Hi Guys/Gals,
Killer community you’ve got here. I’ve got simple question that I can’t find on the site here. (I think I’m not searching properly)Question: If I buy a property at about the max that I can afford (according to the bank), how do I get a 2nd property even if the renter is covering the mortgage on the first?
Do they take all of this into account even though I would be personally “maxed” out on my credit?
Thanks in advance.
Little bit about my situation:
– I am on my 2nd real estate book.
– small business owner with a single income.
– renting at the moment.
– I am in my 2nd year of business but not showing a lot of income ($24,000 last year)
– Liabilities 0 – no Credit Cards, no car loan, etc.Do I have a chance after I secure my first IP?
After reading my first post I don’t think I made a ton of sense. Here’s another go at it.
How do I buy another property with my first property just paying for itself? How do I convince the bank that I can afford to get another IP?
Well there is a few ways, get the property revaluaed in 6 months and see if the banks will lend you more.
The otherway is to add the rent to your income (and deduct the mortgage payments). THis calculator will give you a general idea on how much you can borrow: http://moneymanager.smh.com.au/tools/calculators/borrowingpower.html
Otherwise it means saving up 20% for no/low docs home loan (or borrowing of family/friends).
Rgds.
Lucifer_auI believe it comes down to cashflow and I believe the banks look at worst case scenarios and sees if you have enough cash to cover all loans.
If I am right, let me know if I am not, then you need to improve your cashflow scenario.
wejons1
Thank you for the responses but I want to make sure I understand.
If I buy a condo and the total mortgage and fees = $850 and the renter is paying $900.
Now, my salary hasn’t increased and the condo was all I could afford according to the bank, what are my options of getting IP #2? Do I need to save another 5%-20% for the next property off of the $50 coming in off the rental or will the bank see that this property pays for itself and “start me over”?
Thanks again! I’m such a noob
Or (thinking more about what lucifer was saying) do I claim that I make $900 more in income and write off the mortgage? Does this make any sense?
how long can you service the debt if there is no tenant?
you have to look at that, you are not always going to have a tenant, your income must provide for it
that is why people have to stop at a few properties if the have negative geared them
wejons1
Hi Piece,
When lenders are assessing your borrowing capacity they will consider your ability to service the loan (make payments) and also the amount of security you have.
Initially lenders are primarily concerned with your core income level which does include a varying recognition of rental income (your DSR). Some banks have a more generous recognition of rental income than others (up to around 75-80% is fairly typical). Banks get a little twicthy when your loan repayments get to around 30-35% of your gross recognisable income.
The other issue is the ratio between the value of the assets and your debt levels your loan value ratio (LVR). Banks are generally very comfortable when your loans are up to 80% of the value of your assets. Over 80% they will still do the business but will normally require you pay lenders mortgage insurance.
Ultimately you are best placed talking to a savvy mortgage broker as they will be able to fit you with the best lender for your short and long term circumstances.
A well structure loan portfolio in the beginning can be very advantageous in the long run.
Derek
[email protected]Property investment support – starts but never stops.
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