All Topics / Finance / 30 properties before 25, finance???

Viewing 20 posts - 1 through 20 (of 103 total)
  • Profile photo of Ossi89Ossi89
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    @ossi89
    Join Date: 2011
    Post Count: 31

    Hi, this is my first post on this site (I only joined 30 minutes ago). I am 21 years old, live in Sydney and have just bought my first investment property in Orange, NSW. I keep hearing stories about people under 30 on average incomes who have over 30 investment properties. My property in Orange essentially pays for itself so I would love to buy some similar properties. How do these people continue to get finance approved? (I realise this is a very basic question but I am trying to learn as much as I can as quickly as possible, any tips would be greatly appreciated) Thanks.

    Profile photo of wade anthonywade anthony
    Participant
    @wade-anthony
    Join Date: 2007
    Post Count: 53

    Congrats on your first ip. Get experience, you'll find heaps of it here and most of the people have a fare bit it and best of all its free…many people have different ways of doing things…and I am no expert but someways to do it is

    – buy lower than market value, renovate, force some equity in the property then use it against the next ip.

    – learn how to use different loan types to benefit you, if you dont earn loads of money dont be affraid to use other people ie the banks

    – Buying for income or for capital gains assets?

    Work out what way suits you or mix it up.

    Hope it helps

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Wow, I didn't expect a response that quickly, I like this site already, thanks Wade! I am very interested in what you said about using the equity in one ip to buy another. Based on the research I did before buying my property in Orange I am confident that I bought it lower than market value. How could I continue to use the equity in my property/s to buy more properties? Will I reach a point where the banks will no longer finance me based on my income? This is what I am really trying to understand. I have read about people on incomes of 60k or less who own 10-15 properties. What have they done that allows them to continue getting their loans approved? Thanks again!!

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    The hardest part will be to keep coming up with the deposits.

    To keep on borrowing you will need good rental incomes and a good wage. You will also need increasingly larger deposits. You can get the deposits by a combination of saving and growth in the value of the property.

    Have a look at the stuff Nathan Birch does and you can get a good idea on how it works.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099
    Ossi89 wrote:
    Hi, this is my first post on this site (I only joined 30 minutes ago). I am 21 years old, live in Sydney and have just bought my first investment property in Orange, NSW. I keep hearing stories about people under 30 on average incomes who have over 30 investment properties. My property in Orange essentially pays for itself so I would love to buy some similar properties. How do these people continue to get finance approved? (I realise this is a very basic question but I am trying to learn as much as I can as quickly as possible, any tips would be greatly appreciated) Thanks.

    to be honest- it’s not about getting as MANY properties as possible….it’s all about the strategy and overall “plan”
    I have clients who only has 3 IP and there “overall worth” in term of capital growth and rental yield was far more Superior compared to another clients who has 10 IP….

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    You need to be creative, energetic and driven. It's also a balance between finding IPs with strong enough cashflow so they take care of themselves (and don't hinder your borrowing capacity too much) but still achieve growth (which you may have to manufacture through renovations).

    As Terry mentioned above – Nathan Birch is the poster child for this, what he has achieved is awesome.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Thank you all for the great advice!!

    Jamie and Terry, I had a look into what Nathan Birch has done, its amazing! So what he does is basically buy properties below market value, properties that are positively geared (or neutral), renovate which creates equity and then use that equity as the deposit for his next ip. Is my interpretation of his strategy correct?

    So if I was to buy a property for $150,000, renovate increasing the value to $180,000, can I then use that equity as the deposit for the next ip? For example, will the banks allow that equity to be used as the 10% deposit for the next ip? I really don't understand how this all works. Some insight would be very helpful.

    I believe I bought my own ip below market value and it currently covers itself in terms of repayments. I am planning on minor renovations shortly so this should also add equity. What is the next step in using this equity as a deposit? Do I need to have the property revalued to determine the equity?

    I do know these questions are very basic but I really have no idea at this stage.

    I look forward to some more great advice!

    Thanks all!

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes you will need to have the property revalued to determine the available equity.

    If you want me to email you an article i wrote on the very subject let me know and i can shoot it to you.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of colinnewlandcolinnewland
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    @colinnewland
    Join Date: 2006
    Post Count: 128

    Qlds007,
    Can you send me the same article please?

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Thanks Richard.
     
    Yes please, I would love to read the article. As I mentioned previously I am just starting out so am open to all new ideas an suggestions. If you have any other information in relation to building wealth through property it would be greatly appreciated if you could forward this to me. Email address is [email protected].

    Thanks again!

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Can anyone tell me how the banks work out an individual's borrowing capacity for positively geared investment properties? For example, if I have an ip that currently rents for 200 per week, with repayments of 190per week, and I want to buy another identical property. How much of the $200 per week I receive in rent will the banks add to my income? I hope this question makes sense…

    Cheers!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Generally 80% of the rent is taken into account.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Thanks Terry.

    I am looking at a property at the moment, currently renting for 210pw. As a rough guide, does this mean the banks will add $168 to my regular income when assessing me for another loan?

    Thanks,

    Oz.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Oz

    Yes loosly speaking.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of sapphire101sapphire101
    Participant
    @sapphire101
    Join Date: 2006
    Post Count: 203

    When renovating and revaluing your property its a good idea to talk to a valuer about what additions would add the most value as well as the real estate agent who will tell you what the market is looking for. Remember the market is very different if you are going to rent out the property as opposed to selling, but because you want to revalue from the bank, then it becomes a toss up between the 2. How much do I spend doing the place up to rent only and will the bank revalue this place in my favour enough as if I were selling it?

    Also you can only borrow against 80% of the new value AND you still have to be able to service the extra loan amount.

    Orange wouldn’t have a high capital gain % so you have to buy really cheap and add as much value as possible.

    The 2nd stage is when you do run out of borrowing power – called ‘the glass ceiling”. This happens when you are moving faster then the values of your properties are rising and you cannot access any equity to keep going or your wage doesn’t  allow you to borrow more or both.

    Now organise money partners and joint venture deals to keep going. It means you split the profits or you pay a bigger interest bill on the money you borrow, but it means you can keep going without waiting for capital gain and equity to kick in.

    In other words you are controlling the market rather than the market controlling you.

    Ian
    http://www.theblockblog.com
    Free Property Investment Info. Tools & Resources for Investors with a Sense of Humour.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    sapphire101 wrote:

    Also you can only borrow against 80% of the new value AND you still have to be able to service the extra loan amount.

    Hi Ian

    Many lenders will let you top-up the loan to 90% (it will incur some LMI).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Thank you everyone for the great advice!

    Richard, your information was very helpful, that really clears a few things up for me!

    One more thing I am trying to get my head around is exactly how using equity in one ip as the deposit for another ip works. For example, if I was looking to buy a $200,000 ip, currently have $20, 000 equity in my first ip, and the banks required 10%. What exactly happens from here? Do the banks treat that equity like cash by increasing my original loan, meaning it works the same way as a normal cash deposit, or is there some other method?

    Cheers,

    Oz.

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    Hi Oz-
    Yes the bank treats equity like cash; but make sure they do NOT x-cross your loan unless you really need to; so
    1. Draw the equity and covert it into cash ( placed into a separate account/mortgage as a redraw or offset)

    Use this 10% cash as per normal…

    Regarding rent; most lenders will only take in 80% …some banks like ANZ will go off there “rent valuation” or the current rental agreement at 100% rental rate if requested….however ANZ “serviceability” ratio tends to be slightly tougher..so you lose some and you win some :(

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Ossi89 wrote:
    One more thing I am trying to get my head around is exactly how using equity in one ip as the deposit for another ip works..

    Here's a basic example – http://www.passgo.com.au/blog/25-the-project/67-how-to-use-the-equity-in-your-home-to-purchase-an-investment-property

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Ossi89Ossi89
    Participant
    @ossi89
    Join Date: 2011
    Post Count: 31

    Thank you all, greatly appreciated!

Viewing 20 posts - 1 through 20 (of 103 total)

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