- Firstinvestment24 wrote:Derek – The property will be finished in 2014 but I am not considering it anymore. For a start I cannot obtain a large enough loan for it and from the research Ive done and the comments on this forum it doesnt seem like a smart move.
HI FI,
Good decision to back out of this one.
Major concern is the OTP nature of the purchase which means you will need to go unconditional on the contract before the bank is prepared to go unconditional with the loan. In effect you will be locked into a contract before the bank will give unconditional approval on your loan.
Fast track 18 months or so closer to settlement and the valuer assesses the value of the property below the price you are paying for it and you'll have to find extra cash to put into the deal. Because your contract is unconditional you now have to make up the difference.
Key point if buying an OTP property make sure you find a good solicitor who is very experienced in such transactions and who can provide with you plenty of advice. Work with your solicitor to negotiate, if at all possible, out clauses to see if you can work around the scenario outlined above.
Make sure you find the solicitor – do not use the one recommended by the agent/marketing company.
Finally – the quoted body corporate fees seems very low for a high rise building with the amenities described and in down town Melbourne.
Often developers/builders will under quote anticipated body corporate fees to make the investment look more attractive to potential purchases. In these cases the owners (post settlement) find their strata budget is insufficient for the needs of the complex and bc fees start heading north making the cashflow position decidedly different to that expected.
Some things to consider in your hunt.
I might add the outlook for the Melbourne unit market is not attractive. Over supply and much in the pipeline with a rising vacancy rate make inner Melb unattractive at the moment.
Firstinvestment24,
There are multiple developments due for completion in 2014 in Southbank. In my opinion the market will flood with rentals as we saw with the earlier City Rd developments.
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If 1 building has 10 floor and each floor has 10 units, that’s 100 unit.
If all of them become available for rent at the same time, it’ll be very challenging to find tenant.
How many buildings are going up at southbank you can see for yourself.I also do see potential in Geelong, but do your due diligence.
hi all,
I'm in a similar situation to the OP in that I'm looking to purchase my 1st investment property. Key difference is that I purchased my PPOR in 2004, so it would be my second property and I would be looking at using the equity in my PPOR.
My PPOR is a 2BR flat within 8km of Melb CBD, close to multiple forms of public transport, vibrant cafe culture and shops. I would conservatively estimate current market value to be $350,000. I have $90,000 still owing on the mortgage. My main salary is about $55,000 but I earn an additional $20-$30k/pa from my self-employed business. I have no credit card or other debts besides my mortgage.
I am looking at investing in the Geelong area, ideally with about $350,000 which would get me a 3BR house on a decent block within close proximity to Geelong CBD. Research tells me that rental could be $300/wk. My partner lives in Geelong so in the long-term, I may eventually relocate there, however in the short-term this is not on the cards. My long-term goal at this point in time is to afford to buy a house in inner Melbourne.
My question is – how does the whole equity thing work? Do the figures stack up and is this a feasible plan? How much extra would I actually need to borrow? Please excuse me if the questions have obvious answers but I'm very new to the investment game and all things financial in general!
I too am interested in how this equity thing really works… I'm in the market to pickup another property in the next 12months and ive started looking and getting all my numbers and things sorted already. I have also just refinanced my first IP and now have an offset account. Does the offset account come into play with the equity or is it literally based on what you have paid off the actual loan?
FI24 as for you, i'm a similar age to you, and my advice to you is take your time! Do your research and get reading! There are hundreds of good books out there, (0-130 properties was actually the first one i read) and also the API (australian property investor) magazine is something that i have also found to be a good read and something worth looking at. Everything you read and everyone you talk to is something learned wether it be good or bad. Learn from other peoples mistakes as well as your own and make sure you are certain all your numbers are looking good. Don't rush into anything as you very well may end up over your head.
Listen to what the people on here have to say, some of them have some fantastic advice to throw your way!
Good Luck!
If you are spending $350k on something in geelong that only fetches a rent of $300 per week something is wrong. $300k for $350 per week is more like it
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
west57 wrote:I would conservatively estimate current market value to be $350,000. I have $90,000 still owing on the mortgage.The bank will assess your asset level in conjunction with your income level.
Based on the information provided your equity position is assessed as follows:
80% of property value ($350) = $289K less existing debts ($90K) = $199K accessible equity which is often set up in a line of credit type structure. This line of credit (or similar) can be used to pay any deposits and purchasing costs for subsequent purchases.
It is important to remember these are only numbers on a pieces of paper and the bank will make an overall assessment by also considering your income level when working out how much and what you can do.
west57 wrote:My main salary is about $55,000 but I earn an additional $20-$30k/pa from my self-employed business. I have no credit card or other debts besides my mortgage.I am not a broker and I suggest you contact a good broker who is also a property investor to get your structure right and maximise your borrowings. I do not recommend dealing directly with a bank as the bank will put their interests ahead of yours. If you are stuck for a broker there are a few who post regularly on here who would be good starting points.
west57 wrote:I am looking at investing in the Geelong area, ideally with about $350,000 Research tells me that rental could be $300/wk.To purchase this property with an 80% loan you will need to use $70K as a deposit. You will also need a further ~$18K for purchasing costs (stamp duty, solicitor etc). These funds totalling $88K can be drawn from your line of credit (explained above)
west57 wrote:My question is – how does the whole equity thing work? Do the figures stack up and is this a feasible plan? How much extra would I actually need to borrow? Please excuse me if the questions have obvious answers but I'm very new to the investment game and all things financial in general!Plan is theoretically feasible – you'll need to work with a broker to see if it can be done practically.
Shiny_Suit_Man wrote:Does the offset account come into play with the equity or is it literally based on what you have paid off the actual loan?When assessing your level of security banks will assess you on the limit rather than the balance of the loan.
Hi West
Yes on the surface the numbes certainly stack up.
I have financed 3 or 4 deals in Geelong for forum clients over the last month or so and not had issues with valuations.As Derek has mentioned "actual equity" and "borrowable equity" are 2 different things and whilst you appear to have plenty of each the structure of the loan going forward is important to enable you to carry on with investing.
Too often i see clients with poorly structured loans thanks to laziness or lack on knowledge from their mortgage broker or Banker (If the later then often this is done by design to ensure the clients offers up more security than needed).
Try and limit the amount of reliance your PPOR is used to support the new loan by split the loans between securities.
Any Broker with investment experience will be able to offer up some suitable recommendations.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Go Geelong go!
A good tip for investing anywhere is pop into the local police station, say you are moving yourself and your family to the area and wondered if they could give you some guidance as to what areas to steer clear of and why. Also of course ask them what areas would be appropriate. If the police think an area is fine for you and your imaginary kids then a worthwhile tenant would be happy in the area too.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks all for your helpful advice, will definitely be pursuing my options with a broker now.
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