Hi All,
My first IP settled in February (3,1,2) in a nice suburb 8km out of Adelaide. 1950’s house half reno’d, from what I know it’s a steady growth area. Not exactly in line with my goals in hindsight, but managed to get a 20% deposit down and I think it’d be valued at more than what I bought it for so should be some equity there and has the potential for manufactured growth through renos or redevelopment of the site.
I’m looking toward QLD now for a second IP (keep hearing about the growth predictions) and I can’t stop thinking about the next one (too soon??) One particular area I’ve noticed is North Lakes, and I was just seeing if there were any opinions on the area. I understand there’s been some redevelopment of the Westfield, I think IKEA? being built and the COSTCO that’s there now as well as the train line going through. I understand there’s a few schools around as well. I notice the 4,2,2 houses (what I’m looking for) I’ve looked at are going for around $410-430k mark but I don’t know if that’s already a ceiling price for that type of dwelling.
I’m still not very good at predicting a boom suburb so any feedback would be greatly appreciated as some fast growth is definitely in line with my goals to purchase more.I’m trying to remain level headed about this and I think I’ve already learnt lessons from my first purchase. This next one is going to be pivotal to my success, but the other part of me isn’t wanting to miss out on some good growth! haha
Thanks for reading and for any opinons/info :)
Knox.
Hi Knox
I am wondering why you put down a 20% deposit as opposed to a 10% deposit. Since you mentioned hopes of equity in that property I presume you are hoping to access some equity for a deposit on IP # 2… in which case you perhaps should have considered only a 10% deposit on IP #1 so that you had some cash available for deposit on IP #2. Food for thought going forward.
Refinancing to access equity isn’t free, there are bank fees associated with it, and February was fairly recent to presume sufficient growth in your property’s value to fund an entire deposit on another property.
I may have misunderstood and you might just be starting your planning and scheming phase and intend to force the capital growth through a reno. But thought I’d mention about the deposit size so you can ponder on your next deposit whether 20% down is what’s best for you or not.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JacM, thanks for the reply!
I was advised at the time that it’d be better to out 20% down so it would look better to the banks and for serviceability. I was originally wanting to put a 10% down so as to free up more cash for further purchases. Would I have some sort of instant equity from putting a deposit of that size (77k) down together with the hope that the house is actually valued at more than what I bought it for? (Which I hope is the case). I have another 60k savings also, so I’m looking to either use that or the equity that I hope I have but still try to maintain a cash buffer.
I’ll be all about the 10% deposit for IP #2 :)
Thanks again, Knox.
I have another 60k savings also, so I’m looking to either use that or the equity that I hope I have but still try to maintain a cash buffer.
Hi Knox – sometimes a finance application is more likely to progress when LMI is not involved or the LVR is less than or equal to 80%. You have mentioned serviceability so that may have been a factor toward the advice to structure you loan that way. It could be an idea to go back to the person who helped you last time and ask why the deal was structured that way for you.
Agree with JacM that generally as investors we should be looking at our cash on cash returns and preserving our investment capital where possible. 5% deposit investment finance is also and option.
Gearing levels are something that you need to be aware of but not afraid of. LMI is a tool for investors so getting our head around that is something worth spending a little time on. The trade off is the ability to manufacture the equity you need to get back to a reasonable debt equity position. That is, put less of your own in if you can and manufacture value as quickly as you can.
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This reply was modified 9 years ago by
Don Nicolussi. -
This reply was modified 9 years ago by Don Nicolussi.
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Would I have some sort of instant equity from putting a deposit of that size (77k) down
Putting down a bigger deposit does not force your property to grow in value faster, unfortunately, so it’ll be worth the same irrespective of how much deposit you put down.
However a bigger deposit tends to mean you’ve paid a little less interest so you’ve saved a bit of money there. It also means that if you’re that way inclined, you could potentially look to refinance to a different lender at a higher LVR, thereby sort of reversing your decision to have put down 20% and revert to 10%, or even 5% deposit, with the difference released to you for use on subsequent property purchases.
Hope this helps.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks JacM I wasn’t aware something like that was even possible! Haha. That’s why I love this place, the continuing education. Same to you Don, your input is greatly appreciated also :)
You guys wouldn’t happen to have any thoughts about the North Lakes area in QLD?
Knox.
I’m interested in this line of thought as I’m about to buy a couple of IP’s. I thought if I went lower than 20% deposit I would have to pay for mortgage insurance? Is there a way around this or am I just misinformed?
AndyHi Andy,
If you use a deposit smaller than 20% you will most likely need to pay LMI depending on the lender. But this is not all bad – depending on your strategy, it can allow you to buy more property more quickly than if you put down 20% for each property. I often recommend a 12% deposit plus costs – this keeps LMI down, and positions you to access growth in the property without too many hassles.Jess Peletier | Seed Financial
http://www.seedfinancial.com.au/
Email Me | Phone MeMortgage Broker - Perth and Australia wide
Thank you Jess, that’s an interesting way to look at it. Will review my finance options both ways.
AndyAndy are you sure North Lakes is where you want to be investing in ?
Clearly you are not a Brisbane local.
We certainly are not buying in NL for our clients.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Knox, well done on your first IP. You do need to check on why you were advised to put down 20% dep. If you only put down 10% then you could have used the other 10% for another purchase. While you do need to pay LMI (Lenders Mortgage Insurance) on a 90% loan it can be a good move and help investors. You could even look at a 95% LVR. These are ways investors can get ahead quicker. The idea is to put down less of your own money into the deal.
Don’t get caught up in the hype of the Brisbane market without doing adequate research and seeking good advice. North Lakes in a long way from the city and there are a lot of new housing developments going in there. Being so far from the city and with a lot of land releases is an indicator that there may not be the chances of the growth that you would like. We are not advising people to buy in North Lakes. You might want to look closer to the city. 10 or 15kms from the city. If you buy an existing dwelling then looking for something in an infill area in or around Acacia Ridge or Sunnybank could be options. A less desirable, cheaper area is Inala but if you have a tighter budget, there should be some growth in that area in the coming years and if you play your cards correctly you can buy property cheaper than what new land releases are selling for. A buyers agent can negotiate on the purchase price for you and you should get a good deal out of it.
But that is just a quick general thought. You would be best sitting down with an adviser or buyers agent who can map out a strategy for you. You need to know where you want to go financially and a buyer’s agent/mentor can advise you on the types of properties that will get you there, where and when to buy them, taking into account your financial situation.
Hope that helps.
Regards,
Lloyd Edge | Aus Property Powwow
http://www.auspropertypowwow.com.au
Email Me | Phone Me"Let's Talk About Property"
Any particular reason you don’t like North Lakes Richard?
Any particular reason you don’t like North Lakes Richard?
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I’m not answering for Richard but for my money North Lakes in a long way from the city and there are a lot of new housing developments going in there. Being so far from the city and with a lot of land releases is an indicator that there may not be the growth that you would like. We are not advising people to buy in North Lakes. You might want to look closer to the city. 10 or 15kms from the city is usually a good benchmark though it does all depend on your strategy. Where do you want to go? What are your goals? Do you want to buy new or existing? What is your borrowing capacity? These need to be sorted out prior to deciding on any purchase or any area. Cheers
Lloyd Edge | Aus Property Powwow
http://www.auspropertypowwow.com.au
Email Me | Phone Me"Let's Talk About Property"
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