G'day all,
I would like any advice or what would you do in my situation.We live in Sydney,house worth 850k,our mortgage is 200k.That makes our equity around 650k.
We have 2 teenagers 15 and 12.Our income,me 75k,my wife 25k.Obviously i would go to a financial advisor with any ideas i may have,but im interested in what you Ladies and Gents have to say.I'm interested in buying a IP around Brisbane,(dont know which suburb yet).But what is scaring me off is the negative gearing figures.Say the house is worth 400k to 500k,i would need to borrow up to 90% of the total purchase costs.I would get rent of around $400 per week.Now the painfull bit,i would have to top up each week around $250 to cover the mortgage.This would be impossible for us.
Is there a way of greatly reducing the amount i pull out of my pocket each week?.Can i claim all of that $250 that i pay?
Is the above formula correct?.Am i aiming too high?.Would a lender be interested?
Thanks for any advice and comments.
Hi David
Firstly welcome to the forum and I hope you enjoy your time with us.
Have to say initially you dont get much in Brissie these days for $400K as prices seem to be forever increasing howevver
(Wonderful when you already own property in SE Q.) that is not say you cant stop looking.Lenders look at a combination of factors in assessing the risk with equity (obviously not a problem in your case) and serviceability being just a couple. Structuring the loan is also certainly important and a good investment orientated mortgage broker can assist you here.
Now as far as suburbs are concerned i guess it all depends on what you are after. I personally live in the Western Suburbs and have nearly of my IP's within 15 kms from where i live (odd exception).
With regards to the negative cash flow remember you add to your Taxable income the Gross rents you receive and then reduce your income by all of the expenses (both cash and non cash expenses). You then pay Tax on the adjusted balance.
As long as you are PAYG you can have your Tax coding adjusted so that you receive the additional Tax each pay period rather than having to wait until Year End when you lodge your Tax Return. Also remember when you purchase an IP depending on the age of the property you maybe able to claim non Tax expenses such as Depreciation and Capital Allowances.
A Quantity Surveyor can certainly give you a report on each property and is well worth the charge.
Feel free to drop me a line of you want a Residex report ran off for any particular property.
Richard Taylor | Australia's leading private lender
Richard is there a simple formula to use to work out what the monthly salary would be, incorporating interest from an IO loan of an investment property.
My wife and I are crunching the numbers at the moment to determine what our purchasing power is.
We have an Equity loan organised from my PPOR. The outstanding on the PPOR is $240K on a property recently valued at $1.25MM.
So the equity loan will be 100% of the purchase price.
Any advice and/or formula's I could apply would be great
Chris
david24 wrote:G'day all,
I would like any advice or what would you do in my situation.We live in Sydney,house worth 850k,our mortgage is 200k.That makes our equity around 650k.
We have 2 teenagers 15 and 12.Our income,me 75k,my wife 25k.Obviously i would go to a financial advisor with any ideas i may have,but im interested in what you Ladies and Gents have to say.Hi David, welcome to the forum. You might found that a financial advisor may steer you away from property as an asset class (not all – but some do).
david24 wrote:I'm interested in buying a IP around Brisbane,(dont know which suburb yet).But what is scaring me off is the negative gearing figures.Say the house is worth 400k to 500k,i would need to borrow up to 90% of the total purchase costs.I would get rent of around $400 per week.Now the painfull bit,i would have to top up each week around $250 to cover the mortgage.This would be impossible for us.
Is there a way of greatly reducing the amount i pull out of my pocket each week?.Can i claim all of that $250 that i pay?
Is the above formula correct?.Am i aiming too high?.Would a lender be interested?
Thanks for any advice and comments.
Have you considered looking into areas with a higher rental yield? If you look further south towards Logan you’ll find more affordable properties with decent yields. Obviously you’d have to carry out your own due diligence on particular areas but if cash flow is a concern than perhaps something that’s not so negatively geared would be a better alternative.
Another thing to remember is that rents generally increase overtime – which slowly reduces your costs.
All of Richards excellent points will improve cashflow as well.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
chappy1970 wrote:Richard is there a simple formula to use to work out what the monthly salary would be, incorporating interest from an IO loan of an investment property.My wife and I are crunching the numbers at the moment to determine what our purchasing power is.
We have an Equity loan organised from my PPOR. The outstanding on the PPOR is $240K on a property recently valued at $1.25MM.
So the equity loan will be 100% of the purchase price.
Any advice and/or formula's I could apply would be great
Chris
Sorry, I should have responded to this in the last post.
This spreadsheet will give you an idea of how much the IP will cost you to hold per week – http://www.passgo.com.au/pass-go-investment-property-analysis-tool
From that, you’ll be able to roughly work out how much cost p.a you could subtract from your annual income.
With that equity line. I’d take out enough to cover the 20% deposit plus costs (around $125k on a $500k purchase) and set up another loan for the remaining funds (possibly with another lender – depending on where the best deal is).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Oops – that’s embarrassing. I thought both posters were the same people. Anyways, Chris – I hope that last post helps. I used a $500k purchase an example because I thought I was responding to David.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Welcome David.
Richard and Jamie have 'nailed it'. By utilising Depreciation on your property in conjunction with Tax Variation (221d) your out-of-pocket costs could be reduced so much that you could end up with a neutrally or even positively geared property. Doing your 'due diligence' is a critical factor as well and you should avail yourself to all the research you can on a particular area before investing. The provided link will help you with alot of the fundamentals.https://www.propertyinvesting.com/forums/property-investing/general-property/4336374
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