First Steps to owning an IP

My partner and myself only started property investing 2 years ago and we are in your age bracket also – I found it bit hard at first taking the first steps however we are now purchasing our 3rd one so it does get simpler.
When we started out I just looked for property initially, went to seminars and read everything I could lay my hands on as far as IP’s go.
We ended up finding a property first and then applied for the finance however there is nothing stopping you from approaching a few banks initially however they may want to charge you for a valuation if you have not got a definite property you want to borrow for (this charge should only be approx $150).I would not pay any application or valuation fees if you find a property and then apply for finance – most banks can offer finance without charging you for these items but be careful they can hit you afterwards with ongoing account keeping fees which are too high – take this into account when looking at your overall profitability.
The equity in your home depends on the value of your property and any remaining finance you have on it.
Remember that the structure you have in place before purchasing may be an important point to look at if your intention is to buy mutiple properties for both asset protection and tax minimisation purposes – doing it over again I would have looked at this more closely in the beginning.
The traditional banks will lend you up to 100% plus costs of your purchase using your home as equity.
Your strategy is important also – what is your plan – do you want to purchase based on the growth you may get (this can limit your number of purchases) or outright positive cashflow – this is something else I would have considered more carefully in the beginning – if for positive cashflow then try to save the deposit and costs amount then use the equity in your home to finance the rest – this will give you the best outcome.
We bought for growth and we have been fortunate in that we have attained $115k in extra equity for just the 2 properties in the last 2 years however on the downside they are negatively geared but positive cashflow because of the depreciation claims.
You mentioned you have a LOC – you can use whatever credit balance you have for the deposit and costs(you do not have to justify to anyone what you are using this for)and then approach the bank (once you find a IP to purchase) to add the new IP as security against your LOC and raise your LOC limit.
Hope I have been able to assist – there is so much information around and so much to learn – I have just brushed the surface.
But remember you have to take action and there is no time like the present – you should be able to get some good deals at the moment – it just takes a lot of time in looking around to find them.

MIKALA

Hi Jenny,

Just after reading Simon’s reply – no offense intended Simon – however be careful of broker’s advice – they do receive commisions after all so make sure they declare to you what they are getting out of their advice to you regarding which loan to go for….personally I check out the information from the horses mouth so to speak – takes a bit of time and a few calls however I do not need to worry that I am being undully influenced to go with a particular lender and base my decision on the best deal I can get – doing this you can sometimes get something better by playing off the lenders against each other..eg no fees etc …they all want your business

MIKALA

Hi

I’ve been working in mortgage broking and management for nearly three years. I also assist my clients source out properties, I may be able to help.

Your bank or mortgage broker normally, will give you an indicative figure on what you can borrow based on your income, your existing level of debt, the deposit you have available to use for the purchase, the projected rental on the new purchase and of course the area and type of dwelling you intend to buy.

Going by your message, you obviously have all the information, except the location or type of property?

That’s easy to fix, as I am sure you have an idea of what you want to purchase, in addition you also have an idea of the of cashflow you have available to fund the ongoing investment costs.

These are your starting points. So let’s say you have $100 pw to spare then you know that you can contribute $100 pw towards this property(ies).

If you don’t want/can’t contribute anything then you need to look for cash positive/neutral properties.

Then your other critical points are your needs/wants out of property investing. Ie: capital gain or cashflow.

These are indicators to help you determine the type of property you should start to look for and of course the location.

Now back to lending, you should always get a finance pre-approval before you seriously start hunting down a property. Immagine finding a great property and someone else will beat you to it because you are not finance ready!

There is no problem getting this as the pre-approval would be subject to valuation.

At worst if the lender that gave you the pre-approval will not accept the property you have chosen, a good broker should be able to get you finance through someone else.

I hope this helps. It’s easy:
1)Determine your cashflow
2)Determine your needs/wants
3)Determine your location preferences
4)Obtain a pre-approval
5)Start a serious property search.

Good Luck

Maria