Buying next IP

Given that a lot of markets are sliding at the moment, it may be quite easy to get a property cheap in the near future.
You never know what offers a Vendor will accept, so you can offer as low as you think you can get away with, but you have to be realistic. For example, if you wanted $200k for your house, and someone offered you $150k how would you feel? I think if you are looking to low ball the Vendor you may need to make it a win-win. You may have to offer a very short settlement for example, and/or show good intention by handing over a sizeable deposit cheque when you sign.

How much you spend is decided by your financial position.
Keep in mind that generally the cheaper properties are easier to rent, easier to sell and also have better rent returns. A cheaper property is one that is below the median for that particular neighborhood.

Before heading to the bank, get your financial records in order – do a comprehensive financial statement as the bank will want the info anyway to work out how much they will lend you. Apart from that it is a good financial practice and good habits to be on top of your financials. If you are going to be successful in this caper you will need to be very financially literate (please don’t think I am trying to tell you how to suck eggs).

As a rule, banks will allow you to commit up to 35% of your income on loan repayments. This includes any existing loans and c/cards.
The bank will also take into consideration the rental return when they assess your loan serviceability, but this figure will vary from bank to bank. Some will only consider around 70% of the rent, others up to 80% or maybe higher – you will need to shop around on that. I know that St.George do 80% because I am with them.

Cheers,
Marc.
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