Why Aren’t You Buying?

Def a student accommodation/ boarding house type of property. Even thought it may make sense in terms of the numbers…the security type is to risky as it’s ” out of the box” – Even some insurance company would look at this as ” out of their policy/ risk”.
To finance this sort of property you need to go down the commercial side of things unfortunately.

IF they were not rooms/ but rather 4 “units” on one title…ie a block of small units, then that’s a different story and the bank would be happy to lend on a block of 4+ up to 80% LVR at a pretty decent rate as well- One room = 15 squ mters? VS one unit = 40-60 squ meters… a lot more “normal” for the banks.

The more Unique OR specialised the security is…the more creative you have to be when it comes to financing- bank’s don’t like specialised properties as it only attract certain buyers.

Ie not many if any Home owners would want to buy your above property, but it would attract some investors ( i say some, it can be a hassle to mange due to the number of ppl…getting strangers to get along with each another is not easy, yes different rooms but shared kitchen etc…)

Just look at the student accommodation selling in Broadway ( the lodge)- selling for $140,000- rent for $338 PW clear ….sounds greats?! there are literally 25+ of them on the market to be sold as of today 0.o

Regards
Michael

Sydney.

Regards
Michael

Great post.

I'd love to buy a bargain, but in Melb atm there really isnt much movement in prices.

I'd love to know where all the much touted price drops are beacuse the areas I'm looking vendors are still seeming to get pretty much top dollar. Any sites are well overpriced and any price drops that are happing to stale properties are just taking the price down to basically RRP, I can't see any huge discounting.

We have 2 properties on the market atm and while it looks like we will get a good dollar amount they will probably take a bit longer to sell.

I think there are still plenty of buyers out there and it is is not quite as soft a market as some commnentators are making out.

Just my 2 cents

D

Stuck on the serviceability issue, my broker reckons I'm pretty much leveraged to the max, (maybe need a new borker

I have 3 IP's and my PPOR, I want to get into CP+ properties in the mining ports Karratha, Port Hedland ect but servicing the loans would be an issue with the banks.

Having read much material on using equity after your IP has appreciated all makes sense and sounds simple enough but I've always come unstuck when it comes to serviceability. Once I've figured that one out I guess that's when I can quit my day job. Will keep searching for more creative financial solutions.

Shape wrote:

Your broker might want to give AMP a call Regards Michael

Yep, AMP are great when the old serviceability wall is in site. If the deal is sub 80% then they'll take 100% of the rental income. Also, they don't load other lenders loans when assessing serviceability (others might assess the loans you hold with other financial institutions at a rate 2% higher and on P&I).

If serviceability is really tight – look at fixing some (or all) of the loan. They assess the serviceability on fixed rates differently.

That said though – you need to make sure you can afford it! Look at your income/expenses and make sure that it won't be placing you in any financial hardship.

I recently wrote a blog entry on improving your borrowing capacity here

Cheers

Jamie

I'm new here. I just want to answer the question, I'm not buying "yet" because I'm really trying to look at properties, and basically looking for a reliable agent/company who will help me and will answer all my questions. I already have some properties and I've been talking to some people, but you know, this is a major decision that I should really look into.

Its very easy (and tempting) to ignore banks when it comes to servicability, but sometimes they're right. People (investors) have a habit of considering servicability in terms of exactly todays interest rates, with 0% vacancy and no unexpected expenses. I'm not saying anyone in this thread is guilty of that, I'm just reminding people that your calculations need to account for the future. What if rates go up a couple of percent? If you own multiple properties, what if more than 1 is vacant at the same time? If you're relying on personal earned income for servicability, what if you're laid off? How long can you keep things going while you look for a new job?

In my experience, I've had it run both ways. Banks refuse to lend me as much as I've been comfortably confident I can afford, and banks offer to loan me much more than I feel I could confidently repay. Its important to do your own numbers. Sometimes a period of consolidation might be better than expansion.