Hello Everyone,
I've just signed up and I'm hoping someone could give their opinion on my plan to buy a property. I thought this must be the site to find some experienced investor insight, as opposed to marketers, and any suggestions will be very much appreciated.
Our situation is fairly straightforward. I am 60 years old and my wife is 62. We were almost wiped out in the GFC (including Super) and don't have any property. My hope is to buy a modest investment house and rent it out for about 6 years and then move into it as our retirement home. We wouldn't be planning to ever sell it. I am a teacher, and have permanent employment for the next 8 years and I earn around $84,000 gross + 4% increase per annum. My wife also has permanent employment and earns around $25,000. We have subsidised rent where we are (we teach in a remote region). We have a deposit of $45,000 and don't have any debts at all.
I was thinking of buying a new-build on the Sunshine Coast for around $370,00 (near the grand kids) and having the tenant and tax man help to pay for it. We would want to pay it off in about 8 years. We could comfortably afford to put about about $2,000 a month in payments – plus around $1,500 from rent. Out goal would be to pay it off as quickly as possible.
Any suggestions will be greatly appreciated,
HF
Hi HF
Welcome aboard.
A big thing to consider here is your ages. Given that you've got a relatively small deposit – any purchase you make will involve Lenders Mortgage Insurance (LMI) – as you'll have less than 20% to put towards the deal.
The lender (and the LMI provider if it needs to be signed off by them) will want to see that there's an exit strategy in place for this purchase – ie. what's going to happen when you reach retirement age? Given that it's going to be an IP purchase – that's usually a good enough reason as it can be sold and the loan paid out. HOWEVER, if the bank suspects that you plan on making the property your primary residence down the track, they will probably have objections – even if you explain to them that you plan on paying it off before moving in.
Not saying it isn't possible – just have to be careful how you go about it. Make sure your banker/broker also explains the impact the GFC had on your finances.
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]
Hi HF
Welcome to the forum and i hope you enjoy your time with us.
As Jamie has mentioned the impact of the National Consumer Credit legislation will have most lenders and mortgage insurers running for the hills given your age and circumstances (by the way for it is worth i am sorry to read about your situation) and if you can keep the loan at <80% it will certainly be a lot easier.
To aid the situation a blended loan might be an option although of course it will come at a higher.
It would mean a traditional style loan for 80% of the purchase price which you might do on an interest only basis on say a fixed rate and then the balance at a higher rate by way of a second mortgage.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I'm sorry to hear about your being wiped out in the GFC. I have met a number of people that were successful before the GFC and have been let down by the way events unfolded.
However, your idea of producing a retirement 'plan' through investment in the Gold Coast is going to lead to heartache whether you can afford it or not.
Here are the variables you are bringing to the party. And tell me if i'm missing anything.
– A solid job being a teacher.
– A last bop of savings 45k ready to invest in a depreciated in value, and costly in expense area. The Gold Coast.
– A plan to retire up there and be close to the grandkiddys.
The first point of failiure is investing in a depreciated area without investigation as to why its depressed and largely becoming vacant.
The second point is reliance on both an income and the kindness of banks as your backstop to a financial and lifestyle strategy.
The third is an emotional purchase into a situation that you can barely afford. Let alone the body corp fees that are charged in the Gold Coast.
Its not that any or all of these by themselves are a pivotal point of failiure. But all of them together are asking for one or more of them to fail on you.
I have been dealing with retirees who come out of jobs and face uncertain futures at least several times now. And most of the tasking is reinforcing the fact that there is never a bad time to run an effective and workable strategy to secure your financial future.
Some listen, and some achieve it. Some come back a couple of years later complaining about the lost opportunity. I refrain from pointing out what had been missed and offer them tea and biscuits.
My suggestion for you is work out what you CAN do and what is currently possible for you to achieve with the banks and your current financial position. Banking variables change and at the moment conservative lending is more of the practise than usual, because of the GFC and its results. But given time, hopefully a better range of flexibility will be restored.
With the current banking climate I would suggest treating the 45k as your 20% and seeing if you can push through an investment deal between 220-260k with steady tenancies and steady returns. Fix your rate for 5 years and on the other side of the deal you should have a lot sounder footing for your retirement plans.
As I state .. its not an ideal deal but its what the banks will allow given both the current credit situation and your current circumstances.
Its also not the best time to speculate or heavily gear on a variable interest rate in the short term. Inflationary pressures are already here and you might as well find the best path to take advantage of that.
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