Financial advisor or buyers agent or ..

[Jacque]

Hi Raj

Some great posts so far. My thoughts:

Reiterating that a broker should ideally be your first port of call. As for someone who is "good" it will depend on recommendations from others who have used them as well as your own findings. I'm happy to report that I've had clients deal with both Peter T (PT Bear) and Rolf from this forum for many years now and all have been very happy

BA fees do need to considered (as per Avatars post) and it appears at this stage you may not be able to afford one, until you've saved more or can draw funds from elsewhere. Beware of middlemen posing as BAs- as per a previous post- a truly independent and exclusive BA works for you as buyer and charges a fee for doing so.

As your deposit is relatively low at $20K this will limit you most likely to regional properties even if borrowing 90%. I'd suggest doing some further reading (latest API mag has some info re: best spots that you might find useful- written by John Edwards of Residex) in to where and what to buy, based on your borrowing capacity.

There are plenty of regional investors here once you narrow your search area down to a specific town or area so feel free to ask questions then. Reading forums such as this, as well as engaging in your own independent research, can be a really beneficial way of getting a handle on the market you're interested in.
Good luck

 

[LisaParker]

I started down the IP path recently enough to remember having similar questions and not knowing where to start. For me the steps below are what got me moving.
-Established what spare cash I was banking each year.
-Established what the minimum amount of cash I wanted to be banking each year was after IP purchases (this told me what kind of holding costs the IP’s could have per year).
-Found out from a broker what I could borrow assuming I had the required deposit in cash
-Talked to some buyers agents to find out what was possible with these numbers and what kind of property they specialised in.
-Got some sample IP cashflow calculations from these buyers agents (PIA sheets usually) for properties they had purchased previously
-Decided on which buyer I wanted to work with and worked with them to define what I wanted to spend, where to purchase and what to purchase.
-Purchased first IP via BA

If you are going to use a buyers agent your 20k is not going to go very far after the BA fee. You may need to find the property yourself or save a bit more before engaging a BA.

That is perfect advice for you Raj, if and when you are eady to make your IP purchase.

 

[mumbai]

Thanks for all your advice. I am still into it and started off with meeting my Tax consultant and Mortgage broker.
Tax consultant and the mortgage broker said to buy a new(ish) property to get the depreciation.
Mortgage broker got the valuation done for my PPOR and based on that I can stretch to buy a $500K worth of property without putting any extra cent. However, I am looking for something around $400K mark
Now the million dollar question, where to buy the IP. Since, this is my first, I ruled out out of Sydney properties. OTPs ruled out.

Any suggestions on where can I start looking for properties around $400, which have potential for CG and good rental yield?

 

[Rolf Latham]

.
Mortgage broker got the valuation done for my PPOR and based on that I can stretch to buy a $500K worth of property without putting any extra cent.

Apologies for the distraction to your posted question.

Can u come back to us with the proposed structure, ie how will the 500 k ( or in your case) be made up, what amount is secured to what ?

ta
rolf

 

[Rolf Latham]

I am looking for something around $400K mark
Now the million dollar question, where to buy the IP. Since, this is my first, I ruled out out of Sydney properties.

If you are looking for yield, 440 and a bit will buy or build a nice granny flat option on the blacktown region for 600 to 700 a week rent.

ta
rolf

 

[mumbai]

My PPOR is valued at 490K, I have 20K in cash and the current mortgage owing is 434K.
Based on that, he said, I can buy a property worth 500K. The stamp duty, MI and deposit will be taken care of in that.
Does that not sound right??

 

[mumbai]

A granny flat for 600-700 rent per week in blacktown area does not sound reasonable.
I guess I can get a big house on rent for that amount? Isn't it?

 

[Rolf Latham]

My PPOR is valued at 490K, I have 20K in cash and the current mortgage owing is 434K.
Based on that, he said, I can buy a property worth 500K. The stamp duty, MI and deposit will be taken care of in that.
Does that not sound right??

the LMI premium will be steep thats for sure, because your home will need to go back to 95.

This will release 31 k minus any excess LMI premium + your 20 = 51 k

If you buy at 400 k, you will need 20 k deposit, round 20is in costs, so your 51 should make it, just.

500 k purchase leaves you with zero buffer I suspect

ta

rolf

 

[Rolf Latham]

A granny flat for 600-700 rent per week in blacktown area does not sound reasonable.
I guess I can get a big house on rent for that amount? Isn't it?

320 for the house and 250 for the granny is quite normal

ta
rolf

 

[mumbai]

Ah, gotcha.

 

[knightm]

500 k purchase leaves you with zero buffer I suspect

ta

rolf

Yep - thats too much of a stretch I think, better to start with a small one well under that amount. If you find afterwards that you have money to spare, guess what, you can buy another one!!!

I would consider maybe either cheap western syd, or cheaper outer bris suburbs or regional options based on your posts and do some research of current rental yeilds and vacancy rates, projected rental growth and capital growth.

For spreasheets to analyse your cashflow, I would check this sticky out there are some great spreadsheets that help you work out how much you are out of pocket each week with any given purchase price, set of costs and income numbers.

The debate about positive cash flow vs negative gearing is as old as the hills so for yourself you will need to do some reading about this concept so you at least understand what you are signing up for when you do buy.

 

[Aaron_C]

It's never a good idea to max out your borrowing capacity, even for a purchase. What if valuation comes in low? Where will the extra funds come from?

 

[Roosterman]

Tax consultant and the mortgage broker said to buy a new(ish) property to get the depreciation.

I would take this advice with a little grain of salt. Depreciation, and tax advantages generally, should not be the determining factor in a purchase decision.

 

[mumbai]

I had a look at some houses in Blacktown between $250-350K and they seem pretty good. The rental is a bit less around 300 pw.
According to my tax consultant and mortgage broker, I should be looking into buying a newish property and get depreciation on it.
Now, my question here is, whether the gain in depreciation is that significant that I should look into buying a new unit (closer to the city) for 400-450K or stick with a house in western suburb for under 350K?
Also, whether the unit or house will give me a better CG in the future?
Personally, according to me land always appreciates and hence I am a stickler for houses. But, need an expert opinion from you guys.

Thanks