my husband and i have recently bought our first home it has gone up in value with a few renos by nearly 40k which normally would be great but we have a lot of debt which we are consolidating with the loan.
my question is how can i afford to buy an investment property for around 140k when i only have about 8k left as equity. all the loan calculators i have looked at tell me i need a deposit of around 16k.
are there any ways of getting around this?Hi Mitchy,
First of all get yourself a good mortgage broker and ask them about using deposit bonds. You pay a premium (like insurance) and they put forward the deposit. The premium is not refundable but is tax deductable…….or scrimp, borrow from relations and offer them interest on their money. Hope I’ve helped.
sq
Hi Mitchy,
One option is to go for a 100% investment loan. That way you would only need to pay your mortgage insurance and stamp duty, which should be covered by your $8,000. The rates start from 6.89% on these loans.
Kind Regards,
Cameron Perry
Finance Consultant
F.R. Perry & Associates
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044There are a lot of new products on the market including 95% investment loans. 100% is available too however it comes at a premium interest rate although it’s usually worth considering if the capital growth will outweight the interest rate right?
Suzie Q a deposit bond will only cover you between exchange and settlement, the deposit still needs to come from somewhere at settlement time.
The costs would depend on what state you are in but I’d assume around $12k for NSW. A bit less for QLD. Where are you.
Also what is the loan value and the home value on your current property?
Liz
Mortgage Lender
1300 780 826i live in south aus
my loan value is 152k and the house value is 160k but we have about 8k left (we just consolidated to 144)
my mortgage broker told me i would be better off concentrating on doing up this house and paying down the loan to increase the equity and buy then
the house we are looking at needs a lot of work but is on a large block which can be sub div. as is our current home.
any thoughts?
[baaa]Ohh mitchy
“i need a deposit of around 16k.
are there any ways of getting around this?”can i have it now….can i have it now…
so young and wanting everthing straight away……just like my daughter.can i give an alternative view…..being old and everything
WORK…..SAVE……WORK……SAVE
thats how we use to do it in the old days……..
but what the heck….look at all that money their throwing at you………
no deposit…..no equity………..
NO LIFE…..and then become just another statistic in life
“A RECORD number of New South Wales families lost their homes last year as growing numbers struggled to meet mortgage commitments”
won’t happen to me
and anyway what would old people know………..
hb
Gee HB – HARSH![angry2]
Ok you have a point, and let me start by saying to Mitchy that in my professional opinion, you are talking about extending your own home LVR to 95%, then buying another investment at 95%, most banks will get a little jumpy about this, unless you can show VERY good servicing ability (income/incomings) you are going to have trouble.
You are overextending yourself and unless you are both very secure in your jobs and budgeting and have a tonne of research I wouldn’t consider it. If you did, perhaps leave the equity in your home and opt for a 100% product, but only if you feel like the rental and capital growth are worth it.
However, there is a big lesson to be learned for a lot of young guns out there, …save save save!!!
HB, yes you have a valid point, but as someone from the X generation I would like to acknowledge that yes I do believe that it is taking these generations longer to grow up, but not ALL of them. However I do believe there are valid REASONS behind what is going on in our society?? Do you think these children were BORN with the notion that they could have everything now??
People in my age bracket are very conscious of the need to get into property to establish themselves securely, ie. mitchy, is obviously trying to set herself up for family, her long term security. If she did go into further debt would she not be working her bumb off to pay it off??? We’d hope so, or she’d learn a quick lesson like the other statistics you quote.
In the meantime, if your daughter wants everything now, perhaps you might ask yourself whether you really blame yourself, as a mother, for her misgivings, or society in general, for it’s consumer based engine driving this economy…??[eh] And probably a tonne of other factors….
Anyway I’ll get back to WORK because frankly, most people in my generation know that we work the LONGEST hours of any generation. The statistics are all there….
Liz
Mortgage Lender
1300 780 826i may be young and want every thing now but what is wrong with that?
my hubby and i have worked damn hard for every thing we have, we werent helped out from our parents(cause they couldnt afford it).
we want to be able to retire comfortably and the sooner we start the quicker we will be able to achieve our dreams.
just because we havent passed 30 yet doesnt mean we are too young and niave. we wouldnt do anything we couldnt afford to as we have children and dont want them to suffer for our wants.
[chill]My thoughts exactly Mitchy…[wink2]
Liz
Mortgage Lender
1300 780 826hi young people
how often have you told your kids not to do something, only to find 3 minutes their in tears and your reply is “well i told you that would happen”
whether their 2 or 20, they know best….well until disaster happens.
The great thing about being older……..is you’ve DONE it
all the debts, the bills, the kids, the bank, recessions, boom times, credit squeeze, 18% INTEREST ,etc etc
and some come out the other side relatively intact…….and a few dollars behind you.
But not everybody did.
some lost everything….including their homes.
try getting a loan then, especially if your a bankrupt.life is timing……and cash
for example, a large property was bought for a 1.2m on almost 100% loan….within 12 months before they could develop it, the market turn, and it was sold at morgagee auction for 360k (only 2 people at auction)……they lost their home…….today that property is worth 1.5m
great CG if you bought at 360k
pretty ordinary gain if you paid 1.2m after 12 years (wouldn’t have even cover the interest payments)patient ,timing and CASH are every thing
i started with nothing….$0
at 26 formed my first company worked 24/7 none stop within a couple of years we where turnover 1m a year….high profits and high cashflow. money to buy PPOR cash, money to buy 2 IP’s cash.the point of these forums is to learn and get advice from people who have been thru it.
everybody has a story, this is but one.if my daughter ran your ideas past me, i would redirect her down a different path.
other on this forum might direct you to more IP investments.
some strategies will be more successful than others
unfortunately there’s no green arrow to show you which way to go, but a lot of sharks along the way trying to make a quid out of you.older people do have a knowledge base
why start at the bottom….tap in, and jump a few rungs on the laddergood luck
hb
Hi hb,
Your post is very interesting and certainly shows there is more than one way to build wealth. However, most people do not operate their own businesses, and if they do few are as successful as you obviously have been. For the majority using their cashflows to invest is a sensible way of building wealth. Paying cash as you did for IP’s is simply not a viable option.
I can’t see the problem with high levereage if the person/people have the cashflow to service the debt. Of course there is risk, but I think the risk of doing nothing is greater.
Thankyou again for your post, I think it was a very informative and certainly provides a different view point to the norm on the forum.
Regards
Alistair PerryHi Aperry
“few are as successful as you obviously have been”
Really
Crazy John started with no contacts, no university degree and no experience. Fifteen years ago, he was selling electronics in suburban obscurity – now, worth in excess of $300 million.
Eddy Groves started his business career as a milkman at the age of 19. Today he owns the nation’s biggest childcare chain,with an estimated personal wealth of $150 million.
My bookkeepers daughter was lost for years after finishing uni, now at 26 she is opening her 3rd Fashion Shop, and just bought a penthouse for 500k, plus her audi sports car, all from $0
her sister seeing the potential has started her own fashion label, and has had great write up in national papers….all from $0
the list is endless
there’s opportunites everywhere
we all use the services of small businesses everyday
butcher, baker, newsagency, child care centre, hairdresser, etc etc….
1.2 million SMALL businesses in Australia“I can’t see the problem with high levereage “
really
last year 20,600 non business people declared themselves bankrupt#1 cause……..UNEMPLOYMENT…37%
#2 cause……EXCESS USE OF CREDIT….21%
WOW….and you don’t see any problems??????
if Mitchy had to sell everything today, because of a misfortune (and before she invested in an IP)
how much would be left after all the outgoings are paid….1k maybe 2K….maybe $0
How much after an IP????????I wouldn’t let my daughter (21) go down that path…….
but then, there’s wiser people than me on this forumgood luck
hb
Hi hb,
I never said that people can’t start businesses and be successful, such as the people you listed. Hell, I am a small business operator myself. This does not change the fact that the majority of people are employees.
I think you will find that the excessive use of credit is mostly to do with consumer credit. How many small business owners go under by the way? A very large percentage fail in there first year, is this a good reason not to start your own business?
I’ve got no idea of Mitchy’s income, so how could I tell how much she would have left over. If she thinks she can afford credit and a lender is willing to provide it then why should she not invest.
Regards
Alistair PerryI agree with some of what you say HB..”make haste slowly” as they say…
However, I also believe in the power of leverage and Other Peoples Money, If I had to wait until I saved the cash to get to where I am today I wouldn’t be here.
I agree with a degree of caution and ensure I have cash reserves as a back up (I could take a year or so off and still pay the mortgages), my loans are Fixed Interest- Interest Only (why would I want to pay off the principal at this stage as it benefits me not) my current LVRs are decreasing with great CG of late, rents are rising , I’m looking at other opportunities, but I still try and have emergency funds.
Mitchys $40k equity is not much, but its a start and at least she’s looking at her options (she did say they have a fair bit of debt which they are consolidating- a concern) IMHO I’d reduce personal debt quickly and learn about good debt and bad debt.
Thats the great thing about the forum; many and varied responses from people with different backgrounds, experiences and knowledge- and the reason why I keep coming back to it and learning
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi all
I don’t agree that you ahve to wait for the years to pass to earn the right to do some of this stuff. Look at Matin Ayles at 30. He started with verry little from what I understand.
I believe it is more about understanding what a person wants, identifying goals, determining appropriate strategies then “doing what ever it takes to get there”. This could mean selling the house, losing the loans, ditching the flash car or whatever other “doodads” have been accumulated and going for the dream.
We only have one chance at this life. Of course there are loads of learnings along the way. AS they say in the share market trading circles, “Plan the trade and trade the plan”. Take account of the risks along the way and work out your own risk profile. Then stick to all this planning etc and you will eventually come out on top.Mitchy if you have done the due diligence on the potential IP then it should be easy enough to encourage others to come on board and help with the cash.maybe do a JV on the first one or two to gain the experience.
I agree with Redwing. Personal debt is a concern, including debt for a PPOR.
I think it is fantastice that young people are trying to work this stuff out. I’m 48 and it isn’t easier as you get older, I think it is always complex and always needs the same amount of attention if you want to succeed.
Examine your current position thoroughly and work out what you want and need to do to improve it. Think broad and be creative in your solutions. If you put the effort in then it will work.
Sue
MIT | Owen Real Estate
Email Mesorry
last reply ….getting boredredwig…if you read mitchy question carefully, you will see she has only 8K equity….
lets play the numbers games…….
what you can do with 100K loan…2 different scenarios
for this exercise lets ignore equity….lets keep it simple.
1. borrow 100k for a IP….say in Elizabeth Downs..an area mitchy knows
with a rental return of say $150/wk…..sound fair???
Interest only 7%…make it $7k repayments a year
rental $7.8k for year, but by the time you pay PM you break even…fair??
we won’t bring in Council & water rates, and any repairs…OK
so there…break even no problems…lets sell 5 years….
5 years down….she’s doubled 200K….wow…..(is this possible in elizabeth downs?????)
pay the bank back
made 100k profit…..pay the CGT…….lets say $25K
in hand after 5 years 75K CASH for do NOTHING
WOW
lets not put into this equation what 100k is worth 5 years later…OK lets try that same money…something different….
2. buy some plant and equipment $100K
(because i can only use my business as a template…this is what would happen with 100k)
Yearly income generated $200K…(lots lots more but i’ll be lean for this exercise)
i employee someone to operate it….$50K (average salary), as you’ll see later i can pay more…but i’m a mean boss
the portion of the rent space for this new equipment is say $30k a year..excessively, but hey, its only money, and i own the building.
i have 5 years HP on equipment, repayment $24K a year
i claim back depreciation on plant and equipement 30%/yr equal 30K
so how much cash EACH YEAR do I have?????
200-50-20-24+30=136K a yearNow i know i have to pay tax……….
so lets be generous and pay the full 48.5%makes a take home amount of $70K a year
or over the 5 years of $350K……TAX PAID IN HAND
and i haven’t even sold the business yet………..
But I HAVE TO WORK THERE…keep an eye on my employeesame amount borrowed
2 completely different outcomessure i used my business as a template…..but a lot business would not be different….you only have to drive around commercial estates and see the glitzie buildings and quality of cars in carpark to work our whos doing fine………when you local real estate agent shows up in a bmw.or the solicitor has the a merc in the drive, or the concretor shows up in a monaro v8, he’s obviously not being paid $20k a year
over and out
hb
Hi AP
everything is a gamble
last year 20,600 non business people went into bankrupcy
only 4,300 business did that same year…..not bad out of 1.2 million SMALL businesses
over and out
hb
hi mill in training
everything you say is correctbut your like those horses with blinkers on
narrow focus
“Look at Matin Ayles at 30. He started with verry little from what I understand.”
he’s a business……
so if its doing so well developing ,why is he doing the speakers curcuit……??????
simple……..it PAYS MORE!!!!
$700 per person is easier than competely with developers trying to do the same thing your doing……
i’ve seen people make $5,000 for a 10 minute presentation spot….
still blinkers are nice….at least you know which direction your going…
over and out
hb
Hi Aperry
“I’ve got no idea of Mitchy’s income,”
you don’t need to……..“so how could I tell how much she would have left over“
easy…..
she said she has 8K equitywhen it comes to sell, what costs do you have???????
Lets assume the PPOR is around 240k
Agents commision 2.5% = $6k
advertising costs …say…1.5K
Discharge of mortgage registration,Preparation of discharge of mortgage,Attending discharge of settlement,Solicitor/Conveyancing fees,Settling costs e.g. Outstanding bills….maybe $600
all up costs of $8Kis that easier
hb
for example, a large property was bought for a 1.2m on almost 100% loan….within 12 months before they could develop it, the market turn, and it was sold at morgagee auction for 360k (only 2 people at auction)……they lost their home…….today that property is worth 1.5m
great CG if you bought at 360k
pretty ordinary gain if you paid 1.2m after 12 years (wouldn’t have even cover the interest payments)I wish I knew about that auction. Seriously!!
D&L Property Projects Ltd
Sourcing Quality Investments in New Zealand.Email to receive current deals & New Zealand Information Sheet.
[email protected]Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
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