Hi all,
This is my first post, and certainly not my last!! My wife and I are looking at taking the next step into building our property portfolio.We are after any assistance on purchasing our second IP for $199,000 with tenants. Any advice welcomed, our financial situation is as follows:
We currently have a property in the ACT which we purchased for $280,000 in 2004, and whilst we haven't had a valuation on the property as yet, I'm guestimating a conservative increase in property value of $40,000 ($320,000).
We have steady tennants renting the property at $320pw.
Our weekly repayments are $403pw, and (thanks to my recent employment) have been able to pay off $82,000 from the principle now owing $198,000.
We are on a single income of about $63,000 (before tax), with monthly expenses of about $2000
We have $55,000 in an offset account.
We are looking purchasing another property and have found one on the market for $199,000 with tenants renting at $230pw
We are being extremely cautious as we have been burned financially in the past and are tentatively looking at our options to purchase this property.
We're not too sure of our next step or how to best finance the investment property, and we're after any thoughts/suggestions on ways we may look at doing this.
We're thinking of borrowing enough money to pay out the first property outright, plus enough to cover the purchase of the second (including closing costs). But we're not too sure how this works in regards to approaching the banks or the things we would need to do to set this up.
If anyone can provide any information we would be greatful. Also a "Noddy's Guide" (step-by-step) of what to do next would help us alot. ie 1. Get Valuation on both properties 2. Hire solicitor 3. Get pre-approval 4. Approach seller with offer etc.
Regards
ScottyFirstly, let me say welcome to the forum and congrats on making your first post!
In regards to the financing of the property I can't give you financial advise, because I am not a financial advisor, but I can offer you my knowledge of the subject.
Borrowing the full amount to pay out your first mortage – I doubt this is going to happen as the banks need the property for collateral. So if you fail to make payments on the loan they can take the home, sell it and fully pay off the loan. To do this they generally request an 80% loan to value ratio (otherwise you pay lender's mortgage insurance).
Borrowing 80% of the new investment property will allow you to borrow around $160,000, with you putting in a $40,000 deposit and paying for expenses (such as stamp duty). This will be nowhere near enough to pay off your first property.
Generally speaking many people finance investment using an interest only loan. You only pay back the interest on the property (not the principle too), but this lowers your costs and thus increases your available monthly cash flow. If cash is tight, then it can be hard to pay principle and interest. You can always change it to principle and interest once the rents increase and cover the extra cost.
Steps to follow:
1. See a bank, get your current home revalued and find out your borrowing capacity
2. Get preapproval for a loan (any loan up to the amount you want to spend). See either a bank or a mortage broker. A mortgage broker may help you refinance both properties so it works best for you
3. Do your numbers and see if you can afford this property and if it is a good investment for you
4. See a financial advisor to get correct financial advise
5. Make an offer
6. Go from there, solicitors are pretty easy to findRyan McLean | On Property
http://onproperty.com.au
Email MeHi Scotty
Welcome to the forum.
You’ll need to have your borrowing capacity looked at by a broker/bank.
From there, you could look at tapping into some of the equity in your current IP. This equity could be used towards the deposit and purchasing csots towards the next.
What type of property is the one in the ACT? I’d assume it’s worth a fair bit more than you think. You might be able to increase that rent too – which will improve your borrowing capacity.
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]
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