I am keen to pursue property investing and my partner and I have acquired the property listed below over the last four years. Up until now I have been working fulltime but would dearly like to cease employment or switch to part time to fully concentrate on property investing focusing on acquiring positive cashflow props, reno’s and flips. However, I fear we will not be able to move forward as while I think we have enough equity I believe we may not fulfil a lenders criteria for serviceability. I would be most grateful for some advice regarding this.
Current situation
* Waterfront canal block – Paid $142,000, current value $295.000.
* 3 x 1 bed House on duplex development block – Paid $156,000 current value $240,000 and negatively geared
*2 b’room unit – Paid $73,000 current value $170,000 and neutrally geared.
*Current Principal state of residence – 4 x 2 – recently purchased for $290,000.All loans (except the block) are interest only. I am considering selling the unit and realising gains that can then be used as deposits to put down on other properties (i.e in line with steve’s multiplication by division theory). However, that wouldn’t change our serviceability situation would it? Our current combined incomes including 80% of annual rental returns are around $110,000.We are wanting to build and settle on the block in 5 years so selling that (despite receiving nil tax benefits in the short term!!)isn’t an option we really wish to consider.
Very confused as to what to do next in order to move forward
Kind Regards
Kylie [biggrin]Well, the 3×1 and the 4×2 has confused me. Is this 3 bedrooms and 1 bathroom and 4 bedrooms and 2 bathrooms?
Have you discussed your serviceability with any lenders or a mortgage broker? You may be concerned for no reason.
There are many ways you could proceed to achieve what you want to do but without knowing all your details, the correct advice is difficult to give.
One option would be low doc if you have not done your tax returns yet for all your investment income.
Remember, any additional investment property purchases will add to your serviceability.
You can run through a serviceability calculation with most brokers from this website over the telephone. Try giving one a call to see what the result is.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi Kylie,
Just my 2 cents. We had the same problem with an amazing gain in equity but problems with the bank regarding serviceability. We had huge debt,including our PPOR.What we decided and this is purely our choice was to sell one of our properties to reduce debt on our PPOR. Of course you will have to pay capital gains at tax time.This freed up some money to clear up our PPOR mortgage and also got rid of a property that was costing us each week, the following tax year we sold another one this cleared up the mortgage of one of the investment properties and got rid of another property that was costing us money. We are now pouring all our money into the remaining investment property mortgages. We are now very popular with the banks, still have good equity and now have income flowing from the investment properties.We are still looking for properties and hope to purchase in the new year.[biggrin]Martin
Thank you Martin and Robert for your advice. Its very much appreciated. I will certainly run our current situation by a broker and see what they recommend. Although I recall that we were initally declined for the most recent loan on our PPOR due to the ANZ’s concern regarding our serviceability. I have a feeling that we may need to take a similar road as yourself Martin[biggrin] Have a lovely new year and I hope it brings you both lots of opportunities!
Many Thanks KylieKylie,
See the broker – just because ANZ have issues doesn’t mean that other lenders will do so as well. There can be some surprising differences in their servicability calculators[biggrin]
All the best,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
***3 year fixed – 6.49%***Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
ANZ has one of the toughest serviceability calculators in the market. Don’t get disheartened.
I must also add that there are a lot of good brokers using this forum. Why not pick one???
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdNo problem Kylie,
We certainly sleep better knowing we have reduced our debt a fair bit and now have a bit of a buffer. The banks certainly like to have themselves in a win win situation so the way they check servicability is stringent. There are many strategies out there pick the one that is most comfortable for you. Its always good to know you have the ability to purchase if a good deal comes along or when an unexpected event comes along. Many people are flying close to the wind at present and if circumstances change it could be a disaster ie rates, tenancy problems etc.Good Luck. Make sure you do whats right for you and not what people think is right for you.[biggrin]Martin
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