Need advice on PI for absolute beginner

Hi Robyn,

In my opinion, if you are struggling to meet current repayments then perhaps the IP idea should be put on hold until the disposable income situation improves.

In the current market, cashflow positive properties are difficult to find, therefore in all probability an IP would just add to your outgoings, rather than supplement your income, and therefore create a further drain on finances.

As for obtaining finance, it is difficult to say without further information but it sounds like your partner is a perfect candidate for a lo-doc loan. If you are not familiar with the term, lo-docs are primarily for the self employed who cannot, or will not (for various resaons) substantiate their income. Tax returns are not required and in most circumstances an income declaration will suffice. 50k will be sufficient for a 250k property at 80% LVR.

Judging by your repayments (assuming a 30 year loan) you seem to be paying in excess of 8% p/a. Even assuming a 25 year loan, the rate isn’t spectacular so this brings a whole new aspect to your situation. Perhaps something along the lines of this may be feasible –

– Refinance to an interest only loan (if you have enough equity built up you may be able to refinance into a number of lo-docs with very good rates). This will save you in the region of $200 a week.

– Rent your current house out. Most further renovations will then become deductible, further reducing the cost of improvements to your property.

– Rent for maybe 12-24 months until your financial position improves somewhat and then move back into your home. You should then have more equity, be in a significantly better financial position, and have had a good amount of time to research anything related to property investment and study local areas and trends in some depth.

Of course this is only one option, but it could be worth considering if your current situation really is dire. Whatever direction you decide to head in i hope it all works out well!

Jamie

If your partner only shows $30,000 on his tax return I assume he is self employed. That would allow him to get a lodoc loan if he has an ABN. But be careful, as the ATO may start asking questions down the track.
Lodoc loans normally get 80% LVR’s (loan value ratio) at about .5% higher than market interest rates. But you do not need to prove your income to the banks. But you still need to find the 20% deposit plus the closing costs (stamp duty on property and morgage, land broker, building inspection, valuer, morgage registration, title search, adjustment of rates, loan application fee, etc).
Having said all that, be careful. You have currently borrowed more than 90% of your purchase price in a market that is declining. So in spite of all the renovations that you have done, the value of your house may have gone down.
If you look at investing, I suggest you look at reno projects, as your hubby is good with a hammer and screwdriver. I just bought Steve’s reno toolbox and can recommend it.
Bootlace suggest to put the IP idea on hold and improve your financial situation. I totally agree with that. Read Steve’s latest book. It helps you to budget, set goals, etc. Use the next 1-2 years to get more equity behind you and learn as much as you can about investing. Look at lots of properties to get a feeling for the market, identify your niche, etc. Then when you are ready, you get off to a flying start.