Hey guys, I've been lurking around the forum for a little now trying to pick up on pieces of advice / info / anything and its quite amazing reading about what some of you have achieved with your portfolios thus far. I am, since January, proudly the owner of one investment property (well the bank owns most of it), and I am now thinking about taking the next step. The details of my current IP are as follows.
Purchase price $330k
Current value $400k (NOTE: this was a VERY ROUGH ballpark figure thrown up by one of the banks)
Initial loan $300k
Current loan ammount $245k
Weekly rent $450 (NOTE: will drop to around $350-370 in around 12 months time)Currently my loan is a P&I loan with a redraw facility. I requested to my broker to have an IO loan with an offset account but my broker decided that it would be easiest for me to secure a loan with my banker as I have some sort of history with them (I am a uni student so therefore I have a limited earning capacity so I was finding it somewhat difficult to secure a loan), but a redraw facility was the closest they had to an offest account.
I am now at the stage where I am in a reasonable position to be actively looking to buy number 2 in the near future (ie. next 6 months), or at least i think im in that kind of position. However, I feel somewhat lost and unsure how to be going about it all. Obviously I should be looking for a property that is CF+ or close to but that is about where my thinking ends and questions start to arise, hence why I am posting this for some sort of guidance.
The first thing that comes to mind is my loan structure. Should I be trying to swap over to another bank to have an IO loan with an offset account before I start to consider buying another house?Also, having a limited earning capacity, I have it in my mind that it is going to be impossible to get finance for another property as I wouldnt have the cashflow to service the loan. I think this is my biggest cause for concern as it raises doubts in my mind and prevents me from picking an investment stratedgey. I start to think that i should buy a house do a reno and sell it off for some 'quick' cash, i also think mayb i should buy in a mining town with high yields so that rent covers the loan, or maybe i should buy a cheap house in the sticks for 80k and rent it out at a high yield. So can someone please put my mind at easy and explain to me how to go about financing the next property, and maybe what the best stratedgey is for somebody in my situation. I have litte savings at the moment (starting to save my cash now instead of payng off mortgage), and am on about $300 a week.
Quote:The first thing that comes to mind is my loan structure. Should I be trying to swap over to another bank to have an IO loan with an offset account before I start to consider buying another house?
You don;t need to if;
1. You dont want to
2 . Your current bank will lend you the money/amount your after ( new place)End of the day you can ask your current bank to change your loan to I/O, in a way your “Refinancing” ( if you can say that) back to your lender; with no financial lost hopefully.
So if your happy with your lender and they are willing to lend you want you need- doesn’t hurt to stay with them.Quote:Also, having a limited earning capacity, I have it in my mind that it is going to be impossible to get finance for another property as I wouldnt have the cashflow to service the loan. I think this is my biggest cause for concern as it raises doubts in my mind and prevents me from picking an investment stratedgey.
It depends on the numbers and how tight your serviceability is- be aware even though you may not service a loan with one lender; it may pass another lender’s serviceability; as all banks uses different calculations and have different guildlines.
In general serviceability ranges from 20%- + bank to bank.Ask for a list of lender’s your broker is accredited with and ask him/her for the top 5 that will give you the highest amount.
Quote:start to think that i should buy a house do a reno and sell it off for some 'quick' cash, i also think mayb i should buy in a mining town with high yields so that rent covers the loan, or maybe i should buy a cheap house in the sticks for 80k and rent it out at a high yield. So can someone please put my mind at easy and explain to me how to go about financing the next property, and maybe what the best stratedgey is for somebody in my situation. I have litte savings at the moment (starting to save my cash now instead of payng off mortgage), and am on about $300 a week.
Get your finance sorted first to a point; before jumping around to different property.
So really find a property type and strategy YOUR happy with and COMFORTABLE with and then your broker to work out how your finance can fit into the whole scheme.if it doesn’t work….ask your broker for a solution that does- but first and foremost – make sure YOUR COMFORTABLE with the purchase; as your the one buying the place.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
I am sure your Broker had some reason for suggesting a P & I investment loan when you have no PPOR loan but i guess he had his reasons.
Maybe you dont ever intend to purchase a PPOR.
Even if this was the case i think i would have suggested Interest only with 100% offset but everyone to their own.
As Michael has mentioned if you are happy with your current lender stay put but if you want some independant advice why not contact Michael as he answered many of your concerns in his earlier post and knows the industry inside out.
A second opinion never goes astray especially when it is free.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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