Hey Guys,
I just wanted to know if anyone has ever done the following:
– Have you got a property valued by the bank before placing a bid?
And is the following possible. Let's say the Bank Values the house for $500,000
However, let's say you end up winning the auction for $450,000
Because the Bank valued it at 500k, can you then borrow the additional 50k to fund the deposit since it's actually worth 500k?
Has anyone done this? I would appreciate the advise of savvy investors.
Cheers
Hiya
Banks will go off the lower amount – whether it be the val or purchase price.
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]
It can be possible to get the valuation done before hand. But the lender will only lend based on valuation or purchaser price whichever is lower.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Depends on the lender and the initial LVR
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]
Thanks guys! That being said, that would also mean if you funded the deposit yourself you could instantly refinance and tap into the equity to purchase another IP?
Jamie, could you recommend a link to a webpage that I could use to start learning how to crunch the numbers? I need help using numbers to know if an IP will be positive cashflow or neutral cashflow. If you know a page which contains all the formulas please let me know.
Cheers,
Sam
Hi Sam
I've got a spreadsheet on my website that might help.
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]
Thanks Jamie,
I've used the spreadsheet and it looks as though there would be little difference to the end result even if I added an extra $50 a week to the rent.
I'm thinking about buying a property for $265k
Weekly rent would be $320.00
Deposit would be 10% or $26,500. However, even if I put a 20% deposit it doesn't look like the situation would differ much.
With a 10% deposit it would be negative $44 per week and with a positive it would be $88 per week.
It this all right? Could you please confirm…
You need to factor the full amount including the deposit when running the numbers. A lot of people place a 20% deposit and only calculate the outgoings based on the current loan amount and they do not consider the interest on the 20% deposit which you could be earning if parked elsewhere.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Shahin, do you mean input the total price of property as well as deposit? Or the full loan amount. For example, loan amount $270k and 30k deposit?
The total cost which means the purchase price as well as all the upfront costs such as stamp duty, legals, LMI (if applicable). This will give you a true reflection of the ongoing net operating costs.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Sam
Yes do your calculations on the full amount being borrowed irrespective of the security being used.
If the loans are being structured correctly you will find your are taking out 2 separate loans so need to factor in the jnterest cost.
If the numbers are still not adding up then maybe look at a buyers agent or a financial planner who recommends property.
Must confess properties we source for clients are more often cash flow positive from day 1
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Banks will always go off the contract price for the lending. This is because it deemed to be a fair market price.
This is of course if its done via a real estate sale. It the transaction is between you and me they will look harder on the valuation.
I have purchased homes for far less then the value but when the bank does it valuation its always the contract price. Even it if purchased a for 50K below market
You can pay cash for the property at $450k and then go get a bank loan. Ask for a bank loan to borrow say 90%
If you are having problem with the deposit you can ask the vendor to leave what you don't have for 12 months.
Say, you only have 10% and the bank needs 20% deposit.
Ask the vendor to lend you 10% for 12 months or month
After that simply refinance and pay them out.
It really depends on what your trying to achieve
If you do buy it for 450K wait sometime and have it revalue to pull you equity out.
Thanks guys! My next question is.: Let's say the spreadsheet say's that the property is going to cost me about $80 per week. Would tax benefits cover this to make it neutrally geared? Do people rely on tax for an IP to be positive or neutrally geared?
Happy Easter to all,
Sam
sambarry wrote:Thanks guys! My next question is.: Let's say the spreadsheet say's that the property is going to cost me about $80 per week. Would tax benefits cover this to make it neutrally geared? Do people rely on tax for an IP to be positive or neutrally geared?Happy Easter to all,
Sam
This would depend on the income of the owner of the property and the amount of depreciation available. Possibly the tax refund would larger than $80 pw and this would mean cashflow positive after tax.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry, I'm gonna call my broker & accountant after the holiday to see what position I would be in.
Robert, "Pay cash for the property and then go and get a Bank loan for 90% of the value"
2 immediate issues:
1) You wont get any lender / mortgage insurer do a 90% cash out loan.
2) You will have just lost the Tax deductibility on the entire interest as the purpose of the loan would not now be for investment.
There are several correct ways to maximize your deduction and equity position going forward and neither of the above would be recommended.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
sambarry wrote:Thanks Terry, I'm gonna call my broker & accountant after the holiday to see what position I would be in.Hi Sam, I think you would be better off using one of the knowledgeable brokers that have already responded to you on this thread. No point praying a service provider can "catch up" with knowledge. Surround yourself with people that are smarter than you. Now that's leverage …. and you shall prosper.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Let us know the numbers and we can work it out for you Sam.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You cannot determine tax benefits without knowing your income. Based on the above figures you would be looking at approx $130 per week negatively geared on a rental of $280 per week and $110 per week negatively geared on a rental of $300 per week. This doesn't take into consideration negative gearing benefits or any possible depreciation benefits.
If this is purely a cashflow play then its not a particuarly good one. Lots of better cashflow plays out there.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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