Hi, I have an Investment Property and my residential property with plenty of equity, but not much cash for a deposit on a 2nd Investment property which I'd like to buy. I am looking close to Melbourne like Balwyn etc where units cost say $400-$500K at the lower end. If I was to borrow to the max then my loan repayments (say approx $2,500 p/m) would far exceed the rental which would be say approx $1300 p/m.
Any suggestions on how I could afford my 2nd investment property or am I just dreaming?
Striker
Email MeI'll be really interested to see the suggestions you receive. I have over 600000 in equity and not enough cash flow to leverage it. What a waste.
S
Maybe review the location and price range?
I too will be interested to see more financial responses.
Can you afford to support any shortfall in repayments (post negative gearing etc etc) if so there are a couple of lodoc style products at standard interest rates that maybe able to accomadate a situation like yours.
Course like anything further information would be required but a loan restructure should get you there.
Richard Taylor | Australia's leading private lender
I too have hit a ceiling on my ability to borrow more. I am half self-employed and half salaried (it’s complicated!) My bank has told me that even though my portfolio is cahflow positive and the deals I am looking at are cashflow positive, because my tax return doesn’t show significant earned income, I can’t borrow any more.
I have good equity and so if any one know of more flexible lending criteria, I’d be keen to find out, otherwise I am going to have sell part of the portfolio before I invest again.
Luke
I don't understand? So how do I qualify for a 450k new home which costs me $80 a week. I too have lots of equity and a salary of over $70k I had no problem. Why don't they use your home as security? Why don't you give a financ broker a go?
Banks don't seem to like the self-employed and contractors very much at the moment
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I feel like a broken record.
Got anything in your super?
Hi Dylan
It doesnt work like that regretfully.
Each lender uses a different serviceability model so doesnt suprise me if you have come up again a Bank that says no more.
As i mentioned earlier there are varies ways to skin a cat it just depends on what you trying to do and whether you feel you can afford the loan.
Richard Taylor | Australia's leading private lender
Ben I hate to say it, but… maybe no one actually really has any super to use, and anyone who did is probably waiting until all the mess gets cleaned up first and a precedent is set for the whole thing.
SHales can you get a money partner? Someone who has plenty of cash flow who you can do up an agreement with?
jamescameron maybe you can shop a bit further out and try to get something that is closer to positive cashflow? Yeah it wont be as nice an area but it wont stretch you as much.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeHi Benjamin, what's the standard % deposit a SMSF has to contribute to a property? And are the banks currently being less difficult in lending to an SMSF rather than an individual?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Jac
Rule of thumb max loan 70% and no dont difficult to get a loan approved but just be prepared for paperwork coming out of your ears and a fair bit of lenders costs.
Do them fairly regularly and they dont get any easier.
Richard Taylor | Australia's leading private lender
Richards on the ball.
As far as the headaches go, they're more headaches for guys like Richard that has to do it, more than the client who asks to get it done. (Sorry Richard.)
It's easy enough to get a SMSF loan at 70%.
So, Benjamin or Richard…….how does one use Super to invest in property? I have Super but it's not self managed – can I still do it? Also, as this concept is a bit foreign to me, will it help with the struggling cash flow situation that I am in or is it there to assist more with the equity side of things?
James
Striker
Email MeHi James
No you need to have your Super in a SMSF as an industry fund wont cater for this.
Wont help increase your cash flow at all as the shortfall / surplus will be in your Super fund.
Sounds to me like ideally you need to restructure your loans to free up some equity to enable you to go forward.
Richard Taylor | Australia's leading private lender
Fair enough Richard, restructure loans you say. Come the end of 2010, I will have paid out the remaining $65K on our mortgages and will have 100% equity in our real estate (investment and PPOR) and cattle (about $150K worth). We have negligble personal borrowings. I don't know how to restructure this.
But, still, two properties are going to struggle to make the repayment on the newly acquired property (because the new one is worth twice the old one)
It seems to me that jamescameron and I have a similar problem – returns are only 6% and we don't jave the cash to make up the shortfall.
One idea I'd like to explore is using the sharemarket to build deposits. A carefully selected, positively geared share portfolio might be a way to build wealth without borrowing half a mil. I have no knowledge of the share market but my Dad's portfolio returns greater than 10% in dividends, with cap growth on top.
Yes either looking at a share portfolio or increasing income through options is one way.
Other way is of course buying a property and have the interest capitalised to a separate Line of Credit.
You would need to get specific Tax advice over this.Alternatively, look at using a LOC to pre-pay the interest annual in advance each year and then having the rent and income going into the same account to reimburse to credit limit.
Also consider something fairly new so to maximise the non cash deductions such as Capital Allowance and Depreciation.
Remember whilst a property might start off as negatively geared it doesnt take long to become neutral and then positvely geared.Individual information on your circumstances would be need to provide you with lending options.
Richard Taylor | Australia's leading private lender
Those are useful variations on the standard approaches to finance. I'd like to see us pay property off (ie make repayments on principle and interest). I can't get around (perhaps you can) the fact that in order to pay the principle off, I need the repayments to be greater than the interest expense, and therefor, I need the net property return to be greater than the interest rate. The answer lies not so much in finance structure (though I'm quite certain that clever finance structure has important consequences for tax and for future flexibility), but in the structure of my investment – to achieve a greater cash flow return than the interest expense – which is a big ask at 100% finance.
Perhaps, jamescameron, the answer for us lies in making our second investment cheaper than the first, or the same price. If I were to purchase a second investment home at the same value as the first, the two would make their own repayments. My desire to purchase a more expensive one (as a part of a plan for a future ppor in a certain area) is stuffing that up.
Discussions such as these are useful. They make us think.
S
You must be logged in to reply to this topic. If you don't have an account, you can register here.
