Forum Replies Created
Hi again Aaron
Most lenders only require last 2 year Tax Returns so subject to satisfactory income that wont be a hurdle.
Depending on the lvr you are looking at circa 6.35% – 6.45% no applic, valuation ongoing fees, no early repayment fees or charges.
Certainly yield looks good on paper just want to check out the Body Corporate fees and factor those into your calculations.
Other than that if the rental demand is high looks like a good starter.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Heh Jamie do you know of any then lol ?
At 90% lvr you should be able to get IO for 5 years and probably looking at a rate of say 6.45% with no applic, val or ongoings.
Capitalised LMi is fine at 90%.
Assuming of course security is in an acceptable post code region.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Catalyst Yes very observant of you.
My thoughts exactly. Very well timed to join up the day a comment about the Company you partner with has been mentioned in a post.
CheersYours in Finance
Richard Taylor | Australia's leading private lender
Hi Ben
Yes have to be 18+ to buy anything.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ben by the way we have assumed that you are 18 or over as you cannot enter into a Contract to Buy land until such time as you over 18.
Good luck
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ken
Please can you tell me why Phil only recommends new property (and by the way i am fully aware of the Capital Allowance / Depreciation argurment) when since the Doomsday book land is what has increased value and not the property itself.
Buyers Agents often recommend a property that is a year old or older and do it for it a number of reasons.
Can you tell me why your group doesnt do this?
What commission do you receive on the successful settle of each property?
Couple of basic questions which i am sure you will agree in wanting to be transparent are simple enough to answer.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Big AJ
Firstly welcome to the forum and i hope you enjoy your time with us.
Certainly property investing can be adictive (trust me i bought 40 properties in 14 years) but half the battle is buying the right type of property. That is not say that a house is better than a townhouse is better than a unit but more to say that it is what suits your needs and risk exposusure.
One of the biggest issues with Companies you have listed is the question is what they are selling the right property for you or for them. Most of them offer house and land packages or land because it is very difficult to get a true valuation on the property and to see whether you are paying more than you should be and the balance is going to them by way of a commission.
Do any of them list or promote a 5 year old Townhouse in a good growth suburb – No and the simple reason being is the mian they are not Licensed Real Estate agents and therefore if they were they would only be able to earn a given commission. Secondly you would be able to compare prices from one Townhouse to another or one unit in the block to another and they dont want you to do this.
They will tell you that Bank valuers down valuer their properties on the instruction of the lender and to expect the property to come back at less than purchase price. You know it is worth more and you can revalue in 6 months time.
Well sorry that just isnt the truth.
Lenders do not instruct valuer to downvalue and a valuation is carried out merely to assess the lenders risk.
What makes me laugh with these organisation is they all seem to have someone on hand when you go to their office.
You are chatting to the person giving the demonstration or sales talk and wow our Solicitor who can witness you signatures has just walked in or heh there is the in house finance broker over there in the corner and he can help you fill out those cross collateralsied loan applications.Heh what the heck it is only money and well throw you house in as security for the first couple of loans and then you dont have to put any of your own funds in and well as i said before we know the valuer will down value the property but that sweet we can still get the deal over the line for you.
Yes time maybe something that you have a little off but my recommendation would be 2 fold:
1) Either look to engage a Buyers Agent someone who is acting for you and who can quote an amount up front for his / her services. You know what it will cost and as long as you feel what they come up with plus their fees is still a good buy you have someone do all the leg work.
2) Alternatively locate an area do a bit of reading on it and then call a couple of real estate agents and tell them to come to you with what they have listed. You can look through the properties and short list anything you want to have a look at. Give them your parametres up front i.e I want a 3 freehold bedroom Townhouse no older than 6 years old with single garage parking.
You will be suprised what you can learn from a good agent. Yes sure they have a job to do and yes the earn a commission but let them start the process off by doing some basic legwork for you.Get your Mortgage Broker to have you loan structure in play so you are ready to jump as soon as you find something and try and obtain a copy of the valuation. Not always possible but with many lenders you can even if you cant get hold of the valuation work out what the lender valued the property at. If not your Broker can always find out.
As i said in the opening paragraph remember you want to buy what is right for you and not what is right for the investment organisation to sell to you. They market new property for a variety of reasons but in the main it is because of the healthy commissions that can be earned and difficult to detect.
As Mesma mentioned the forum can be a wealth of free information.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ben
Welcome to the forum mate and hope you enjoy your time with us.
Must say i love your enthusiasm but in the real world there are a few finance facts you need to be aware of.
Not a snows hope in hell any lender is going to give you more than 80% of the land purchase price and construction costs and even if they did for a 6 unit construction are going to expect you to be able to support the end loan without taking into consideration interest and then are probably going to want to see some good asset backing and previous development experience.
Anything above 80% is mortgage insured and is more likely to require Credit scoring. The higher the lvr the higher the credit score requirement and you wont find any lender do 95% of anything more than probably a duplex block of 2 units.
Whilst you might get 90% lvr with units on the same Title again you would expected to demonstrate good stability in income, savings and prior experience.
The Rams loan is like many other standard residential lenders product merely a marketing tool or statement and the fact as to whether they ever do such a lvr is a different matter.
Also bear in mind every time a lender makes an enquiry on the status of your Credit by an application, enquiry etc it goes against you and will effect your scoring.
As i say love the enthusiasm but start slowly and small read and learn as much as you can and then you can work upto the bigger deals once you have some runs on the board and some good equity backing behind you.
FInal observation in the development area there are hard and soft costs, some of which lenders will advance against others they wont and expect you to front up with these funds. You are also potentially liable for GST on the end sales price if you decide to sell any of the units and most lenders lend against net GST value.
There is a big difference.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
95% lvr should be available but as it is likely to be credit scored at that lvr it will depend on 101 other items.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
No you would merely pay top up LMI (difference between what the new premium would be and the amount already paid when you purchased the property) so not going to be very much all all.
Terry has used some general numbers for you to get an indication of the concept.
You reduce the interest rate by 1% (and in fact with a couple of lenders you could reduce it down to high 5's if you are happy to go fixed) and the figures look a wee bit different.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry i think you are still failing to grasp the concept of investment property purchasing and financing.
When you start off and purchase the IP you will incur LMI if the loan to valuation is greater than 80% (85% with 1 lender).
You wont get a refund of the LMi just because the property has increased in value and the lvr fallen.You might find a lender offer a partial refund if you refinance away to another lender and their valuer agrees with your valuation (unlikely in the current climate as most lenders are not refunding LMI).
The interest rate you are working on is probably a little high for a good loan so work off 6.5%.
The refinance funds are Tax deductible full stop unless they are used to purchase another income producting asset so work off the orginal balance of $144K. (There are ways of getting the interest on the renovation funds deductible but that is a separate issue).
In regards to your Capital Allowance / Depreciation claim this is a non cash deduction so doesnt effect you cash flow but will reduce your Taxable income.
Remember you mentioned you want to buy the property as TIC with your wife receiving 99% of the income / deductions.
If she is not working earning an income then there is not much to deduct and if you really need the NG claims then you shouldnt be buying largely in her name.Go forward 12 months and if interest rates have fallen further and rents have increased it is likely the property will be positively geared so whose name do you want the income to go to ?
A DFT gives you the flexibility to decide each year depending on your circumstances at the time.
Of course as has been pointed out there are certain costs associated with setting up the correct structure but over time and depending if this is the only IP you are likely to purchase they can be insignificant compared to the long term Tax savings.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Refinancing wont get the property to neutrally geared as you cannot claim the interest on the additional borrowing.
You cannot just increase the loan and expect the ATO to dish out a Tax deduction.
This is what Terry and I have been saying you need to think carefully about what you want out of the property (are you going to keep it long term etc) what will be the position post financing etc etc and then work backwards to see what entity / structure you should buy it in.
It is an expensive mistake to rush in and assume.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I agree with Terry apart from a couple of lenders you will be seen as jointly and severally liable for the entire $700K existing loan and on your income serviceability could be a real issue.
Even assuming your partner doesnt have any existing borrowings he may wish to buy something else in the future.
Careful consideration and structuring needs to take place to ensure you dont hit a very quick speed bump on your investing journey.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
All depends if you think the property is going to be positive / negatively geared (and whether you want or need to claim any deductions) whether there is much Depreciation / Capital Allowance to claim and whether you think you will ever sell the property for a profit in the future.
Hate to say not a quick matter of throw a dart in a dartboard needs some careful calculations depending on your answers and furture requirements.
Thats why I would have suggested a DFT. A lot of these issues can be worked out later.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi David
Welcome to the forum and hope you enjoy your time with us.
If i thought prices would fall further this year i would be telling you to save up your deposit further and wait until you get back but from all reports Sydney prices could well kick again and go up this year. (Certainly here in Brisbane i am expecting to get back into the buying market which i hadnt dont with the odd exception for a couple of years).
Why dont you think about buying something that you would potentially live in and in the meantime rent it out.
At least that way you can cap the price now rather than cross your fingers prices have gone up too much since you have been away.
Of course in saying this i dont know what sort of purchase price you are looking at.
Being an Expat you will be limited on LVR so that might be an issue.
Certainly worth exploring though.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes you could certainly purchase the property with a 99/1% share on the Title as Tenants in Common and your wife would receive 99% of the deductions / income.
Some lenders insist it is a minimum 90/10% but not the end of the world.
Deductions are based on Title ownership and not who is on the loan.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I have used and referred to client Depreciator.
Cant go too far wrong with the right sized firm.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Midsomer
Firstly welcome to the forum and hope you enjoy your time with us.
Couple of points:
1) Buying the IP will not prohibit you from applying for the FHOG in the future. Sure you may loose your FHO stamp duty concession but dependant on which State we are referring to that might be too late anyway.
2) Anz would have to have the worse reval policy i can think of so would assume you were using them as an example. Getting them to much more than a drive past or desk top valuation will be hard and they are very struct on their paneled valuers so need to bear that in mind. With Anz they have a very limited panel so not a matter of getting XYZ to do the valuation and then asking Anz to accept them. Doesnt work that way.
3) Reno work. I assume you and your dad will be funding the renovation as the Bank will not advance funds on the deal. As mentioned in 2 above getting funds released post reno work isnt going to be easy especially where LMI is involved.
4) As far as whose name to buy the property in well that is going to depend on 101 issues. Post renovation will the property be positively geared? From a quick calculation on the initial numbers it doesnt look like it but a couple more reductions in interest rates and it could be the case. I think i would be thinking slightly further ahead and consider buying in a Discretionary Family Trust. Certainly going to be better for Asset protection and flexibility when it comes to income distribution.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Johann
Happy New Year to you.
Whilst you have a PPOR loan you would use savings as a deposit for an IP as you loose the Tax deductibility of the funds contributed. You would better off using equity and paying your PPOR down (or using an IO loan and putting savings in the offset account if you think the PPOR may 1 day become an IP).
Also i would suggest you think about a 90% lvr rather than 95% on an IP.
Credit scoring on 95% lvr is a lot tougher and whilst it is still achievable the LMI would make 90% + LMI probably the better way to go.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
As Catalyst has mentioned the QS report can be claimed in the Tax Year in which the expense was incurred irrespective of whether it is your first IP or not (Not sure where that came from).
Your Building & Pest Inspection report costs are added to the cost base however any action taken in regards to the comments of the Pest report can be claimed in the current year.
Legal and borrowing costs can also be claimed in this year however they are aportioned over the Term of the loan of 5 years whichever is the lesser. This also goes for any mortgage insurance payable.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
