Costs involved in buying existing property as a newbie investor in NSW ?

Hi,

Can anyone please let me know what are and how much approximately the costs that needs to be accounted when buying a new investment property ?

Let say for example, I?m buying $500k existing property as investment (As I?m no longer First home owner) in NSW.

What can be put into the bank loan so that I can maximize LVR and what must be paid cash cannot / should not be put into the loan.

Thanks,
 
Minimum deposit is generally about 12% of the value of the property plus stamp duty conveyancing etc.

If you have equity in another property, such as the one you live in, you may be able to borrow this as well.
 
Hi,

Can anyone please let me know what are and how much approximately the costs that needs to be accounted when buying a new investment property ?

Let say for example, I?m buying $500k existing property as investment (As I?m no longer First home owner) in NSW.

What can be put into the bank loan so that I can maximize LVR and what must be paid cash cannot / should not be put into the loan.

Thanks,

As tobe mentioned, generally require a 12% deposit (LMI, around 1.5% of the property value, can be capitalised onto the loan). Will need to cover stamp duty yourself (cannot be added onto your loan) - which is usually around 3-5% of the property value (depending on the state). Add in another $2-3k for legals + build and pest and you'll get your number.

On a 500k purchase:
12% deposit: $60k
Stamp duty: ~$20k
Legals + other: $2k
= ~$82k required.

Your total loan will be around 90% of the purchase price = $450k.

If you have existing equity in another property, you can borrow against that to fund this 82k.

Cheers,
Redom
 
As tobe mentioned, generally require a 12% deposit (LMI, around 1.5% of the property value, can be capitalised onto the loan). Will need to cover stamp duty yourself (cannot be added onto your loan) - which is usually around 3-5% of the property value (depending on the state). Add in another $2-3k for legals + build and pest and you'll get your number.

On a 500k purchase:
12% deposit: $60k
Stamp duty: ~$20k
Legals + other: $2k
= ~$82k required.

Your total loan will be around 90% of the purchase price = $450k.

If you have existing equity in another property, you can borrow against that to fund this 82k.

Cheers,
Redom

Thanks Toby.

Redom, Does the number above is applicable only to Investment Property or can it be used for PPoR ?
 
Cool, so in this case for:

Investment Property, I should be borrowing 88% maximum LVR

Property of Residence, I should be borrowing 80% or lower, while the stamp duty and the other overhead cost can be covered by the equity gain from the other IP (using Line Of Credit facility) ?
 
Investment Property, I should be borrowing 88% maximum LVR

Depends on your cash position, MB,lender and Your own strategy!!

best to talk to a broker.. there are few good ones on forum (inc those who replied on you post)

I went 95% inc LMI for first ones (as most of LMI is tax deductible for IP) and used cash to buy more IPs and funding DA and CC cost for development.

now buy at 88% for development sites.
 
High Risk High Gain advice

Depends on your cash position, MB,lender and Your own strategy!!

best to talk to a broker.. there are few good ones on forum (inc those who replied on you post)

I went 95% inc LMI for first ones (as most of LMI is tax deductible for IP) and used cash to buy more IPs and funding DA and CC cost for development.

now buy at 88% for development sites.

Mr. M,

You're highly leveraged investor :cool:

@AlbertWT, don't go that way above if you are not comfortable with the high risk mentioned above !

Especially in this investing climate in Sydney.
 
Cool, so in this case for:

Investment Property, I should be borrowing 88% maximum LVR

Property of Residence, I should be borrowing 80% or lower, while the stamp duty and the other overhead cost can be covered by the equity gain from the other IP (using Line Of Credit facility) ?

Mr. M,

You're highly leveraged investor :cool:

@AlbertWT, don't go that way above if you are not comfortable with the high risk mentioned above !

Especially in this investing climate in Sydney.

apparently not rich enough:)

i only buy development sites with average of 20-30% margin on total cost.

last project was 33% margin (minus payments to ATO)

so i am fine at the moment.
 
True. Time and place for all...good skill to have if you can do it from the word go.

From a buy and hold perspective...
Sydney prices have doubled in the same time frame, (less purchasing and selling costs inc tax). Don't see value in development in a rising market. This is what has happened in the last 5 years (2.5 of which has been growth only).

Looking at this scenario:
3 x $370k, 1000sqm lots in 2012 in Western Sydney [for arguments sake, they may have been 400k each in 2012]
Total Purchase Price $1,110,000
Current Value = $750k each
Total value = $2,250,000
Equity = $1,110,000

And if you hold one of those that have been re-zoned in the Blacktown plan gazetted last year then you're laughing :).

I guess the point is, hindsight is great...except even those properties looked 'expensive' for the area and rent back then.

And 3 properties is just an example. If one is putting $2m in development, I'd buy 6 x $370k properties for 3 years any day...$2.2m purchase price, end value $4.5m, equity = 2.3mill....possible with development but at an opportunity cost and greater risk.

Having said that, I'm sure that us who've witnessed this boom have learned better, made equity, will make a bigger dent in the next cycle :). Note important to leverage other markets in the mean time.
 
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Hi,

Can anyone please let me know what are and how much approximately the costs that needs to be accounted when buying a new investment property ?

Let say for example, I?m buying $500k existing property as investment (As I?m no longer First home owner) in NSW.

What can be put into the bank loan so that I can maximize LVR and what must be paid cash cannot / should not be put into the loan.

Thanks,

Hi Albert,

To answer your question..Look at the following to make your cost base:

- Deposit
- Stamp Duty (google up a calculator)
- LMI (if deposit <20%)
- Legal fees - $1500
- Renovation Costs

Plus when you rent the property out you'd be paying 1-1.5 week's rent in leasing fees.

After that ongoing fees would be:
- Interest Repayments (including any other top up's you're using to fund the deposit)
- Property Manager Fees - typically 5.5% inc GST in NSW
- Strata/Building Insurance
- Landlord's Insurance
- Council Rates
- Water Rates

monalisa and I work out our numbers (expenses and income) for the property with a view to weekly, monthly and yearly basis. This gives us the overall income for the property.

We also plug in our estimated depreciation for the year and and LMI deduction (divided up over 5 years) and multiplying these losses with our tax rate.

Subtract this loss from the income to give you your approximate net position on a weekly, monthly and yearly basis.
 
Hi Albert,

To answer your question..Look at the following to make your cost base:

- Deposit
- Stamp Duty (google up a calculator)
- LMI (if deposit <20%)
- Legal fees - $1500
- Renovation Costs

Plus when you rent the property out you'd be paying 1-1.5 week's rent in leasing fees.

After that ongoing fees would be:
- Interest Repayments (including any other top up's you're using to fund the deposit)
- Property Manager Fees - typically 5.5% inc GST in NSW
- Strata/Building Insurance
- Landlord's Insurance
- Council Rates
- Water Rates

monalisa and I work out our numbers (expenses and income) for the property with a view to weekly, monthly and yearly basis. This gives us the overall income for the property.

We also plug in our estimated depreciation for the year and and LMI deduction (divided up over 5 years) and multiplying these losses with our tax rate.

Subtract this loss from the income to give you your approximate net position on a weekly, monthly and yearly basis.

Hi MsAli,

Would you mind to share that calculator or Excel spreadsheet here ?
 
Hi Albert,

To answer your question..Look at the following to make your cost base:

- Deposit
- Stamp Duty (google up a calculator)
- LMI (if deposit <20%)
- Legal fees - $1500
- Renovation Costs

Plus when you rent the property out you'd be paying 1-1.5 week's rent in leasing fees.

After that ongoing fees would be:
- Interest Repayments (including any other top up's you're using to fund the deposit)
- Property Manager Fees - typically 5.5% inc GST in NSW
- Strata/Building Insurance
- Landlord's Insurance
- Council Rates
- Water Rates

monalisa and I work out our numbers (expenses and income) for the property with a view to weekly, monthly and yearly basis. This gives us the overall income for the property.

We also plug in our estimated depreciation for the year and and LMI deduction (divided up over 5 years) and multiplying these losses with our tax rate.

Subtract this loss from the income to give you your approximate net position on a weekly, monthly and yearly basis.

Thank you MsAli for the detailed explanation.
I'll try to do that in the spreadsheet over the weekend.
 
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