Hello all,
I just finished Steves book and this is my first forum submission. I hope to get more involved in the site as time goes on and i also realise that i am at the start of a long road of discovery and learning.
About 8 yrs ago I bought a one bedroom flat in Newcastle. I owe 60k on the loan and I estimate the value of the property to be around 160K. It is negatively geared and i realise this is a situation that needs to be rectified if i want to fast track my path to financial freedom. It is only costing me $400 a yr at the moment but as the tenant has been in the property for almost 20yrs i did not want to risk loosing her until i was ready to take investing seriously.
I am a traveler at heart and have spent most of my time traveling and working since i finished high school. I am now 26yrs old and want to take my financial situation/future more seriously. I am casually employed as an Operating Theatre Assistant and earn $25 per hour and work full time casual at the moment. I would ideally like to work as little as possible and spend time researching and investing in properties.
How can i get access to the equity in my house? Which financial institutions will look most favorably on my situation? Is is possible to get access to the equity in my house claiming just rental income? For example the income from my current IP and a signed lease for the next IP?
also would anyone suggest selling in the current market? given the FHOG and the popularity of small apartments would it be fair to say that it is a sellers market? If i sold would my position be any better then my current position?
i will stop asking questions now. Thanks for reading. Please feel free to respond to any/all/none of the questions.
Also i am looking for a mentor if anyone in the newcastle region is reading this and keen to take a young investor under their wing.
or i could move to melbourne and hunt down steve
Hi Jacob
Firstly congratulations on making the decision to get into property investing something that once you start you cant give up.
I am suprised that the property is a – geared with a loan of only 60K outstanding.
Structuring the loan is probably one of the hardest tasks and getting it right is not easy to avoid making the usual mistakes.
Whilst there are lenders who accept merely rental income as serviceability it will not be long before the term "Rent relaint" get bandied around again which is something most institutions like to give a wide berth to.
My suggestion would be to establish the loan structure prior to giving up work or cutting back you hours as your lending opportunities will dimish without regular income.
A good mortgage broker should be able to consider the options for you and advise you accordingly.
Richard Taylor | Australia's leading private lender
If the tenant has been there 20 years she is probably paying under market rent and is unlikely to leave in a hurry. I suggest you do some research and see what similar units are renting for and put the rent up. No use in you giving money away – this is holding you back financially and may be reducing borrowing capacity as well.
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
How can i get access to the equity in my house?
The process is relatively straightforward; any mortgage broker would be able to guide you. I am sure they would be happy to help you! 80% of the current value (i.e. 68K in your case) would be a typical amount, but check with teh broker as it will depend on your situation.
Which financial institutions will look most favorably on my situation?
err, not that many. Casual is not greatly regarded and I have been finding the banks increasingly tight on their lending criteria. Unfortunately your equity amount is not that high.
Is is possible to get access to the equity in my house claiming just rental income? For example the income from my current IP and a signed lease for the next IP?
If your current place is already negatively geared then it will be a little tricky. As per Richard's comments, are you sure about the numbers? Maybe time to up the rent??
also would anyone suggest selling in the current market? given the FHOG and the popularity of small apartments would it be fair to say that it is a sellers market? If i sold would my position be any better then my current position?
Be careful on relying on a forum to decide on a selling decision. It will really depend on the specific opportunity and there is not enough information to make an informed decision. The main thing i will point out is that you will need to think about the transaction costs involved in selling which will offset any profit. I keep my properties if I am able too but you will need to work out a strategy that suits you!
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