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Richard is right, some finance brokers are good and others…sometimes they don't know what they are talking about and they give advice with a lack of information.
Get a second opinion from another bank or mortgage broker and see what they say.
The thing that worries me is that you are living week to week and it sounds like you are struggling to get by. If you have to have exchange students paying rent to keep up with your mortgage expenses that sounds like it could be a little dangerous.
Just be careful not to over extend yourself because if interest rates continue to go up then you might find yourself with a lot of properties…but no money to service the loans.
Having said that, good luck and I hope you can do it. Find a good broker who will help you.
I hear Richard is a pretty darn good broker
Ryan McLean | On Property
http://onproperty.com.au
Email MeWow!!! You only owe $40k on your $200k property! Well done. You have been very diligent and payed that down and that puts you in a great position.
You have already received some great advice from the people above.
Interest only can be a great idea as your repayments are less and it frees up cash flow. However, if you prefer to pay down the principle then that isn't a bad thing. It just means it will be a little bit longer before the property becomes positively cash flowed.
You have put yourself and your family in a great position, almost owning your home outright and looking to invest. Keep looking into it. Even with only one income, it is likely that the banks will still lend to you if your finances are as good as you say they are. The might just lend you less than what you could currently get with two incomes.
What price range are you looking for your next investment property?
Ryan McLean | On Property
http://onproperty.com.au
Email MeIf you are living off centrelink payments then it is very likely that the banks will lend you much (if any money) to buy an investment property.
The banks tend to want to know if you can service the loan even if the property goes belly up. Look at the recent Queensland floods. If you weren't insured for floods (and not many people were) could you still service the loan with no rental income?? I think the banks will look at that.
If you had a high percentage ownership in the property (40+%) then it may increase your chances of being given a loan.
You can look at vendor finance, but that is generally only if you a buying a home to live in, not to rent out.
Ryan McLean | On Property
http://onproperty.com.au
Email MeAn interesting thing that I found out the other day.
Robert Kiyosaki (who Authored Rich Dad Poor Dad), who preaches positive cash flow property. Bought his home before he invested in any property.
Not saying that that is what you should do. But just interesting that the number one author on personal finance did just that.
I was always a fan of renting and then investing in property, but now I am swaying the other way.
Owning your own home has other benefits (even if not financal). It offers security for your family and over time mortgage repayments can be much less that rent. You can also tap into your equity to invest if your property goes up in value and your finances are solid.
Ryan McLean | On Property
http://onproperty.com.au
Email MeYou don't pay capital gains on your PPOR.
So for the 15 years you lived there, when it was your home and not an investment you don't have to pay capital gains. For the last 5 years, when it was an investment…that is where you have to pay capital gains.
Friends of mine recently sold their unit where they lived in for 3 years and rented out for 6 months when cash was tight. They had to pay capital gains for the 6 months that it was rented out.
Ryan McLean | On Property
http://onproperty.com.au
Email MeJust note that though student properties may appear to have a high rental return they are often vacant for 2-3 months of the year when the students are on holidays.
This can put a strain on your cash flow.
Not saying don't do it, just saying that this is something to be aware of.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThat’s a tough one. A contract is a contract. Did you put the rising cost on insurance in the contract or did you just state that insurance was $1000 for the duration of the contract.
You might have a good chance, but if the contract says $1,000 and does not allow for rising prices then you may have to wait until the contract is renewed.
Good luck.
Ryan McLean | On Property
http://onproperty.com.au
Email Me1. Demand – If other people are willing to pay more to live in that area that pushes the prices up. If more people want to live in the area then it pushes prices up
2. Supply – If there is too much supply (like loads of unit/houses) then renters can pick and choose and bargain. If there is a low supply and lots of people looking to rent then the renters can't bargain because they have less choice.
3. Quality of Residence – This includes how nice the place is, how light, does it have a new kitchen/bathroom, does it have inbuilt robes, does it have a good view or close to amenities?
Hope that helps you understand some of the big driving factors.
Ryan McLean | On Property
http://onproperty.com.au
Email MeSounds like you need both. A financial advisor to help show you how to achieve your financial goals AND an accountant for showing you the best structure to save on taxes and maximise investments. The two go hand in hand.
Most financial advisors haven't walked the walk. You need to look at where the financial advisor earns most of their money. If they earn most of their money (or a great deal) from their investments then BINGO you might be onto a winner. If they earn all/most of their money from the fees they charge you and other clients then that may be a warning flag.
Good luck
Ryan McLean | On Property
http://onproperty.com.au
Email MeDuckster raises a good point. This is not something you should try and stinge on. Go and see a qualified professional and get professional advice. Forums are good to learn the ropes, but accountants know their stuff and the correct advice could save you a lot of money….legally.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHey and welcome to the forums. Thanks for your question.
Firstly, good on you starting young!!! The earlier you start the easier it will be. Note: If you want the first home owner grant you will have to live in the property you buy for at least 6 out of the first 12 months. That means no rental income for six months, so think about that if you are going after the first home owners grant.
Secondly, buying a more expensive property does not mean you will make more money quicker. You need to research your area (that you want to buy in) and find out what people want. If it's a family area you might want to look for 3-4 bedrooms near parks and studio apartments might not be in as high demand.
You also need to look at your cashflow. If you can't rent the property out could you afford the more expensive property? Do you want to be paying that much money into a property? What if you have to change jobs?
Robert Kiyosaki (Author of Rich Dad Poor Dad) recommends that people start with smaller deals first (as there is generally less risk) and then move onto bigger deals as your experience grows. You might want to think about that.
Hope all that helps.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWelcome to the forum.
Firstly, asking where is the best place in Australia to invest in real estate is like saying "Where is the best shop to find good clothes?"
It all depends.
There is no one best place to invest, and depending on your investment strategy some places might be good for you and bad for someone with a different strategy.
If you want high positive cash flow then rural centres can be a good place to go. Small towns usually offer higher rental yields, but then there can be the added risk of lower population = lower demands. If you want high capital growth, well that is a completely different story. Do you want to renovate, do you just want high growth areas, do you want to buy in Sydney or elsewhere?
There are so many different ways to invest and you need to work out what strategy is going to work for you.
If you are looking for cheap towns close to sydney so you don't have to spend a lot of money you could look into places like Goulburn, Dubbo etc. Get out your Google Maps on your computer/iphone and look for the big rural hubs. Then get on realestate.com.au and start searching.
Ryan McLean | On Property
http://onproperty.com.au
Email MeFirstly, welcome to the forum. Before I start, I wouldn't count on a housing correction in Melbourne. You might get lucky and it might happen, but I haven't heard any of the experts saying we are in a boom, so I doubt the prices would be highly inflated. The fact of the matter is that housing if amazingly expensive compared to your income and it will only get worse.
You've got a good little nest egg to start with. First you need to look at exactly what you want to achieve when it comes to your property investments. Saying you want to make as much money as possible is obvious but isn't focused enough.
Do you want to own your own home? Do you want to get positive cash flow or capital growth? Buying a home and then renting out a room could be a good way to ease the mortgage strain. But if you don't want to minimise your borrowing capacity maybe you should investing in some positive cash flow investment properties. Then the banks will take a fraction of the rental income into account, which will add to your borrowing capacity.
There is so much possibility that you could take any track. Firstly work out exactly what you want to achieve, then the forum members can better direct you.
How much income do you want to achieve each year from rental properties, how much capital growth etc?
Ryan McLean | On Property
http://onproperty.com.au
Email MeHey and welcome to the forum,
Looks like you already have your foot in the door when it comes to the property market, which is the hardest step. Have you got your IP positively cash flowed yet? 50% equity is pretty impressive, well done.
I agree with Richard, if you have a part variable home loan why not switch that part to IO immediately and save the excess money for your next IP/PPOR.
Ryan McLean | On Property
http://onproperty.com.au
Email MeIt would be good serviceability for 55 days…then not so good
Ryan McLean | On Property
http://onproperty.com.au
Email MeIt's hard to go wrong if you buy in good neighbourhoods and stay on top of things. Make sure you have a good real estate agent and that you aren't renting the property for below the market value.
As everyone has said, properties will probably always go up. So if you can afford it then it is a good strategy.
I prefer to go positive cash flow as I am making money from day one. If you go negative cash flow then you will want your capital gains to be significant as they need to outweigh the money you are pouring into the property in expenses every month.
But yeh, if you can afford it then it sounds like a pretty solid idea.
One caution, if you leverage yourself too far (eg having 95% LVR's) then if interest rates go up a lot it may make your cash flow very tight.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI have looked at these. From my understanding they need to meet a few specific criteria
1. They need to be new builds – Probably because the government wants to keep housing supply high
2. You need to rent them out for 20% below the retail rental valueRyan McLean | On Property
http://onproperty.com.au
Email MeIt still could be a good idea. You be the judge, not us. You know your situation and the property better than us. If it is right for you then there is no point letting us hold you back.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHaha, I bought Rich Dad Poor Dad for my wife (when she was still my gf) and tried to make her read it. She got about half way through and gave up.
For some people investing is in their blood and they LOVE it, for other people not so much. I just gave up trying to push her, I will go ahead and let her come along for the ride.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI'm with you. Not a fan of units because strata strips any cash flow you might get. Houses are better because you can control the finances better (I think).
Before choosing a strategy you need to clearly identify your goals. There are hundreds of different strategies for investing in property and they are all good. But not all of them will be right for you.
You already know you want to pay off you PPOR….good! But how do you want to pay it off? Do you want rental income (aka. Positive cash flow) from investment properties to pay it off? Do you want to pay it off yourself while buying investment properties also? Do you want to get capital growth with your investment properties and draw down equity to pay off your PPOR (kind of like moving the debt to your investments).
When do you want to pay it off by?
Then….long term
What do you want to achieve from your property investments? How much cash flow per month do you want? How many properties do you want to own? Do you want high capital growth or high rental yields?
Do you want to buy and renovate.
By looking at what you want to achieve you can cancel out 90% of the strategies that are out there, as most of them won't suit you.
Ryan McLean | On Property
http://onproperty.com.au
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