Hi all,
First time forum poster. Just trying to get a feel wether im in a position to start looking at purchasing an investment property. My situation is :
– Living in own home that is worth about $260K and still owing $60K on the loan.
– Never re-financed
– Currently have a combined weekly income (wife) of about $1,200
– Wife pregenant and due in January with second child
– So weekly income will drop to $700 for the next two years after January 2010.Based on that do you think i have a chance of purchasing an investment property (wife says NO) or is it not as simple as that.
Any comments, thoughts, suggestions and laughter much appreciated.
Thanks,
jRHi Jr
Firstly welcome to the forum and I hope you enjoy your time with us.
Think your wife is a being a little cautious and understandably in her current state.
You have a decent amount of equity and as long as the property you look to acquire is fairly cash flow neutral then really there is absolutely no reason at all why you shouldnt start your property investing journey.
If you structure the loan correctly then no reason why you wont be able to afford it even on the one wage.
Remember with interest rates at their current level many properties are paying for themselves ignoring non cash items such as Depreciation.Richard Taylor | Australia's leading private lender
Don't forget to perform thorough due diligence.
Factor in what you can afford. e.g. If the rates were to increase 2%…
Cheers,
MiikeShivers Yeah, you have been ready for a while with 77% ownership. Just make sure you find an IP which has good rent and rentability. Do your maths and what Miike said factor in some interest rate rises but I'd be going for it.
Concur with the above. For many people the block is a belief issue around getting into more debt and the belief that more debt is bad and less debt is good.
It would be best to have your wife's support so if you do go ahead, try and align both of you in terms of how property investing and leverage works to build wealth
JR
Go hard before your wife stops work, but use a finance company that is not going to make life 'repayments or increases in the IP' a burden on your lifestyle.
Make sure that what you buy is 'as Richard stated' neutral or cash positive'.
The rules are simple:
Use your equity for 20% of the purchase price plus costs and the remaining a loan on the IP.
Most banks ' I could be corrected here I deal in property in the main not finance' are happy to lend with your income and what would be considered a safe loan.
In fact you are most likely in a position to buy two done correctly.
BluegrassBluegrass is correct with the equity you have and depending on your marginal tax rates you could buy 2 and still reduce your tax position.
Structure is the key to successful investing along with the right property.
Richard Taylor | Australia's leading private lender
Hi All,
Thanks for the great feedback guys. I was starting to think i was kidding myself as we are not in the high income range and our house is well below the average price.
Well im happy with the feedback so im going to organise to see a financial adviser as i really have no idea on the best way to structure this. Hopefully he does a better job in convincing my wife and if done properly is not a massive risk just one that needs to be thought thru.
Thanks again and much appreciated. Anymore thoughts are welcomed.
Cheers,
jRJR
Just be careful that a Financial Adviser doesnt try and swing you into a managed fund or direct share investment.
Most FP's do not like property as they do not earn a commission from you buying an investment property.
As a Financial Planner myself I often see or speak to clients who have been given poor advice from other FP's who unfortunately give our industry a bad name.
Richard Taylor | Australia's leading private lender
Beware going heavily into negative geared property because if you are planning on receiving family payments a negative property loss magically is deemed as income for calculating your family payments or parenting payments.
JR
It seems again I an agreeing with Richard but he is right!
By the time you walk out of the FP's office if he/she does not like property they would have convinced you to buy managed funds or something similar that crashed through the floor in the last twelve months.
That said you need to talk with someone, I am sure there are wealth advisers and finance people on this site that can help and you will end up with what you want/need to make life easy for your kids future!
I can help with the property when the time comes, but realise that the property is only the product that you lend on.
If Red Telephone Boxes gave you capital growth and tax depreciation you would be investing in them.
Regards
BluegrassHi All,
Thought id give those of you interested a update with my progress. Keeping in mind im not the fastest mover when it comes to getting off my a$$ and getting things done.
I got a phone number for a financial adviser from my bank (Credit Union). After a week he finally returned my call. I told him i was interested in purchasing a investment property and would like some advice on how to go about doing this. He told me in not so many words that he couldnt really do much. He told me i needed to visit my bank first and sort out the investment loan with them, then if i wished i could contact him for advice with negative and positive gearing and so forth.
Sounds to me he is either lazy, too busy or like QLDS007 mentioned he could see no commission on the horizon.
I would like to know if i should visit my bank first and sort out the loan with them avoiding any need for a FA or should i ignore what he said and find one who actually wants a new client?
Thanks again and im slowly bringing the wife around.
jR
Hi JR
Hate to say i told you so but well i did.
As a Licensed Financial Adviser myself i find it so hard to believe that there are so many advisers out there that are only in it for what they can get of the deal and not really interested in helping the client.
To be honest finding a FA who recommends property is like winning the Lotto because of the way in which the remuneration system in general operates.
Now with regards to how to finance the deal you have to also understand that it is not in your Banks interest to tell you how to structure the deal to your advantage when they can offer the advice to their benefit. Of course that is assuming the manager or the young girl you talk to has any idea in regards to loan structuring and tax mimimisation strategies.
Most Bank staff have no idea whatsover and will never tell you you can do better by going down the road to an alternative lender.
You ideally want to limit the exposure of your own home to as little as possible and that will give the wife for comfort.
An independant mortgage broker will be able to give you a variety of suggestions to enable you to move forward.
Richard Taylor | Australia's leading private lender
Hi JR,
Thought I would throw my two cents in as your journey so far is sending you down a few garden paths (very typical unfortunately). Especially in the early stages, you need to very careful who you speak with and in what sequence.
Think carefully about their people's agendas as this will impact directly on the advice you get!
Financial Planners = no, Banks directly = no. Your first step needs to be able to find a STRATEGIC mortgage broker who is able to determine options for you. You do not want a run of the mill broker who will just apply a standard recipe. Look for someone who is focused on INVESTORS not owner occupier. I also would suss out if they actually invest in property themselves as there is nothing like direct experience to give good advice.
Cheers
Mark
Hey JR
Give the FA the big swerve (or get Richard to give you advise) and go direct to the source off the investment property seller and have them sort it all for you.
They are being paid by the builder and that is what the good ones do for their clients.
I do not have an up to date A&L sheet so you can get an idea of your BC, but I am sure Richard would!
Regards
Bluegrass
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