Hey Everyone.
We are currently in a huge dilemma and have run into a dead end… To be honest, i really don't know who else to speak to so I've decided to post up our situation with hope that someone can advise or even possibly help us out. I am aware that various finance specialists are active in these forums and would happily deal with anyone who thinks they can manage our case. We would actually prefer the property to be purchased under dads name but using mine seems to be our only option.
We have spoken to many brokers and banks regarding the purchase of a second investment property but have been advised that our situation is too tight. From what i have gathered, our investment property is the one weighing us down and we have been declined several times dad is starting to lose motivation. Our IP is self-managed and rented out to students per room. It has always been positive geared but the students pay us cash directly and the banks have advised us that this is not a secure form of income which can be put down. As it is self-managed no contracts have been formed. Today dad spoke to another broker and he was willing to put the average rental income for our suburb in the application. Even with that he was only able to borrow another $70,00. Dad has never refinanced or done anything with our accounts so far and we were hoping to get 100% finance like our first IP. The property we want to purchase is roughly $650,000 and is next door.
PPOR: $200,000 owing (Westpac), valued at: $650,000. We have one student renting at our PPOR who pays roughly $1000 cash per month (no contract and has lived with us for 6 years). Our PPOR is used as security for our IP.
IP: $680,000 owing (Westpac), valued at $750 000, bought 5 years ago. Currently rented out to 5 students with monthly rental income of roughly $5000.
Dads income, $64,000
My income: Just graduated and have been a casual employee for 6 years. Looking for full-time work now and currently only earn roughly $10,000.
As mentioned above, we would prefer it under dads name but if it is impossible then mine is another option. I just believe that we can service the loan under dads name with me and my girlfriend to help with repayments. However, if it has reached the point where dad cannot go any further I would understand.
My income is very low at the moment and my girlfriend (de facto relationship) currently earns $42,000 so I was thinking of doing a joint application and put dad as our guarantor if that helps??
I think that just about wraps it up. Hopefully I've included all the information necessary but would be happy to answer more if needed. Thank you so much for your time and I would really appreciate the help!
Hi Dan
You need to have some sort of formal lease agreement in place in order to use the IP rent as income. You could get by on using a rental appraisal from a local property manager – but it would need to be appraised as a normal rental and not a share house.
Having you on the application is likely to reduce the overall borrowing capacity as your annual income of $10k is less than what the banks believe it costs for an individual to meet a minimum standard of living.
I haven't crunched the numbers but your partners income would certainly help. Whether or not you'd want to involve all parties in the transaction is another story.
How much are you looking to spend on the next IP and how much rent do you think it will receive?
Whatever you do, don't submit any more applications until you're reasonably certain of receiving a good outcome.
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 for the reply Jamie.
I was thinking of adding my income to dads if it would help. We haven't put in any applications yet but brokers have crunched the numbers for us and It seems like dads chances are now very slim….
The next step i was thinking was putting a joint application with my partner and having dad as our guarantor.
The investment property is next door and will go to auction next week. We have future plans for it and hence the rush with finding finance. I'm assuming it will go for roughly $650,000 and we were hoping to do something similar to our current IP. We have a very good relationship with the agents sending us students and are confident we could achieve rent of roughly $3000 per month.
If a formal lease agreement is not available then you could probably run off your Tax returns (assuming you declare it)
Agree with Jamie your name on the Title is going to cause you more harm that good.
Wont get your father as a Guarantor would need to be a co-borrower and there are too many variables to ascertain whether it can be done without full information.
Course have the loans cross collateralised hasn't helped your cause but certainly has aided Westpac's position in the deal.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I have asked dad and he said their 2 separate loans with the one bank. But he also mentioned that the equity or our PPOR is used for our IP. I'm starting to get confused as to whether our accounts are cross collateralised or not?
Dad does declare the normal rental income for our area on his tax return.
We haven't submitted any applications so far and they have just been talks…The most important thing isn't who's name it goes under but rather getting the property as of now…We still can't manage to find anything…
Regards
Dan
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