A question of servicability ..?

[Fat Lizard]

We've just obtained our first IP, and obtained our Income Variation ..

We juggled all of our options, extracted maximum equity from PPOR, pushed and pulled the numbers, and eventually it all fell into place.

Now, how long do I have to wait, or, what are our options for getting another IP < 12 months?

I read the posts, and magazine stories, with headlines like "20 properties in 5 years", yet in the short paragraphs it's summarised as "...we went to [town] and bought 2 more, the next year another 3 ..."

Is it simply a case of juggling everything again, in the same way, or is there some way to leap-frog, now that we've moved into the IP system?

I'd be interested in hearing member's stories about how they beaten the servicability barrier, as observed by banks - ie., deposits, 'proof' of available funds, percieved cash available.

The trials, tribulations, pitfalls, tip or tricks ...


Fat Lizard

 

[Xenia]

We increase servicability by adding some positive cash flow properties to the mix. The positive cash allows us to fund negative shortfalls in other properties and allows our portfolio to grow at a faster rate. We use 2 types of positive cash flow strategies that are specific to certain properties and dont work for all they are:

1. Lease Options or we call them Let-Sales in our business. This is a trading technique where some properties are sold off on a positive cash flow technique in order to create money to fund other properties. This is essentially writing a covered call over certain properties in your portfolio to help fund other higher growth properties.

2. Multi-letting or student accomodations. Again you need to have a propery that suits this strategy and it is attractive because the property is not sold at the end. Management and vacancies are higher which is the only downfall.

Both above options increase serviceability!

All the best

 

[wanelad]

Seeking positive cash flow properties in this market may be a little tough although the student idea mentioned is one way of doing it. Some investors buy cheap properties eg out of the main arena in order to buy more.

Regional areas can have restrictions to LVR (land value ratio) though, so you would need to do your research into areas that lenders find favourable.

 

[Stella]

Apparently our serviceability is good - our stumbling block to IP#2 is deposit.

PPOR last re fi 5mths ago $380k now prob closer to $420k ish - IO owe $304k (split into 2 IO loans - 1 LOC for PPOR $260 (owe $248k) & 1 for IP for deposit & IO repayments $44k owe $34k - balance gives us around 10mths repaymentson IP) - phew that sounds confusing!

IP purchased 2 mths ago $270k prob $280- 285k now based on similar recent sales - owe $256500 returning $270pw rent.

Apart from sitting & waiting for CG on IP then using that for next deposit, how do we get IP #2 sooner rather than later?

Cheers

Stella

 

[MissMuffitt]

I too have been bitten by the investment bug...

We are going to have a look around for our second IP in about 6 months...
Gladstone is booming and we will use the equity again to fund the next deposit.
Hubbie is 54 and earning good money in construction $95ish PA,so we want to "make hay while the sun shines"

He really want to semi retire at 60...

PPoR is getting valued again this week I am hoping for $350,000
And the 1st IP will be valued then too, we bought it for $275,000 but I feel it was undervalued at the time and might be worth $300,000.

We shall see...

But I can see that IP is the only way that he will be about to do what he wants buy the time he is 60..

MM

 

[Rolf Latham]

Hiya Stella

Id say you have enough equity to fuel another purchase if you are using lenders mortgage insurance to the max

ta
rolf

 

[Stella]

Thanks Rolf - yes LMI is my friend (atm) so now to convince the other half its not too soon for #2 then.....

 

[Lia Hayes]

Regional areas can have restrictions to LVR (land value ratio) though, so you would need to do your research into areas that lenders find favourable.

I have found the Colonial is one of the few lenders with no postcode restrictions. We had plenty of grief financing our property at Andamooka, as it is so outlying.

As Rolf said, you should be ok to go again, only problem I've had lately is in two IP's where the values have SHOT up, but I can't get to the equity as there is only one valuer in the area and he absolutely refuses to value it any higher when its only been a few months since we bought it. Grrr.

As far as servicing... some lenders will service existing debts at actual rates and not put a higher assessment rate on it... some lenders have a higher servicing rate on particular products in their range. A few accept board as income, up to three at a time with no verification required..

Credit cards are a huge killer for serviciability. Refi any credit cards, store cards etc, or drop them down to the lowest limit you can manage with them.