Just wanted to share my situation with you people and see your points of view about it …
Suppose you’re young and unemployed and have about $10k~$20k to spend on the deposit of your I.P. Would you be looking for +CF types of IP (less growth, more income/cashflow) or CG geared types of IP (more growth, less income/cashflow)?
P.S I would suppose +CF is more “correct” based on the above situation since this person cannot afford to negative gear his I.P for growth (CG).
What do you think? What are your views on this?
There is no correct asnswer.
Why no lok for one that provides both cashflow and capital gains. they do exist!
But if you are unemployed, getting finance will be the biggest hurdle you have to get over.
There are No Doc loans which you could use, but often regional areas are not acceptable locations for these. There are also minimum loan sizes, so with a small deposit like that will make it hard.
Terryw
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It would have to be positive cashflow or they could not make repayments. Unemployed means NO INCOME. There is no choice.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hi,
My contribution is a little out of left field… I wouldn’t directly look for either, instead I’d look to build an investing system that identifies solutions to a range of problems.
Why limit yourself to one type when there are good opportunities in both?
The reason why I emphathise the need to have a system is, as Terry pointed out, securing finance in your own name will be difficult without a job. However, if you have a system then others (i.e. money partners) can co-invest in that system/process.
Finally, you don’t need a full time job, but it may be a short-term necessity to achiove a longer term outcome.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the contributions (Terry & Robert).
Steve, do you mind talking more about this “investing system that identifies solutions to a range of problems”? I don’t quite ‘catch the ball’.
Originally posted by FireCaesar:Thanks for the contributions (Terry & Robert).
Steve, do you mind talking more about this “investing system that identifies solutions to a range of problems”? I don’t quite ‘catch the ball’.
I believe Steve is reffering to building a business system that does the complete A – Z on property transactions:
-Sourcing and testing opportunities processes
– Sourcing funds and private investors
– Negotiating terms instead of needing investors
– paperwork and contracts
– advertising for buyers and sellers
ETC ETC ETC…..
If people can plug into a system that you have in place… then you increase your chance of success and spread the risk.Kiwi,
Out of interest, how many properties do you own and how many do you control under lease options?
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdOriginally posted by The Mortgage Adviser:Kiwi,
Out of interest, how many properties do you own and how many do you control under lease options?
Robert,
What is the point of the question??? to get me to prove my credibility perhaps….. I would have thought other readers would ascertain whether I am full of it or not by what ideas and contribution content I provide freely.
Put it this way… I am not going to write a book on the subject as it has already been thrashed to peices. I would rather just quietly get to where I need to go without the fame factor tainting my senses.
Cheers,
Kiwi
[baaa]I take that answer to mean none. Thanks mate.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdRobert,
Firstly I am not your MATE! as mates respect one another… and secondly:Take it however you like. If you want to live in your little fantasy world of judgement…. then so be it….as long as you are happy.
I am not getting into a childish discussion of mine is bigger than yours. – peace… and leave the judgment to the readers.
Unlike others I am not trying to be a great hero… just telling it like it is out there in the real world.
If you have some constructive feedback rather than trying to strip people of dignity and belittling people then I am happy to discuss… otherwise….. Choose another pastime to waste your time with.
KIWI! – Kia Toa Kia Nga Kao NuiKiwi,
Are you angry because you guys keep losing in the footy?
Mate is just a colloquial term used in a relaxed environment which I am certainly in. I wish you could join me.
If you can’t see my words for what they are, then it is you who has the problem – “MATE!”. I just asked a simple and very similar question to one I was asked myself a week ago.
I often find that people who react aggressively when questioned tend to be lying about something. I am just trying to determine if this applies to you. I am not trying to belittle you or strip anyone of their dignity. I just find a lot of what you say as rather confusing and wanted to know if you actually knew what you were talking about.
CHILL OUT MATE, DUDE, KIWI OR WHATEVER YOU WANT ME TO CALL YOU!
Forget I asked and I will never question your knowledge again.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdTis the season to be jolly….
Originally posted by FireCaesar:Suppose you’re young and unemployed and have about $10k~$20k to spend on the deposit of your I.P. Would you be looking for +CF types of IP (less growth, more income/cashflow) or CG geared types of IP (more growth, less income/cashflow)?
P.S I would suppose +CF is more “correct” based on the above situation since this person cannot afford to negative gear his I.P for growth (CG).
But if you are unemployed, getting finance will be the biggest hurdle you have to get over.Um… It’s not that big a hurdle. For instance, if he’s in NSW the government has what they call the “Government Guaranteed Loan Scheme”. As it sounds, it virtually guarantees loans to low income earners who are in, or qualify for, public housing.
Start at http://www.nsw.gov.au and follow the housing links – it’s pretty easy to find. Basic info is… It’s through the Commonwealth Bank at their standard variable rate, but is farmed out through only one mortgage broker in the particular area the buyer is located.
There are No Doc loans which you could use, but often regional areas are not acceptable locations for these. There are also minimum loan sizes, so with a small deposit like that will make it hard.I saw the other day in some fine print in a pop-up Internet window, that the ANZ won’t allow anything less than $5000 for a mortgage – for amounts less than $5000, they should apply for a credit card instead. I’d say that’s pretty low. ; ) Secondly, I wouldn’t be searching for a low-doc loan. (Usually higher interest for one.) Third… I’m on a disability pension and getting a loan sure doesn’t seem to going to be a big problem for us. Wouldn’t unemployment benefits be the same, considering the NSW government is giving out loans through a scheme designed just for such folks?
It would have to be positive cashflow or they could not make repayments. Unemployed means NO INCOME. There is no choice.Or neutral – or slightly negative. And of course, it all depends on how well they budget. I know people with $60-80K jobs who pay the minimum on their mortgage and have nothing left at the end of the week. We can save two thirds of our Centrelink payment – and that’s while paying rent.
Here’s some other things I’ve been thinking about that would apply to you, FireCaesar…
Most will say to keep saving – but as you’ve seen (and instinctively know) – while you’re saving and paying rent, everyone else in the property market slowly leaves you behind at a rate of increase of 5%-10% annually.
What these people forget is, you are paying rent. And the upper limit a lender will give you will means you’ll have to purchase a cheaper-end property anyway. Furthermore, you have no job restricting you to staying in a high-rent area. What I’m getting at here is – the type of property you/we can afford to buy – after thrusting ~ $27K into a deposit – the repayments will be VERY close to the rent you are already paying – and if you move from say Sydney a couple of hours inland – the repayments would actually be LESS than your current rent.
Of course, depending on where you are, it may mean you have to move for six months – for two reasons:
1. To get the $7,000 First Home Owners Grant.
2. To live in the house for six months in the first twelve, to qualify for the grant.The result of this is:
1. $20,000 deposit +
2. $7,000 FHOGIf it’s your first home, you are exempt (in NSW at least – maybe other States too) from stamp duty, etc. And $27K is 20% of… $135,000. The reason it is important for someone on government benefits to keep their deposit at 20% is twofold:
1. With a 20% deposit, you can avoid paying mortgage insurance – which protects ONLY the lender – not you. It’s designed to protect them if you lose your job and can’t make the repayments. But since you already don’t have one… And… You’d have to pay their insurance company back anyway, if the lender every claimed on the insurance – this means you’d be paying for it TWICE!
2. The lower the loan amount/property value, the quicker you can pay it off and gain equity – and/or – the more likely it is that when you rent it out, it will be cashflow positive or neutral (just covers loan repayments and outgoings/repairs/etc. with no profit).
NOTE #1: Someone unemployed wouldn’t qualify for a loan of $135,000 anyway. You’d have to check, but it’s probably more in the vicinity of $70,000 + your saved deposit + the $7,000 FHOG.
NOTE #2: Sometimes lenders will only accept half the $7,000 FHOG as part-deposit. But there’s nothing stopping you paying the other $3,500 off on day #1 of the loan.
So the main idea is, as someone who is unemployed, you don’t want mortgage insurance. Buy a $80,000 property, whack $20,000 deposit down on it, shove the $7,000 FHOG into it as well as soon as you get it, then count what you’re saving in rent… Say $6,000 – and you must’ve had money left over to save $20K in the first place… It all adds up to a huge amount of equity being payed it off in comparision to the original loan amount – thus creating a +ve cashflow property (once you move out and rent it to tenants).
If you’re going to rent it out immediately instead, and it’s cashflow neutral – well, you got the first loan and now have an investment property that is paying for itself. So I don’t see why you couldn’t now get ANOTHER loan where the rent covers the repayments.
Whew!
So to directly answer your question – either way I’d pick a cheap property – and aim for cashflow positive or even neutral – since someone on Centrelink benefits won’t qualify for the loan amount required for a Capital Gain property anyway.
Allan.
Originally posted by JustAllan:Um… It’s not that big a hurdle. For instance, if he’s in NSW the government has what they call the “Government Guaranteed Loan Scheme”. As it sounds, it virtually guarantees loans to low income earners who are in, or qualify for, public housing.
Start at http://www.nsw.gov.au and follow the housing links – it’s pretty easy to find. Basic info is… It’s through the Commonwealth Bank at their standard variable rate, but is farmed out through only one mortgage broker in the particular area the buyer is located.
I would be interested in more information on this as I have not come across such a loan. I understood Government Assistance for home loans only came in the form of interest free loan repayment assistance paid directly to an existing lender.
I’m on a disability pension and getting a loan sure doesn’t seem to going to be a big problem for us. Wouldn’t unemployment benefits be the same, considering the NSW government is giving out loans through a scheme designed just for such folks?I would like to know how you find it so easy to obtain loans while on a disability pension. Where do you get all these loans and for what amounts are they? How many have you got? Remember, a no doc loan or low doc loan requires larger deposits so you would probably need to already have a property. None of the mortgage insured loans will say yes to someone on a pension.
It would have to be positive cashflow or they could not make repayments. Unemployed means NO INCOME. There is no choice.Or neutral – or slightly negative. And of course, it all depends on how well they budget. I know people with $60-80K jobs who pay the minimum on their mortgage and have nothing left at the end of the week. We can save two thirds of our Centrelink payment – and that’s while paying rent.When a lender checks serviceability, they use a margin above the actual interest rate to account for increases. Neutral or slightly negative will not be acceptable and how will repayments be made if rates go up substantially?
I can’t see how you save so much? It seems your earlier comment about a mortgage refers to getting one in the future and not mortgages you already have. I guess you have no incentive to go back to work if you are able to save so much. You will find out how hard it is when you go for your loan.
Most will say to keep saving – but as you’ve seen (and instinctively know) – while you’re saving and paying rent, everyone else in the property market slowly leaves you behind at a rate of increase of 5%-10% annually.More or less depending on the area.
What these people forget is, you are paying rent. And the upper limit a lender will give you will means you’ll have to purchase a cheaper-end property anyway. Furthermore, you have no job restricting you to staying in a high-rent area. What I’m getting at here is – the type of property you/we can afford to buy – after thrusting ~ $27K into a deposit – the repayments will be VERY close to the rent you are already paying – and if you move from say Sydney a couple of hours inland – the repayments would actually be LESS than your current rent.This does not allow for minimal living allowances the lenders are obliged to use when calculating whether someone can sevice a loan. These miminum living allowances are higher than any pension or dole payments I have seen.
Of course, depending on where you are, it may mean you have to move for six months – for two reasons:1. To get the $7,000 First Home Owners Grant.
2. To live in the house for six months in the first twelve, to qualify for the grant.Actually, you get the grant whether it is tenanted or not as long as you intend to move in within the year. You just have to move in to the property by the 365th day after settlement and stay in it for 6 months.
If it’s your first home, you are exempt (in NSW at least – maybe other States too) from stamp duty, etc.There are limits to this which would not affect small loans like these though.
And $27K is 20% of… $135,000. The reason it is important for someone on government benefits to keep their deposit at 20% is twofold:1. With a 20% deposit, you can avoid paying mortgage insurance – which protects ONLY the lender – not you. It’s designed to protect them if you lose your job and can’t make the repayments. But since you already don’t have one… And… You’d have to pay their insurance company back anyway, if the lender every claimed on the insurance – this means you’d be paying for it TWICE!
Mortgage insurance has nothing to do with repayments. Mortgage insurance is designed to cover any shortfall to the lender after they take possession of your home and sell it. The shortfall is paid by the mortgage insurer and then they come after the borrower to recover their losses. That is why the more you borrow against a property’s value, the higher the premium. It is a ‘risk premium’. Higher borrowing = higher risk.
NOTE #1: Someone unemployed wouldn’t qualify for a loan of $135,000 anyway. You’d have to check, but it’s probably more in the vicinity of $70,000 + your saved deposit + the $7,000 FHOG.It would be pretty much $0 unless you lie on the application form or already have property.
NOTE #2: Sometimes lenders will only accept half the $7,000 FHOG as part-deposit. But there’s nothing stopping you paying the other $3,500 off on day #1 of the loan.Actually, the lender will never refuse any of the FHOG as part of a deposit because the more that is paid, the less risk they incur. I think you may be referring to them using the FHOG as genuine savings. Most lenders don’t consider it all because it isn’t savings.
So the main idea is, as someone who is unemployed, you don’t want mortgage insurance. Buy a $80,000 property, whack $20,000 deposit down on it, shove the $7,000 FHOG into it as well as soon as you get it, then count what you’re saving in rent… Say $6,000 – and you must’ve had money left over to save $20K in the first place… It all adds up to a huge amount of equity being payed it off in comparision to the original loan amount – thus creating a +ve cashflow property (once you move out and rent it to tenants).The $7,000 will be available at settlement if applied for prior to settlement and it is not as easy as you make it sound. You have to find a tenant first and maybe the saved money occurred when the person had a job. An adverse interest rate move would quickly see bankruptcy proceedings which adversely affect you for 7 years.
If you’re going to rent it out immediately instead, and it’s cashflow neutral – well, you got the first loan and now have an investment property that is paying for itself. So I don’t see why you couldn’t now get ANOTHER loan where the rent covers the repayments.You wouldn’t get another loan because you would not have any deposit, not all the rental income would be used by most lenders and they use higher rates for checking serviceability amongst many other factors.
So to directly answer your question – either way I’d pick a cheap property – and aim for cashflow positive or even neutral – since someone on Centrelink benefits won’t qualify for the loan amount required for a Capital Gain property anyway.If you aim for neutral, you will find yourself in trouble. Also, any property can result in capital gains depending on what you do. My suggestion is to get a job or find an alternative source of income that you can declare. That way, if things go wrong, you have some back up.
Think of one thing, what if you can’t find a tenant and you don’t have a job or other income?
A final thought: Talk to your mortgage adviser or a professional before committing yourself to the slaughter!
A wrap or lease option might suit you better.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdKiwi, I need to ask one question about an earlier post.
What do you mean by obtaining a system rather than making purchase? Does this system you are referring too cost money?
I personally would attempt too purchase a cashflow positive property as soon as I could if I had a deposit like Firecaesar is suggesting.
Byronent
Answering the original question, it depends on what you have found.
We were in a situation where we wanted to buy an IP and were only looking at the bottom end of the market so it would be cash positive or at least neutral. BUT, our situation changed somewhat. We realised that with the possibility of children in the next year, we will certainly need a bigger house as I plan on doing Family daycare from home. So we went looking for a house that could service that need.
We found a house that was the size we needed but a great deal more than we thought we would spend. Our mind set changed though to accommodate that change. We bought a house that initially will be -ve geared, but when we move into it, the current house we will be in will be positive geared.
So our main ideas was capital gains for now with the plans to change it to +ve in the next couple of years. The beauty of where we bought though was that it can ask a huge rent which should cover a lot of the payment.
Anyway, to cut a long story short, we bought for what our needs were at the time, even though it isn’t exactly what we were hoping to achieve for starters. Our original idea hasn’t been scraped, just pushed aside for a little while. We shall go back to our original plan soon.
Cheers
Steph.P.s hope you had a great Xmas!
Success is 1% inspiration and 99% perspiration.
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