Hi all,
One of my friends has paid off his own house . It is worth $400K. His house has a granny flat that he can rent it out to genarate extra income. He wants to buy a 300K IP. It can be rented out for $340/wk. He has $100K deposit. The mortgage broker thinks he doesn’t have a chance because currently he doesn’t have a proper job. He will get some Super pension in a few month time. What can he do in order to get a loan?
Regards
Huey
Hi Huey
He can get a no loc loan (essentially the loan is based solely on the asset base and they don’t ask any questions about income).
HOWEVER, his interest only repayments are going to be a little less than his rental (repayments = $300, rental $340). What happens if the property is vacant? What happens if interest rates increase? He needs to consider these factors. Does he have a second source of income to supplement investment income (besides his pension which he needs to live off)?
In my opinion, this is perhaps a too risky strategy for a pensioner.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auMany thanks Stuart,
He is highly educated so hopefully he can get a more stable job soon. He also can get a lump sum instead of the pension (about $80,000) and uses that money to pay the loan. He wants to get 2 IPs but I think 1 is more than enough at this stage.
Regards
Huey
Howdy,
Have you talked to him about getting into higher yield properties? Like Stuart says he can get into low docs easily with his equity, but it’s income risk he needs to focus on.
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MelVh2000,
Ask your friend, why -ve gear? not proper job mean less tax. Try neutral or +ve gear instead
Kind regards
Chandara
[Keep going, you’re nearly reach the end of financial freedom]Thanks Mel & Chandara
He wants to get an IP close to where he lives. There aren’t any neutral or +ve gear property in the area. Most yields around 4 – 4.5%.
Cheers
Huey
300K seems like all eggs in one basket, esp if neg geared and no steady income to offset the neg gearing.
Who is to say that cap gain will continue unbabated?
What is the growth rate in the area?
What is rental vacancy in that area?
If he is near retirement age, it may be one occassion for a one off ethical financial adviser, because things can be done with superfunds etc.which can be very tax efficient.
It sounds a little risky to me.
But thats only my opinion.All he needs is a no-doc loan like Stuart said. Max LVR is 65% Therefore max loan amount is $260000. Interest Rates vary,one of the cheapest would be 7.29% with no- ongoing fees and only 1-2 months repayment exit fees. Application fee $600
If he has calculated the risks
Hi
There is RAMS at 7.09% with 65% LVR too.
And, there will be a new no doc loan coming onto the market shortly. 65% LVR at 6.95%pa.Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi
There is RAMS no doc at 7.09% with 65% LVR too.
And, there will be a new no doc loan coming onto the market shortly. 65% LVR at 6.95%pa.Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hang on a sec here…
Didn’t you say he owns a 400k property fully cashed out?
If he was to put 30% into a 300k IP with a $340 rent then why would he need a low doc load at such a high intest rate??
If he had a decent broker then he would be at around 6.02% and only needing $232 per week therefore CF+. the bank would give this to him with bells on.. He has $400k security on the whole deal..please correct me if I am wrong… I am only starting out… 7 properties at the moment..
Calron the Alcamist
Turning things into gold is fun.
[email protected].a[]I think you can actually get more than 65% LVR if you know where to look. Have a look at
http://www.yourmortguage.com.au
I is a really good site for comparing loans.Dan.
If you want an extraordinary life you have to be prepared to do things that ordinary people aren’t prepared to do.
No Job, plus only one source of rental income = too rental reliant. What happens if the property is unoccupied for a while?
To get a low doc, you would have to declare some sort of income. ie he would have to lie.
a 100k deposit on a $300,000 property makes a LVR of 67% so he is close. (needs to factor in closts as well).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Agree Terryw, too many what ifs in this case.
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