Hey Guys,
Im looking to get into the property market ASAP to try to capatalise on the strong rent increases tipped to continue through this year.
I recently have moved into a job that has a salary, so i am able to finally have a bank look at me, i have been in the position for 2 months, been with the company for 9 months and earn $43,000.
I am looking to buy a property around $200k mark, however i am looking into options about how to finance this. I have access to the first home buyers grant, however i am looking for properties that will make money from day 1, and since i will need to move into a house for at least 6 months this may not be the best option.
My perants may be able to help with a garantee once they sell there house in November, and im sure i would be able to borrow more if i got rid of my $7000 cc debt. To top it off i currently have no money for a deposit (although i can save it in time).
I am looking for suggestions on how i should go about obtaining finace, if there is any ideal structure i should be looking for (for multipul properties down the line)? or any other information that may help.
Cheers guys,
Carl
Young people have experience as well
There are some people who offer ‘lease to buy’ and ‘wraps’ options for those who wish to buy who are, for whatever reason, unable to obtain finance, or don’t have a deposit etc. These may be options for you to use to buy a property, but it will involve you living there and paying rent/mortgage payments for a while.
You could ask your parents to provide a deposit out of their home equity, or after they sell later in the year, and you obtain a loan for the balance of the funds needed.
The problem there is you will have borrowed funds on over 100% of the property value (assuming your parents charge you interest on the funds they loan you), and it is harder to find a deal that will make money from ‘day 1’ with that equation. It can be done, but you have to maximise every single angle of the purchase.
For example;
1. good land content in property for cap gain.
2. built after 1987 for maximimum depreciation claims on your tax return.
3. area of strong rental demand and return.
4. close to all amenities such as schools, malls, parks etc.
5. buy under market value.
6. property must have ‘add value’ component such as subdivision or reno to increase cap value and rent return.
7. the right loan structure for future investing.
8. potential for cap growth – local govt projects, new malls, improved transport and access to cities, undervalued suburb etc.I would be getting rid of the c/c debt as fast as possible first though. This is the most expensive money you can borrow, and Banks look unfavourably at people with high c/c debt without much savings and/or assets. Rightly or wrongly, they view this as you not being good with managing money.
Also, when you get rid of the c/c debt, reduce the limit to about $1k as the limit of your c/c – not the balance owed, is what the Banks consider when they look at your loan serviceability. In other words; if your limit is $8k, but you only owe $1k, the bank work your servicability as if you owe $8k – not good.
I wouldn’t be in too big a hurry to buy just because the rent is going up. This normally happens after a boom; it’s part of the never-ending property cycle.
Instead, look at spending the next 12 months living frugally, reducing that c/c debt and saving for a deposit. It will be a tough year, but will be worth many thousands of nett worth down the track.
Also use this time to learn more, study the market and look for areas that contain those factors mentioned above. Read all of Margaret Lomas’ books for a start; they are excellent and will help you to buy property without risk and maximum returns.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Cheers for the reply, i guess my major problem is i have read all the books avaliable for Aussie property investing (and other forms of investing). I have a great knowledge of my market area (i work in construction majoring in market analysis and valuation).
But your right, i gotta get rid of the cc before moving on, cheers for you comments.
Carl
Hi Carl
Sometime ago, Richard Taylor put up a post on shared equity loans/mortgages. This may offer you another option for your situation.
Hopefully he can respond to your situation with some insights.
While there were mixed feelings about the pros & cons of these arrangements, I think it’s important to consider critically whether it suits your needs and might allow you to enter the market if that’s your major goal.
Gary
Author of “Property Millionaire, The Guidebook to Having Great Australian Dreams”
Creator of Property Millionaire – The Boardgame
http://www.888abundance.com
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