All Topics / Finance / 0% startup and buying a cashflow property

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of ClintClint
    Participant
    @clinth
    Join Date: 2014
    Post Count: 6

    Hi

    I am buying another property in January and I wanted to explore options for not using my own money to purchase the property. I wanted to raise capital to use as the down payment and buying costs.

    Does anyone know of non-traditional ways to raise this money? 1 way I thought was to do a cash advance of $20k-$30k on my credit card and then balance transfer to a 0% interest rate credit card for 18 months which is available in market at the moment but I’m only going to be able to do this once. I would like to have a system that I can apply 4 times per year.

    Is the only way to achieve something like this through seller finance and finding motivated enough vendors or has anyone else found creative ways of raising capital like this? I don’t want to have a partner’s name on the property as I will be holding onto the property myself. The other option I thought was to look into “Subject To” buying. No nothing about this though at the moment.

    Thanks,
    Clint

    Profile photo of Simon PlummerSimon Plummer
    Participant
    @plummer
    Join Date: 2010
    Post Count: 44

    I used credit cards when starting out to get a foot in. Instead of cash advances though, I used them for most of my expenses so I could save my salary. I would then balance transfer it to another card. Then when that interest free period expired, I’d do another balance transfer. You can keep doing them until you run out of banks really.

    Although I paid very little by the way of interest it’s hard to say whether it was the best thing to do as opposed to just save. I guess it got me in the market so no complaints there. Only issue is that it took a few years to pay off and reduced borrowing power.

    Other than making deals with the vendor the only option really is to borrow it. Private investor, family, friends or a bank.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Banks count your credit card limit as double when applying for a loan.

    So if you ave $20,000 limit on a credit card the bank counts it as you having $40,000 loan do this will affect your borrowing capacity.

    Keep thinking. Or you could just work more and save quicker.
    Or look for ways to add value to the property you be, revalue, withdraw equity.

    • This reply was modified 5 years, 11 months ago by Profile photo of Catalyst Catalyst.
    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Banks count your credit card limit as double when applying for a loan.

    So if you ave $20,000 limit on a credit card the bank counts it as you having $40,000 loan do this will affect your borrowing capacity.

    Keep thinking. Or you could just work more and save quicker.
    Or look for ways to add value to the property you be, revalue, withdraw equity.

    That’s actually not true. Lenders factor credit card limits as being fully used for the most part, so based on a limit of 20k you might have repayments of $600 per month. Dependant on the lender, this may equate to a reduction in serviceability of 100k – so much worse than simply doubling the limit!

    With regards to your question Clint, the simplest way is usually the best course of action for a reason. Knuckle down and save for your first property, most likely something cheap and tired and could use a cheap spruce up. This will give you the opportunity to create sweat equity, which can be leveraged into further purchases.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Thanks for the clarification Corey. I read somewhere it eas double. I knew it was bad but not that bad.

    I know early on when money was a bit tighter we were told to get rid of one of our credit cards even though we paid them out each month.

    Profile photo of PHPPHP
    Participant
    @php
    Join Date: 2014
    Post Count: 111

    Hey,

    Have you considered an equity release from your other property? If there’s enough equity in your property now, you can potentially buy another IP without using your savings with this process.

    Regarding the use of credit cards and balance transfers, this is usually not advisable as this can really hurt your credit scoring and all credit applications will reflect on your credit file. this could mean lenders will see you as a high risk borrower with so many credit hits in a short amount of time.

    I would suggest talking to your finance person/broker regarding your plan. Give them your scenario and discuss your goals with them, they can give you options on how to go forward with this.

    PHP | Mortgage Station Pty Ltd
    http://www.mortgagestation.com.au
    Email Me | Phone Me

    Give us a call or send us an email for a free residex report.

    Profile photo of ClintClint
    Participant
    @clinth
    Join Date: 2014
    Post Count: 6

    Thanks for the replies. I only have $19k on the existing property I own for equity. Has anyone taken out a business loan and borrowed against a new business as start up capital for investing in IPs? Based on the strategy I’m using I can service the additional loan while still staying cashflow positive on the basis I can keep an Interest Only loan for the first 5 years.

    I haven’t hit any blockages with the banks yet with this idea.

    Profile photo of DaOneDaOne
    Participant
    @daone
    Join Date: 2008
    Post Count: 38

    You can certainly keep the loan as an interest only loan after 5 years. You will need to request your lender to keep it a interest only loan at the end of the 5 year term. It will be harder / impossible to get loan against a new business.

    Keep posting your progress with this journey. Good Luck.

    DaOne | Oras Finance - Your Local Mortgage Broker
    http://www.ihomeloans.net.au/
    Email Me

    Help you make your dreams come true: https://www.youtube.com/watch?v=sB3KpKX4UsI

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