Hi All,
I have just read Steve Mcknight's book among others and am very excited to begin my property investment path. When starting to invest what should be the first step to setting up structures or working out how much I can borrow etc, should I first see a financier or an accountant??
Any help would be appreciated
Cheers JaredHi Jared,
I'd imagine if you are just starting out, you want to have a vague idea of how much you can borrow. This will at least help you establish where you can afford to buy, and what type of property.
A good place to start is actually Microsoft Excel! Making a list of all your living costs, and working out how much money you have left in your take home pay each month for "extras and luxuries" such as property investment. You'd want to include in your spreadsheet things such as:
How much you spend per month on:
Buying and cleaning work clothes
Travel costs (train/bus)
Car costs (registration, insurance, road tolls, parking expenses, petrol, servicing, extra things such as replacement tyres)
Birthday and christmas presents
Socialising (yes, you need to have a life!)
Health insurance
Medications
Any current loans you are obliged to repay
Any expenses regarding where you live (rent, council rates, water bill, electricity, gas, or perhaps board costs at mum and dad's)
Food costsOnce you have worked out your monthly "What it costs to be me" figure, compare that to your take-home pay. That is not your annual gross pay divided by 12, because that is the figure before taxes and superannuation are removed. You need to look at the net figure. In other words, what your employer pays into your bank account each month. How does this figure compare with your costs figure? How much is left over? This is the amount you have to contribute towards investments each month. Ideally you also have a stash of cash already to use as a deposit. You'll probably require 10% of a property value (so $20k on something worth $200k).
There are some online calculators which can help you confirm your thoughts. If you google "how much can i borrow" you would find them.
After that, the bank can actually sit down with you and tell you how much they will loan you, and what you can afford to repay on a home/investment loan.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Jared,
If you are serious about investing in property and want to build a substantial portfolio you will need first and formost to ensure that you a) find the right accountant and b) structure your finance correctly to ensure that you can leverage yourself into your next property and you don't hit a wall through your lending capacity due to your finance being structured wrong.
Finance structure is paramount to your success.
You might like to enlist the help of a broker to source the right package initially (but do your own homework first regarding the structure) and once you are confident enough with what you need to do take over the reigns yourself from there.
Thanks yor advice,
Johno, you talk about using the right structure so you can leverage and borrow more to continue investing. Is it the accountant that will crunch the numbers and find the best structure to suit my situation? Is it easier to continue to borrow money when you are structured through trusts/company's?
Thanks slot for everyone's help
Hi Jared
Welcome to the forum.
Without being funny your Accountant will have very little idea on what is out there in the lending market.
Certainly he can advise you on Tax effective structures and look at ways to reduce you cash flow but as to how to structure a home loan he will be a fish out of water.
There is no point in paying out significant $$$ in advice fees or set up costs for expensive structures if you can finance the deal correctly.
Richard Taylor | Australia's leading private lender
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