[Mick CParticipant@shapeJoin Date: 2010Post Count: 1,099]

February 4, 2014 - 12:05 pm

1. Change your loan to I/O …..why would you want to pay down the loan and then ACCESS THE equity back up in 3-4  years?? might as well have access to the equity now and not pay down the loan…and STILL access any equity increase in 3-4 years time.

2. ^ Cash is king…equity is worthless if it can't be converted to cash, or in this case "re-borrowed" 

3. There's a diff btw good and  bad debt…IP is a Good debt, so don't be scared to be in a bit of debt, especially if your looking at "retiring" in 10 years time on a passive rental income ….acurmmmuate the wealth and IP in the shortest period of time and once you get to the stage where your comfortable to pay down your debt, do so only than…Not now. As you need more cash for deposits etc…

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February 4, 2014 - 11:53 am

If you pay down the LOC to a balance of $0 some banks will close this out….so your best to apply for a standard loan + get an offset account…

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January 31, 2014 - 1:31 am

smartcube wrote:

thanks all.really appreciated.

so does this mean that its smart to tale 90% loan and use the funds in offset account this will reduce the interest paid and iam sure will change this into ip in year or 2 so i can claim the LMI on tax?

Ta,

Smartcube

Yes in majority of cases. Especially if your thinking of buying your PPOR in the near future. 

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January 30, 2014 - 11:10 am

Hi Smartcube.

As Jamie mentioned it does depend on your risk tolerance and future goal, so planning is key and knowing what each "purchase" would do to your cash flow and savings is helpful. 

Really need to know your personal situation to comment but giving you a general idea…

Say you did use a 20% deposit – on an $540,000 purchase the outlay would be $108,000 for deposit + ~$20,000 for Stamp duty = $128,000…all good, you still have $72k in cash if you wanted to buy other IP in 2 years time; also to avoid LMI you will have to find other $128,000 ( presuming same price)  so around $56,000 to save in 2 years OR you could pay for LMI on your 2nd purchase. 

^ Sounds all good…now this is where it can get a bit messy and complex…Your future borrowing capacity.

1. getting your 1st loan would be easy as you have so much cash and im presuming no major debt ….Getting your 2nd loan "may" be a bit harder as you would now have a home loan debt from your 1st purchase and less cash and as life goes on more responsibilities, accidents, more lialbiltes etc…

2. Borrowing capacity tend to drop off as you buy more ( a very general statement as there are some expections  ) so getting your 2nd loan may be tricker and much harder especially with LMI involved

3. So if you find out that your personal borrowing capacity drops off dramatically after your 1st purchase than…. max out your LMI exposure early if your planning on buying again in a short period of time…leave the "Easy loans/ 20 % deposit loans " till much later when everything becomes more complex and  harder to approve/afford…

4. Yes you can claim LMI back over 5 years, if it's used as an IP.

5. You may want to buy your PPOR next and it may be > $540,000 were you gonna find the 20% deposit now?? always better to pay for LMI on your IP compared to your PPOR.( lower loan for your PPOR VS your IP)

---

Go speak to your banker or broker regarding

1. Current borrowing capacity

2. Future borrowing capacity AFTER you bought your 1st property ( ie 2nd future borrowing capacity)

3. Future borrowing capacity with standard rates 1.5% higher than current rate  AFTER you bought your 1st property ( ie 2nd future borrowing capacity)

4. Re do number 2 and 3 based on a 90% and 80% LVR borrowing. 

Plan plan plan.

Cheers

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January 30, 2014 - 10:42 am

The equation does exist, but really need to look at other factors as well….as standard it may sound – it does depend on the area your investing.

Ie for example: A older style 2 bedroom unit in Westmead ( Sydney) rents for $400pw — it would sell for average $450,000  — the gross return is 5.2%

( years rent/ purchase price )

Now lets say we took a drive 20 min away Westmead  and we used this same equation ( but in reversed) say for a unit in Macquarie Park  ( Sydney) – 

A 2 bedroom unit in Macquarie Park  ( around 20km away  or 20 min drive away from Westmead) ) rents for $430pw  — the purchase price to receive 5.2% return would make the property be "worth" $430,000…. impossible ~ older 2 bedroom units in Macquarie Park sells for on average $530,000.

Now lets do the reverse and go 23km out the other direction ( also 20 min drive from Westmead) and go west to St Marys.

A older style 2 bedroom unit in St Marys ( Sydney) rents for $280 pw — the purchase price to receive 5.2% return would make the property be "worth" $280,000…. however you can pick up older style units in St Marys for around $250,000.

^^ Above are just some  examples….

---

So really some areas  and some property type you an use some sort of equation…So yes numbers and "rental return is very important" but it doesn't always determine the property value. 

Hope that wasn't to confusing lol..

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January 30, 2014 - 9:53 am

"fair purchase price" doesn't always go by rental return/yield, only works for certain areas and property type.

There's a lot more to "fair purchase price" than JUST the rental return..

What are you actually looking for ?? a number/purchase price where you can break even with your rent??

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January 19, 2014 - 4:09 am

Option If your overall financial strength works out and your eligible  …Buy property at 90% LVR or more. Keep rest of the cash in offset to offset the interest till it's repayable 

– This will limit how much you borrow from your frd…esp given your frd will start to charge you interest later on

– Loan is a 30 years loan at standard rate

– Interest is deducible for tax reason if property is rented out.

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January 17, 2014 - 1:49 am

Find out who the valuer was for your Hertiage deal; than choose a diff valuer – 

But as Jamie correctly mentioned, if it's a small town it's likely there would be probably only be 1-2 valuer servicing that area….but it doesn't hurt to try ( might cost you in terms of the valuation fee) 

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January 17, 2014 - 1:46 am

Im with Connective. They charge a flat fee of $748 per month + ~ $120 per broker per month regardless of volume/deal and you take 100% commission. 

Regards 

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October 23, 2013 - 10:50 am

Sorry only can apply for the loan to purchase the asset.

– No top up etc…

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October 23, 2013 - 5:47 am

CBA does dual occ- i do it all the time with CBA + various other lenders…never done dual occ with Bankwest that's why i was a bit surprised your broker suggested bankwest.

The only issues you "may" have is having multiple credit hits, not sure how your credit file looks likes but CBA is very strict on credit rating and even a small $1 default on a CBA saving account would trigger an auto decline. 

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October 23, 2013 - 2:48 am

1. A good credited broker will give you the commission break down of each lender + a summary of the top banks he/she has submitted in the last 12 month and lastly they will def give you a reason for the recommendation. Discuss and adopt/change if required. 

2 The difference btw commission btw the highest bank and the lower bank is minimal; 0.02-0.10%— so i be supervised if a broker or ANY service provider makes recommendation on commission alone as the product may be "unsuitable" for the client in the long run. In any business it's all about stability and word of mouth referral. 

3. End of the day, the broker or service broker should give you a reason for the recommendation; for a broker it be mainly based on;

– Policy

– Equity 

– LMI

– LVR

– Acceptable security

– Speed

– Customer service

– Meets your requirements

– Rates

– Fees

– Serviceability

– Loan structure

– Short and long term goals

4. If the product meets your requirements, i can't see why you have any issues. Lastly nothing wrong with going to the bank directly ( in fact my first loan before i became a broker was done directly with the bank i grew up with) but end of the day how can you trust the product  and structure on offer  is the most suitable? 

So trust plays a big part in a broker-client relationship….in any relationship for that matter.

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October 22, 2013 - 1:30 pm

Mgs4 wrote:

Just a general question on mortgage brokers. As you build a portfolio and provide a mortgage broker with more business, do you sometimes get other benefits like commission rebates or access to better rates than smaller clients.

Thanks.

No, 1 -10 loans we treat all clients the same. Same discounted rate and service.

Mgs4 wrote:

J From what I've read it seems that if you maintain all your finance with one bank, because of the greater concentration risk to the bank  they'll put greater constraints on your LVR, whereas if you spread the finance across a few banks you get greater LVR across the portfolio. Have others found this as well?

Thanks.

^Half correct. It';s not just the LVR that gets restricted but also serviceability/ LMI cost , chance of approval and flexibility all comes too play when you concentrate too much lending with one lender. 

Cheers

Michael 

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October 17, 2013 - 7:28 am

Di you submit an application for constriction as well? and was it with the same application…..

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October 17, 2013 - 5:19 am

Will come down to the valuation and would have been a better CBA deal as you could have ordered the valuation first and look out for any negative comments + CBA would have supported this sort of security. But not sure about the rest of your financial position so maybe bankwest would have been the only fit? not sure..

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October 16, 2013 - 3:16 am

tommytucker wrote:

Hi

i spoke to a buying agent recently and he spoke about a very cool strategy of building a 2 storey townhouse that is actually 2 individual dwellings. Has anyone had experience with this sort of investment and if so what are the specific zoning requirements? Is it simply the same R40 / R60 sort of requirements or is it something else that is required to subdivide vertically? I'm in Perth by the way. I'm looking to buy presently and would like to be able to think of this possibility as well.

Cheers,

Tom.

So it's 2 townhouse that's on torrent title; just require a bit of land for the set backs.

Im in Sydney so not sure about the perth zoning for these development; but im currently in the processing of knocking down an old 1930 house and building 3 double storey townhouse on 3 separate title ( torrent)  – hornsby council and the place is zoned Medium density Residential.

Speak to the local council town planner – free info + they will give you a bit of heads up on what's require. 

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October 13, 2013 - 1:24 pm

P.s One of the biggest concern and risk with block of units is bank valuation and  " comparative sales" – if the valuer can't find any decent comparative sales then the deal falls through.  http://www.shapehomeloans.com.au/finance-for-multiple-units

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October 13, 2013 - 1:22 pm

ajayayyar wrote:

Hi all,

* When applying for a loan, would the bank cover the loan in a similar way it would for an individual property?  For example, with individual units and houses I've purchased in the past, the bank has provided sometimes 105% of the value of the purchase (including deposit/stamp duty costs/closing costs), 95%, or 90% at an absolute minimum.  Would the same apply for buying a block of units or is there any additional differences?

Cheers

This is where choosing the right banks and right structure helps! Depending on the banks some will limit the LVR and some may not even finance this under residential rate. Having said that there's a bunch of lenders that would go up to 90-95% for block of 4 or less and 80% LVR for a block of up to 10.

However if you have equity in another property you could potentially get an 105% loan ( Stamp duty etc..)

ajayayyar wrote:

Hi all,

* Are there any additional charges in buying a block of units except for stamp duty?  Would be good to get an understanding of what to expect here.

If it's strata titled; then the stamp duty will be aggregated ( if settled on the same day) and will be more expensive; if it's under one title then stamp duty is ok

Other cost;

– Land tax

– Council rate ( normally cheaper! )

– Water usage ( unless it has separate metered….very rare for older style units)

– Bank valuation ~ $300 per unit.

– Insurance is expensive 

ajayayyar wrote:

* Any particular issues/concerns in relation to purchase a block of units in comparison to buying an individual property?

Anyone who has gone through this process or has knowledge around this who can provide some input would be great.

– Cheaper council rate

– No strata

– CG and RY

– Control

– Can strata title later and sell off

list goes on!

Just settled on one last month and yes i applied for an 105% loan

Cheers

Michael

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October 13, 2013 - 3:48 am

ummmm not much details/info to go off- but the numbers and details you have presented are not uncommon – it's an ~6,7% yield- which is common for units in some part of Sydney.

Without giving the address away; if you can provide a bit more details that would be helpful. 

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October 10, 2013 - 11:35 am

brmiau wrote:

We have $240k left on our mortgage and the property is worth $440k. 

 

1. Presuming your going for an 80% equity release – you have $112,000  usable equity –and this is based on the bank valuing your property at $440,000..

brmiau wrote:

 Most properties I've looked at are between $75-$130k so with 10% plus stamp duty so we could buy 3 or 4 I suppose?

Not sure where your buying but from exp property under $150,000  falls into 4 groups ( im generalizing here…)

– Regional towns

– Low population

– Small units ( 1 bedroom or studio's  most likely) 

– Over 55's or service apartments.

^ Not the type of deal a standard bank will want on their books at 90% LVR- but as i said it depends on the location and type of property.

Gopod start- http://www.genworth.com.au/lender-centre/tools-and-resources/location-guide-australia/ type in the postcode here and if it's a cat 3 or not even on this list chances are your bank may not support that area at the LVR you want.

brmiau wrote:

Idealy in 2 years I would like to have between 5-10 properties and in 5 years maybe 20 or so, maybe more if it is all going well. Looking at retiring from work to concentrate on property within 3-5 years after that with around 50 properties. Hopefully earning $4-5k a week.

Possible; but you need good planning skills and speak to someone who has either done something similar or know what they are doing from an investors point of view. 

Property investing requires time, 1-2 mistakes could possible make stop you on your track.

You have a "end picture" now you need the plans to execute. if you know how to execute; all good…if you have no idea – seek help from someone who does- ie a property mentor or an experienced investor. 

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