Advice for first investment

[Stackhat14]

As a noob to investing with a lot to learn I have been pouring over this forum for months and have learnt and loved all the advice!
My husband is a carpenter and we have spent the last 5 (had 2 kids in between) years renivating ou PPOR in croydon Vic.
Our snapshot situation:
Bought for $315k in 2008 3 and 1 and converted to 4 and 2. Made open plan and did complete Reno. We have approx $250k in equity.
Are getting pre-approval now and will have to have that before sept (before bub 3).
We only earn $60k a year, so we can't afford to have neg geared investment, unless it was for a short time while we add value to make it positively geared.
We would consider moving out while we rent our current PPOR for $485 p/w, and reno'd the next IP and possible subdivided. Still would depend if we could afford that?
Or we could get a unit, Reno quickly and make it positively geared, sit on it and so again as soon a the banks will loan more money.
We've looked at the regional thing, but with the 3rd kid on the way, I'd like to have something not to far away while we have to do renos.
What are your thoughts? I would so appreciate the advice from ppl who are already a few stops along the train line we are about to jump on.

 

[Erica]

welcome newby

G'day, sound's like you are in a great position to start you IP journey, $250k equity is double what I had starting out.

I chose to do a subdivision and build- it suits people who are are good at dealing with a high level of uncertainty and stress, plus chews through your equity quickly.

Renovating is a good starting plan- especially if your hubby and yourself has experience having done you own home. I always reccomend to my friends thinking of buying an IP- if you just buy something close to home (any metropolitan area) -as you will know the area well and it's conveniently close by-then add value with a reno- then thats as good a place to start as any.

I think the timing is good, I believe we are at the begining of the new upswing of the property cycle (started 12-6mths ago depending on the state). So market capital gains should be coming through for the next few years, in my oppnion.

Good luck

 

[Bantam Roosta]

Welcome to the forum.

Are getting pre-approval now and will have to have that before sept (before bub 3).

If you mean what I think you mean by this, then think again.

Pre-approval won't help you 'lock in' a loan before bub 3 comes along. If your circumstances change your pre-approval will mean nothing. When you actually apply for the loan, your current circumstances will apply, not what they were when you initially obtained pre-approval.

BR

 

[Stackhat14]

Welcome to the forum.


If you mean what I think you mean by this, then think again.

Pre-approval won't help you 'lock in' a loan before bub 3 comes along. If your circumstances change your pre-approval will mean nothing. When you actually apply for the loan, your current circumstances will apply, not what they were when you initially obtained pre-approval.

BR

Pre-approval won't help you 'lock in' a loan before bub 3 comes along. If your circumstances change your pre-approval will mean nothing. When you actually apply for the loan, your current circumstances will apply, not what they were when you initially obtained pre-approval.


Thanks BR. I didn't explain properly. We are getting a revaluation done on our PPOR at full doc, which needs to be done before bub 3, so we can then use the equity as deposit for a low doc loan from there. Fortunately our best mate is a mortgage broker and is working wonders for us, so this is about the only way we can get finance atm.

 

[Stackhat14]

G'day, sound's like you are in a great position to start you IP journey, $250k equity is double what I had starting out.

I chose to do a subdivision and build- it suits people who are are good at dealing with a high level of uncertainty and stress, plus chews through your equity quickly.

Renovating is a good starting plan- especially if your hubby and yourself has experience having done you own home. I always reccomend to my friends thinking of buying an IP- if you just buy something close to home (any metropolitan area) -as you will know the area well and it's conveniently close by-then add value with a reno- then thats as good a place to start as any.

I think the timing is good, I believe we are at the begining of the new upswing of the property cycle (started 12-6mths ago depending on the state). So market capital gains should be coming through for the next few years, in my oppnion.

Good luck

Thanks Erica, I like what you said about handling high stress, I think that is something we do well.
Do you have IP's in melb?
What are people's thoughts on outer east like Croydon, Mooroolbark, Bayswater etc?
Looks like sub-dividable blocks are all going for a very high price and are few and far between!

 

[alex9050]

Some things for you to think about:

1. Renovating is sometimes not necessary.
2. Do you know how to make a renovation profitable (time, budget, etc.)
3. Do you know why you would renovate a property? For me, a renovation is only to increase equity, or to increase rent (depending on my current financial position). If I was in your position, my renovation would be based purely on cashflow. If my reno costs 20k, that would cost me $1k a year in extra interest - but will provide me an extra 2.5k a year in extra rent
4. Why would you need to move out of your home?
5. Negative gearing is something to avoid like the plague


To the person who said you should buy in your own neighbourhood and renovate that - terrible advice... The suburb may not even be profitable.

 

[Peter_Tersteeg]

Thanks BR. I didn't explain properly. We are getting a revaluation done on our PPOR at full doc, which needs to be done before bub 3, so we can then use the equity as deposit for a low doc loan from there. Fortunately our best mate is a mortgage broker and is working wonders for us, so this is about the only way we can get finance atm.

If you're eligible for a lo doc loan, you've been self employed for at least 2 years. If you're not self employed you won't qualify for a lo doc loan.

Assuming you are self employed, businesses don't tend to stop when a baby arrives and last years tax returns don't change. If you can get a full doc loan before the baby arrives you can probably qualify for a full doc loan after the baby arrives.

 

[Stackhat14]

Thanks Alex9050, I agree with all of your points, and we are pretty savvy when it comes to a quick reno to add to rental yield or equity but not over-capitalising. We are trying to avoid negative gearing like the plague, but with a maximum of $370 to spend (above this we are neg- geared) it is seeming difficult to know where to invest and IF we can get a full size block or have to go with a unit.
I live in Croydon, our house if a 4 & 2, and we would consider moving out of this place and inot the investment whilst renovating, that way we can get the better rental of approx $480pw from our current PPOR.

To PT_Bear, yes you are right we are self employed, however my husband has just started a new branch of work in the business and is bringing in more $ this year then the last few, so it doesnt show on a full years books yet. But we have an accountant who will vouch for us that we will be making more money then our 2013 tax docs say. This is why our broker recommends doing full doc to refinance the house, and then low doc to purchase a property.... I hope that makes sense? Maybe we can get a full doc, I will check with our broker again

 

[Peter_Tersteeg]

To PT_Bear, yes you are right we are self employed, however my husband has just started a new branch of work in the business and is bringing in more $ this year then the last few, so it doesnt show on a full years books yet. But we have an accountant who will vouch for us that we will be making more money then our 2013 tax docs say. This is why our broker recommends doing full doc to refinance the house, and then low doc to purchase a property.... I hope that makes sense? Maybe we can get a full doc, I will check with our broker again

Good to hear Stackhat. Please forgive me for being a bit negative about it. I see a lot of people who assume that they'll just get a lo doc loan because they've got a large deposit, even though they're not self employed.

I'm just playing the devils advocate to make sure you're able to do what you want to do. It looks like you've got a reasonable strategy to deal with your requirements.

 

[Brady]

To PT_Bear, yes you are right we are self employed, however my husband has just started a new branch of work in the business and is bringing in more $ this year then the last few, so it doesnt show on a full years books yet. But we have an accountant who will vouch for us that we will be making more money then our 2013 tax docs say. This is why our broker recommends doing full doc to refinance the house, and then low doc to purchase a property.... I hope that makes sense? Maybe we can get a full doc, I will check with our broker again

Have I missed something here, can you not either wait til June 30 and lodge your 2014 straight away which will show the increase income for this financial year?

Or if you need to purchase before then get your account to complete a profit & loss statement to go along with you BAS (possibly business account statements) to confirm that income has increased for 2014 and look to get this income accepted.

I haven't found a case yet where someone where I couldn't get someone full doc when they qualified for low doc. Most of the time now if you can tick low doc you can get full over the line.