Hi Guys,
I am trying to get my head around the whole finance thing and have got a few questions.
Based on my current wage of $55,000 per year I can borrow up to $300,000. When I sell my current PPOR in October I will have approximately $100,000 cash to start investing. I have decided to move back in with my parents so rent wont be an issue for the next 1 or 2 years.
I want to buy as many investment properties as possible with the 100k and I will either rent them from day one or renovate then rent.
Say if I buy 4 properties and use $25k deposit for each and take out the $300,000 loan. This will leave me with $75k for each property and will equal a total of $100k per property (75k loan + 25k deposit). LVR will also be less than 80% so I won’t need mortgage insurance.
Where do I go from here ? How do I access more funds to purchase more properties ? Do the banks add your rental income to your wage to calculate a new maximum loan limit ? How do I access the equity in my properties and does this mean I can borrow more cash ? Steve always says money follows management !!!
When I read about what the Mappers have done in Steve’s latest book I was amazed ! Some couples started with as little as 60k and brought multiple properties in a very short amount of time !
Any advice would be greatly appreciated !
Brad
Originally posted by Bradles C:Say if I buy 4 properties and use $25k deposit for each and take out the $300,000 loan. This will leave me with $75k for each property and will equal a total of $100k per property (75k loan + 25k deposit). LVR will also be less than 80% so I won’t need mortgage insurance.
You also need to make allowance for closing costs to cover stamp duty, legal fees, etc. This is about 4-5% per property.
Where do I go from here ? How do I access more funds to purchase more properties ? Do the banks add your rental income to your wage to calculate a new maximum loan limit ? How do I access the equity in my properties and does this mean I can borrow more cash ? Steve always says money follows management !!!
More funds are accessed through more savings, higher percentage borrowing levels or increasing loans as equity grows. The lenders will use rental income to help servicing. Accessing equity is merely as simple as applying for an increase to existing loans.
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[withstupid]
The forumite formally known as Big RobOnce you run out of deposit money, you need to either save, wait for growth, or both. Or you could get creative…
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Thanks heaps for the feedback guys !
Terry, can you please give me a few ideas as to how I can be “creative” to fast track my property purchases. Trying to save for future deposits while I am paying off a $300,000 loan on a single income could take years !!!
Brad
heaps of ways such as:
-adding value to increase equity
-lease optioning your property so you can collect a deposit which can be used for the next one
-wrapping so you get a deposit
-buying something undervalue
-stacking the contract to a higher amount with a rebate at settlement (some people consider this illegal!! – its not).
etcTerryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Hey Bradles
If you do it right, you won’t be paying off $300,000 on a single wage. You will do your research properly to ensure that the properties you buy will be at least CF neutral, and will pay themselves off. Then your single wage will be free to be used for other things [biggrin].
Cheers
Kez
More investment strategies —> http://www.21stcenturyacademy.com.au/cmd.php?af=199400
Thanks Terry and Kerri, great advice !
In theory, if I had 4 cash flow neutral deals that were paying off my loan, is it possible to borrow an extra $300,000 on top of the $300,000 already borrowed ? Do the banks regard rental income the same as the income from your job ? I assume they use a percentage of the rental income (to safeguard against possible vacancy) ?
Cheers [biggrin]
Most Lenders will take 80% of rental income towards servicing loans.
I have just done a quick borrowing cap and I think you can borrow a bit more than $300k.
If you want to message me, I can give some maximum borrowing caps for different lenders.
Kerri
Financial Wellbeing Coach
W: http://www.pfsfinance.com.au
E:[email protected]
E:[email protected]Development Finance Specialist
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