Hi there,
I'm located in NW QLD. We have a positively geared investment property near Toowoomba, and 100% equity in our first home. This was all achieved really just by luck. Now we are having to get smart to continue to build our portfolio.We've located a property that we'd like to buy and feel confident about its location and return. If we can get it for 430K or less it will positively gear. They've asked for offers over $400 and we've made an offer of $405K.
First question: Best finance option? Anyone had any experience with Onedirect? I'd like to fix for 5 yrs, as it suits our preferences for managing risk. Onedirect are $40 pw cheaper repayments than our bank (nab). Do you think we could pressure nab into giving us a better deal? I'd rather stay with nab because we have a long history with nab and a business banking manager there who is very helpful.
Second question: I'm in a position to source positively geared properties and sell them. My idea is to buy them cheap (you know, poorly marketed properties that are in my local area), get a tenant into them with a lease and sell them at a profit to an investor looking for a positively geared property. I was wondering if it would be against the rules to offer such properties for sale on this website? My largest anticipated problem is that they would be located in very small country towns, which many investors might find a big turn off. But I thought that selling them with a new tenant on a 12 month lease might go some way towards reassuring an investor who was nervous of the small town. Also, does everyone only consider a property positively geared if it can generate a positive cash flow on 100% finance? Or would everyone consider it positively geared if it only generated a positive cash flow with 80% finance? Like Steve says in his book – looking for a win win deal for all involved, and full disclosure of my profit to the investor who buys in the end.
Rattle on a bit, don't I?
Thanks in advance for any advice.
SaraHi
I'm suprised you're finding an abundance of positively geared properties for sale given the current climate. So the house you're about to buy for $405k has to be returning rent of 29.5k per annum or $600 per week to cover the interest rate? Seems high rent for country towns but if so good on you.
CarpeWe are currently negotiating rent with a corporation for about 800pw. There are two residences in the one property. It is sort of a duplex, I guess. And it is fully furnished. We don't anticipate needing a property manager if we deal with this particular corporation.
I wouldn't say that I have an abundance of properties, but that over the course of a year I might source two or three, tenant them then sell them on, if there is a market.
Sara
Do you think we could pressure nab into giving us a better deal? I'd rather stay with nab because we have a long history with nab and a business banking manager there who is very helpful.
Hi Sara. I think this is the main drama – if you can get a better deal or one you are comfortable with from a/your bank great, but history gets forgotten and business banking managers change, and thus (excuse the phrase) sentimentality should play no part in your decision if it takes the place of business sense. If your lender had a vested interest in his business I could appreciate that, but many business/relationship/whatever bankers get moved, replaced, retrenched and plain leave every week in the 'big4' banks, and while a good one can make it easier for you, remember they can only lend within the banks criteria anyway. If you plan on doing a bit of buying and quick turnover selling, you should consider using a line of credit secured against your home, rather than the hassle of getting a loan, and then the chance of exit fees and other penalties when you payout the loans early everytime you on sell one.
You are in a nice position equity wise, so enjoy the experience not just of getting the loan that suits you, but progressing further with your property. Let us know how you go.
Just bear in mind from a financiers perspective the increased rent by way of a lease to a mining corp or similar is not the figure that is considered for serviceability but more often the likely rent in a normal market as suggested by the Banks valuer.
In many cases i have seen the lender shave the rental figure they use (especially if the loan requires mortgage insurance) due to the inflated demand for property in certain regional areas.
Also bear in mind that the value will be reduced if it is furnished as leners down consider the furnings as an asset.
Richard Taylor | Australia's leading private lender
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