Hi all,
This question involves my parents..
It seems as though they may be stuck in a rut.. My parents have only 1 property (our PPOR), which they have not yet paid off.. they are still owing aprrox $155,000 and it is currently worth approx $425,000.
They would like to invest in property, although are not too familiar with CF+ve investing. Ok here’s where the problem is.. out of both my parents, my dad is the only one with a full time job..he was out of work for almost 2 yrs when he was made redundant from his previous job..and even though he now has full time work, he has had a significant pay cut (previously $90k salary, now $66k).
Mum, on the other hand has not worked full time since ’98, and at her age it has become dificult to find suitable full time job.
Basically, they are in a position where they see property investment as their “lifesaver” as they head towards their retirement days, but how would they be able to borrow money for IPs on a single income??
Is it too late for them?? What options do they have? From what i know (which isnt much!), CF+ve investment seems the way to go (to assist in paying off the current mortgage), but again, how would they go about this when banks would see them as high risk?
I am working full time, so have considered using me as another source of income, but then I worry about where that leaves *my* future as that would limit my ability to purchase properties of my own. The other problem too is my younger sister who is 14 is still dependent on them.
I don’t know what to do as I desperately want to help my parents.. Reading Steve’s book gave me that lil bit of hope, but I am still so clueless myself!Please can any one give any advice??
[worried] Sleepless
It isn’ too late at all. They have massive equity built into their proeprty, and I think there would be a couple of banks that would probably lend them 105% of a property’s price (Commonwealth – but go through a mortgage broker, preferable one on this forum). You father could borrow approx. $400K.
Rgds.
Lucifer_auNo, it’s not too late. They can get an asset lend against their own house quite easily. Then again with any new property. They will also have rent to use for serviceability which may help them borrow more. Asset lends are generally 65% – 75% LVR.
Good luck!
Tracey[biggrin]Sarah, it’s never too late to get into investment and your parents seem to have the capacity to purchase several properties with your father’s income and the equity in their PPoR. There’s no age discrimination. I would go through a broker. The brokers on this site are really helpful – maybe your parents could contact them for reassurance that they are in a position to purchase. The advice on the forum is so much better than from friends or family who are not interested in investing and who might tend to discourage your parents.
We’re in late 50’s and have purchased 10 properties in less than 3 years and that is with neither of us in full time employment, in fact I completely retired out of the workforce because I like to renovate and don’t want to be tied down to having to go to work anyway. We’ve renovated several properties which has considerably increased equity and rental.
You don’t have to have two incomes to borrow money. Our loans are in two names, even though some of the properties are not, but your parents need to write down their goals, work out their strategies, time frames, whether purchasing to renovate and sell or hold and tenant the property, work out tax implications, but they would be well advised to talk to an accountant who is into property investing so they know and understand what investing is all about. The accountant will advise on who’s name or names the property should be. They need to think about what type of property, houses or units (look at body corp fees here), and what price range. A lesser purchase price, more properties can be purchased. When looking, get a rental appraisal so you know what income you will get. The lender also takes a percentage of this into account as your income. Look at the vacancy rates for the area. Buy near shopping, schools, transport, where people want to live for convenience and work.
We have done well buying at the cheaper end of the market and look at not having to worry if one out of 10 is untenanted as we are still getting income from the rest. But that was just our strategy and we achieved our goal in a short space of time. We would have done a few things differently, bought more and have learnt lots along the way. Always looking for opportunities and they are out there. We will buy again.
Yes, on any application for finance, dependents are taken into account. But that isn’t a problem. I would say there is no need for you to be involved in their investing, but you might want to but a property between say you and your father. Then your income is taken into it, plus you get half the rent and are up for half the expenses and half the rent goes into your tax return as income. You get depreciation benefits between you too. We have a unit between hubby and daughter.
Hope they get started soon. Good luck.
Anna
Thanks Anna, Tracey and Lucifer_au for your advice!
Let me Just get a few things straight so i know if i’m understanding it right.. With the equity my parents have on their PPOR, they would be able to obtain loans for further properties? What i’m not getting is that don’t banks look at your ability to service the loan, and considering my parents have still $150k on their mortgage and only $66k guaranteed annual income.. how are they able to borrow?
I understand they can go for asset lends (is that the same as no doc home loan?)..And to get an asset lend, wouldnt they need a huge deposit of like 40%?? If that’s the case, that seems almost impossible!
Anna, are the properties you’ve purchased all CF+ve properties? and are they all within NSW? or have you and husband purchased in other states aswell.
And can you recommend any brokers that would be able to help in my parents’ case?Banks look at a lot of figures to come up on how much they will lend on, this includes rental on the place you are buying, income level, no. of dependants, other debt (credit cards really reduce the amount you can borrow), etc. Banks look at equity in property as roughly the equivilant to cash though, so while you dather might have a ‘low’ income (actually it’s quite high, over the average), your parents have alot of ‘cash’.
Your parents could borrow $400K, with 5% deposit, or they could use the equity in their PPOR to put down 20% deposits on IPs and get no docs IP loans (you could buy 9 IPs valued at $100K, with providing very little financials).
Or you could, as I suggested before, 105% loans, though they demand financials. Also servicability becomes more of a factor. Check how m8uch you can borrow: http://moneymanager.smh.com.au/tools/calculators/borrowingpower.html
It is best to get a mortgage broker though (rather than doing it yourself), since they are the experts. Check out the Finance section of this forum. TerryW is good, but there is also others, that might fit your parents criteria.
CF+ properties are basically in rurual NSW (so 4hrs. away from Syd), but because of the new land tax, I would seriously consider doing your investing in another state or NZ.
Rgds.
Lucifer_auDefinitely contact the brokers on this site Sarah, they will put the figures together and explain it all. Lucifer has explained how your parents could probably buy several properties through using equity as a deposit. They could probably get a line of credit so the deposit is available as soon as they find a property.
We have a mix of positive and negative, houses and units, here and interstate with a few of the units being bought sight unseen. which we since visited though.
Anna
You must be logged in to reply to this topic. If you don't have an account, you can register here.
