Hi all, i will try to provide as much detail in hope that you guys here can provide some feedback and help me out. Any help would be muchly appreciated
I have found a suitable unit that i wish to purchase. It is a 1 bed 1 bath 1 carport apartment unit in the Eastern Suburbs of Sydney. I have placed an offer of 515k and it has been accepted. I have provided my solicitors details over to the agent and my solicitors has advised me that he has been contacted by the agent.
Where to from here? The apartment appears to be double brick. Do i now arrange for a building and pest and strata inspection? (is pest necessary?) Or do i wait till i hear from my solicitor that the contract it ok? Do i make an appointment with the bank? I have looked around and i think an interest only loan would suit this investment. Any advice on yes or no? I would love to lock in the interest rate at this low level – esp with the decrease yesterday – however i have been told you cannot lock in interest rates and have the loan as interest only with an offset?
In terms of finances, i have saved a deposit of 200k. I intend to only use the minimum (roughly 103k [20%]) as a deposit to avoid LMR. and around 20k for purchasing costs – stamp duty, solicitors inspections etc. That would leave about 77k to go into an offset account? I have a pre-homeloan approval from commonwealth bank stating i would be able to get a loan of up to 400k so i think I'm covered in that sense. Do i make an appointment to see them now to get a proper approval or do i wait for my solicitor?
Strata, water and council rates total to up to around 4k a year. Add another 1k approx for accounting fees, insurance, maintenance etc I'm looking at a cost of roughly 5k a year.
Rental (according to the agent – might be inaccurate) is predicted to be around 480 – 500 per week. What are the usual agent fees to get someone to handle my IP? I have been hearing – it's around 5% of the rental.
What is my situation then? It appears to me that given these figures I'm positively geared? (unless i include depreciation of the building to drop it into negative)
I am on a salary of roughly 65k per annum. Is this IP in any tax benefit to me? I currently live at home where my expenses are – considerably lower.
I know it may seem like a bad choice – tax wise but is it advisable then to continue saving and living frugally in hope that the 77k in the offset can go to a 2nd IP in the near future.
Thanks for your time and i appreciate any feedback or responses you guys/girls may share.
1. Order a Building Inspection – you dont need pest inspection for strata.
2. Ascertain the AGM report and sinking fund and have your solicitor review this
3. Get finance ready. No one can answer your questions re finance structure unless they have sat down and determine current and future strategy. Generally speaking a lot of investors go for variable (particularly with yesterday's rate drop) interest only. Fixing is not a bad option either but you need to understand pros and cons.
4. You will possibly need a rental letter from the agent for the bank
5. Based on the below figures you are not positively geared – I think this is because you are taking only 80% of the loan rather than 105% of the purchase cost.
you need to do points 1-3 ASAP and before the cooling off period. why are you going with CBA?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
1. Thanks a lot. I shall arrange a building & strata inspection as soon as i can.
2. I do not quite understand this. AGM report? Is this the annual gen meeting that would take place once a year with all the owners of the apartment block? Do i request the sinking fund + agm reports from the agent?
3. Thanks i shall make an appointment & make a trip into the bank to let them know i've found a property and let tem know all the details to get this ready.
4. What do you mean by rental letter? Is this an agent stating an estimate how much this property may be rented for? Because there has been no arrangments to actually rent the unit out – as of yet
5. i don't understand what you mean by taking 105% of the purchase cost. I thought taking less percentage of a loan would put me more positive (rather than negative)
No particular reason as to why i am going with CBA. Is there a reason i should be cautious? I just thought CBA has always been one of the major 4 banks and i had applied for a pre-approval from them previously. (Them & St George Bank)
1. Your conveyancer should be able to recommend a good B & P that they work with or ask for recommendations on the forum but be quick this is very important
2. Yes
3. Yes – you need to ascertain a formal approval asap as the bank may need to order a valuation
4. If you need rental income for servicing purposes – the lender will required a proposed rental letter from the agent
5. 105% if you have equity in another property and 80% if you don't and are using your own funds.
CBA are fine but you may be able to find a better product going with another bank. Arguably, more important that the lender is the correct structure of the loans.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
There's nothing really wrong with CBA (providing they're the right fit for you) – their offset account is a bit of a pain but apparently that's due to change soon.
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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