Hi, I have been researching the world of property investing for the past few months and was hoping some of you might be able to provide me with some advice.
I currently have a mortgage owing 395K; started looking for my first IP. Checked with my bank and they can lend me 375K more with a monthly repayment of 2200 (approx) considering I get a rental income of 1600. However there would be a deficit of 600 between the expected rental income and repayment, I don’t think this would be a wise decision. Could you please let me know your thoughts and advice on what kind of IP should I be looking at.
Hi Sachin, that $1600 rent equates to an approx 5% return if the purchase price is $375k which isn’t too bad if you’re getting a fair bit of capital growth. With that $600 deficit there would be other considerations (holding costs) which would make the gap a bit larger but there are tax concessions too.
The purchase price and rental figures you quoted, are they from a particular source such as an area you’re looking at investing in? If so, why that area? Would that -$600 per month be covered by capital growth? Is there anything to make the holding costs worth while to you? Do you want to negative gear?
Taking a step back – what are you wanting to achieve by investing in property? If you’re uncomfortable with there being a $600 difference between mortgage repayments and rent received is there amount you are comfortable with? Do you want your property earning you money? Some defined goals might help with the figures and recommendations a bit more.
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This reply was modified 9 years, 8 months ago by
Kinnon Bell.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Sachin
Welcome aboard :-)
How are they proposing the loans be structured?
Most banks will cross collaterise your properties – which is a no no. There are better ways to go about it.
Those repayments seem massive too for a loan that size – are they suggesting P&I for the investment property loan?
If in doubt – seek a second opinion with a pro.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks for your response.
The numbers are not for any specific area; they are approximate numbers to draw up how much bank can lend me, they will change once a definite IP has been selected.
I don’t want to negative gear; I am looking at having minimum deficit, positively geared would be ideal. Reason for this consideration is that I don’t want further expenses as it could potentially impact further IPs I might consider.
Thanks for your response.
We haven’t discussed yet on the loan structuring; it was a very preliminary discussion to understand my limits with further borrowing.
Thanks for your suggestion; will certainly get further opinion.
Thanks for your response.
The numbers are not for any specific area; they are approximate numbers to draw up how much bank can lend me, they will change once a definite IP has been selected.
I don’t want to negative gear; I am looking at having minimum deficit, positively geared would be ideal. Reason for this consideration is that I don’t want further expenses as it could potentially impact further IPs I might consider.
Not a problem. Sounds like you have a plan, which is good. As Jamie mentioned though, those repayments don’t look quite right. For a P&I repayment on $375k it would roughly be around $1990p/m and IO would be around $1531p/m so a bit of a difference. This may help with doing the feasibility of potential investments you look at, but in saying that, you do also need to factor in for when interests rates eventually do rise and the holding of the investment for when they’re around 7-8% as you don’t want to be in a world of hurt when that happens, however many years down the track.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Sachin
As mentioned above, it is really important you get your finance right from the beginning however, it is just as important to get the whole planning of it right. You need to consider what your intentions are today, to next year and into the future as to how best to structure your portfolio. Are you better off in personal names, in a discretionary trust etc.
Are you looking for capital growth or is cash flow more important to you. There are so many different types of strategies for you to employ depending upon your personal circumstances. There are better outcomes than buying and holding and waiting for the market however, most people aren’t taught or educated with these scenarios.
Definitely stay away from anyone who has a product to sell as they are only selling it to you because they get the best commission. Find someone who has a service to provide with options for you to choose from.
Kylie Walsh | PPI Investment Advice
http://ppiinvestmentadvice.com.au
Email Me | Phone MeLicensed Property Financial Advisors who provide Tailored Property Advice and Solutions
@kinnon
Thanks for your inputs; does give me enough food for thought.Thanks a lot Kylie for a very honest advice.
Most Banks will propose a P+I loan. Make sure you take out an IO loan + an offset account.
Cheers
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThanks Andrew, will certainly keep that in mind.
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This reply was modified 9 years, 8 months ago by
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