Hi there, I am just starting out (havent actually brought my first investment property yet) but I am currently making some sort of plan. I am just wanting a bit of help with a few things. In Steves books he talks about putting a minimal amount of deposit forward (10%) and having a high Return on Cash ratio which sounds good. However arent the banks going to be more and more reluctant to lend 80 or 90% of the house value as you increase your porfolio? I mean, if you are paying the mortgage off over 20 years I am unsure how they would keep re lending until you have 130? This could be a stupid comment but I imagine this is why alot of investors only have 1 or 2 properties. Some advice or answers would be much appreciated
Ryan
Hi,
What a good broker will do is place your initial properties with lenders with tighter credit policies, as you borrow more then use other borrowers that have credit policies that allow more properties, take a higher amount of rental income into consideration, etc.
Regards
Gibbo
Hi Ryan
Firstly welcome to the forum and I hope your time with us.
As long as your loans are structured correctly from day 1 there is absolutely no reason why you go cant borrow 90% of the purchase price of each new Investment property.
Whilst lenders and in turn mortgage insurers have a monetary cap on the maximum loan exposure if it done properly you will be a while before you hit this.
The way to go forward when looking at buying multiple properties is to have cash flow / income to service the loans as well as equity to enable you to fund the deposits.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ok thanks very much. That makes sense. So richard, with 50k saved for deposits would you suggest starting with cheaper houses and using the smallest deposit or maybe putting a bigger deposit onto the first couple to use as equity?
p.s thanks for your helpHi Coolra
Welcome aboard.
There's no right or wrong answer to your last question. It comes down to your own strategy and what you're aiming to acheive from property investing.
You could potentially spread that $50k over a couple of cheapish IPs – but how do these properties fit into your investment plans and what you aiming to achieve?
Gibbo and Richard make good points. It's all about using the right lender at the right time – which generally means using up the least generous first and keeping the more generous until last. There's also the two main LMI providers in the background who we need to consider when putting you with each lender.
Going back to the type of property to purchase. I don't want to sway your decision either way – but I love properties that can do with simple, cost effective, cosmetic renos. It really isn't rocket science – you take an ugly place and pretty it up. Have it revalued afterwards – hopefully you've added a bit of equity that can be tapped into and you can repeat the process with IP 2.
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]
Ok so about using the least generous first and most generous last, would you just go and talk to them to find these things out or just from online info? Well without giving my whole life story away basically i am 2nd year out of high school and worked a year in the mines in aussie so have that deposit. So i am quite interested in getting into property renos and doing it that way. Thanks for you help also! This site is great!
coolra, hate top say you will never get any lender tell you too much of what they do or do not do as this is the secret domain of us mortgage brokers (No that isnt a plug for business merely a statement of fact that lenders dont disclosure their lending policy online when it comes to the nitty gritty).
Assuming you dont intend to be buying a PPOR anytime real soon i think i would be looking to cap the deposit at 10% and keep the rest up your sleeve for acqusition costs and reno funds.
I am with Jamie all of my properties we bought in their raw state, developed, reno'd or strata titled and added value to then increased rent paid the debts down to a point where we have next to nothing in the way of debt and a nice annual rental stream enough to keep my wife going in clothes and jewellery and overseas holidays for the next 10 years or so.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
coolra344 wrote:Ok so about using the least generous first and most generous last, would you just go and talk to them to find these things out or just from online info?Like Richard said – they're not going to tell you what's best for you. They can only advise on the products available under their banner – they have no idea how other lenders operate.
They'll also try to persuade you to lodge an application – a few of these in a short space of time can fry your credit file, leaving you in a position where it's difficult to obtain any sort of loan.
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]
Can you quickly tell me more about this application and why they fry your credit file then I will leave you alone haha
In Australia, every application for credit is recorded on your individual credit file – irrespective of if it's been approved, declined or was simply a pre-approval.
If you pop into a few bank branches and they each lodge a pre-approval application, each app will result in a hit to your credit file.
If you have a fair bit of activity on your file within a short space of time, lenders (and mortgage insurers) will start to get nervous and question why you're shopping around so much – they'll usually suspect the worse and assume that you've been declined finance from all the other lenders you've applied for.
You need to find out which lender is right for you from the start – and then lodge the one application. When dealing with high LVR loans, it's important to get things right from the start.
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]
Coolra
When you make an application with any lender an equiry is listed on your credit file, this stays on your file for 5 years. Too many enquiries (not to mention declines) on your file in a short space of time and the bank red flages you. You will not pass credit scoring.
Credit scoring is used by banks and credit card companies, they use use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses dueto bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate and what credit limits.
In a nutshellCheers
DavidThanks very much guys, will keep this in mind. am looking at getting my first house within the next two months so this is very useful!
coolra
If you intend to purchase a PPOR first then you need a totally different strategy and structure to ensure that you maximise the ability to still be able to purchase an IP down the track.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You really should sit and have a chat with a good broker. You can tell a broker everything and then they will make recommendations on which banks, which products, which loan suits your strategy best and will submit your loan application in the most attractive-to-bank way possible. They get paid by the bank, not you, and instead of one bank offering you a choice of 2-3 products, they can offer countless lending institutions and hundreds/thousands of products. If you’re looking at buying within the next 2 months, I’d be speaking a broker NOW and ensuring you understand your borrowing capacity and research possible suburbs. A lot of “experts” recommend thorough suburb research to become an are expert can take anywhere from 8 weeks to 6 months. So start today.
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