Hi I am a young single mum with a toddler and another baby due this year. I know that I cant service a homeloan on a centerlink pension but what about an investment property. Will rental income count towards a loan? My proposal is to do something like this:
$60k deposit from family + another $10k which I would hold back in an account to function like line of credit.
(or offset account?)
Purchase price 240k 3brm house (offer less)
Loan 180K 25yr P&I (fixed/variable)
stamp duty and transfer costs $3,767 savings
rental as is $310pw (could increase with small renovation)
I have run through management costs from 8-10% and interest rates 7-9% and worst case scenario would be something like
$100 a week out of pocket not even factoring in the 10k buffer. Would this enable me to get a loan anywhere?My long term plan is to buy more properties until I can get enough equity to finance a home for me and my kids to live in. Right now I can rent very cheaply with family and this seems the best option. I am also looking at doing a real estate agent course with REIT with a view to learning more and being able to manage my own property. Also any recommendations on mortgage brokers, property accountants, insurance brokers etc in Tas would be great. There just doesnt seem to be any seminars or networking type events down here.
Hi Tassiegirl
Yes if the property is to be rented out then lenders will take the potential rental income into consideration and this will assist your serviceability however any rent or board being paid on your behalf for your current property will also be taken as a liability.
Under the new National Consumer Credit Protection legislation serviceability is key so a good indendant mortgage broker should be able to give you some options.
Hope this helps
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
If you are living off centrelink payments then it is very likely that the banks will lend you much (if any money) to buy an investment property.
The banks tend to want to know if you can service the loan even if the property goes belly up. Look at the recent Queensland floods. If you weren't insured for floods (and not many people were) could you still service the loan with no rental income?? I think the banks will look at that.
If you had a high percentage ownership in the property (40+%) then it may increase your chances of being given a loan.
You can look at vendor finance, but that is generally only if you a buying a home to live in, not to rent out.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBanks will generally take 80% of rental income and assume the other 20% goes towards agents fees, rates and maintenance etc (in my opinion that's quite generous for older properties that may require some work). They also assess on higher rates to ensure you can maintain your repayments if interest rates increase (usually assess 1% to 2% above actual rate).
So your projected $100 per week shortfall will be a bit bigger in a "sensitized" risk assessment.
In short it is unlikely you will be approved when on a pension.
The option of getting a guarantee in generally gone after NCCP legislation as you (the borrower) must be able to service the loan. Although guarantees still exist they are security based an generally not available for income support. Therefore not an option.
The other option that is available is to buy with a family member (if they are chipping in 70k cash why not let them go on title?).
It may not be appropriate in your circumstances however might be the only real option a bank would consider. It also assumes the other person has good enough income.
Unless you can get one of the govt scholarships for the property course, it is a very expensive way to try to save yourself a few dollars on management fees. Do you intend using the course to get yourself employment in the field or just to manage your own property?
TAFE also offers the course either face to face or distance learning options which can be much cheaper.
Not sure how single parent entitlements work theses days however you may also need to consider that Centerlink will consider any rental received as income and therefore may reduce your entitlement
I recommend you have a read of Goodbye Welfare
You may be able to relate to this author as she was in a similar situation like you are at.
It may be in your local library that is where I came across it..Hi Tassiegirl,
If you are on centerlink support then the Tafe coarse in realestate should be offered to you free. It sounds to me that you are a real go getter and studying property wouldn’t be too much a problem for yourself. This course will most likely lead into employment opportunities that would look alot better on paper with the lenders in today’s climate.
If you can’t enter the market now for reasons of the unemployment situation (which is nothing to be ashamed of) if you choose a career in realestate/property managing after a short period of employment you will stand a better chance of starting a portfolio.
Good luck and don’t give up!
Regards
J
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