pokes and prods Simon*, when do the banks stop loaning money? In terms of serviceability (and I know all the banks have different criteria), do the banks add up your salary, your rental income, take 70% of that, and then multiply it times 4 or something??
kay henry
Kay, a rough, very rough, rule of thumb is that the interest needs to be covered three times by your income.
As far as rental income is concerned, with St George for example 80% of rental income is taken into consideration.
Other lenders may use a different percentage.
The reason the whole of the rental income isn’t accepted as income is so as to allow for outgoings like rates, vacancies, maintenance etc.
It is also interesting to know that banks etc calculate one’s ability to service a loan by applying (for calculating purposes) a higher rate than what they will actually charge you.
The reason of course is to allow for a safety cushion in case there is a rate increase in the future.
It also is common practice to use figures on a Principle & Interest basis even though your loan may be an Interest Only loan.
As to the question when the banks stop lending is concerned, there is not really a limit provided the serviceability is there.
Some banks do have dollar limits, certainly. One bank I can think of has a $ 3 M total loan exposure (including loans with other lenders).
The moment a bank’s homeloan section (or their mortgage insurer) cannot handle it anymore you can be switched to the bank’s commercial section.
A much bigger hurdle actually are put up by the two mortgage insurers which have limits on each individual loan and on each individual’s total loan exposure.
It isn’t possible (for me at least) to provide further general details as the situation varies from lender to lender.
There are also loan moneys available from second tier lenders who have more liberal lending rules. Yet some of these do not necessarily have what I would call excessive interest rates.
I am sure other brokers may like to add to the above.
Pisces
Pisces, who are these 2nd tier lenders?. Do they have a retail shopfront,or are they the realm of the brokers?
Regards, Terry
I am sure that most brokers on this site would have access to such lenders Terry.
Pisces
Kay
i agree with Pisces above. It is hard to say exactly what the limits are because it varies between lenders so much, and even with the one lender, it still varies lot.
As a guide, the two mortgage insurers have a limit of $800,000 and $750,000 each. So about $1.5 million in total is possible by using both. That is one reason to be careful when using low doc loans. Some are mortgage insured, behind the scenes, and you may not know they are eating into your limits.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry
There are private type lenders out there who will lend up to 70% LVR without many restrictions, rates are a bit higher (starting around 8%). You can also go up to about 80% LVR using a second mortgage – high rates. They are mainly interested in the securtiy, and may not even check your CRAA.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
]”confused”
] what to do…
]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
