Getting Started

[clamp23]

G'day all,

My first post, I've been waiting a long time for it!

I'm just looking for some general advice/help/feedback as I begin my property adventure.

First of all, I absolutely love this forum, I've lurked around on here for years reading hundreds and hundreds of threads/topics and even though I've never yet posted, it has been an awesome source of information and inspiration.

I decided 5-6 years ago that I wanted to throw all my energy into property investing as an avenue to improve my familys future because I love the whole property process. I knew we weren't yet ready so since then I've spent countless hours studying anything and everything to do with property investing.. (Books, seminars, subscriptions, this forum) and I still love it.

Ok so here's where I'm at right now... I'm from Geelong, 29, married with 2 young ones, a qualified carpenter and have just recently become a registered building practitioner. We have a PPOR with a loan of 280k, valued at minimum 400k, and just ticked over 50k in the bank (offset acct). I think I'm ready to begin!

I would love to just get stuck into acquiring, but we're not located in an area we want to live long term. My lovely wife has always had in mind a town a bit more coastal, so first and foremost I want to keep her happy... I know it's a bit soppy.. The only problem is I've got it in my mind that I don't want to increase our loan on a PPOR, so to find a suitable block and build in that town we need an extra 100k capital to keep the loan at the same amount.

At this stage I think my preferred strategy is to buy/improve/hold, but for the next couple of years my plan is to sell our PPOR, buy, complete good basic renos, live in for the time required to avoid CG, then sell to raise the required capital to get where we want to be. I think I'd need to repeat this process at least twice.

For at least the first project the in-laws have asked us to stay with them because they have the room. This I think is a perfect kick start because of the low costs, and the extra help for my lovely with the boys as I'm planning to do everything I legally can myself so won't be home much.... What do they call it good old sweat equity? I know it's not ideal but I think it's how I have to start to get ahead a little.

I would love some feedback on any of my plans if anyone could be bothered, sorry for rambling on a bit!!

A couple of quick questions also sorry..
-I'm pretty sure that owner builders generally require a higher % deposit compared to those that have contracts with a builder. But does anybody know what the rules are if I am the builder? Can i write up my own contracts? Or would they still class me as an owner builder?

-I've heard of a product/service that banks offer, but don't really advertise because it's a lot of stuffing around, where I can sell the PPOR, but instead of paying off the loan, roll the loan plus the surplus into a term deposit and pay the gap on interest. This option would be nice rather than re-applying for finance. Does this even exist or am I barking up the wrong tree?

Thanks in advance for any replies,

Matt

 

[jingo]

Hi Mat,

Welcome to the forum. I really enjoyed reading your first post. I like your plan as you will be using your carpentry skills and you probably have contacts with other tradesmen so you can utilize their skills and experience for your renovations.

I think renovating Ppors is a great way to begin, especially as you will be able to live with your parents while undertaking the renovations.

I don't know the answers to your questions, but am sure someone else will.

Looking forward to hearing about your renovations once you get started.

Regards Jason.

 

[boomtown]

On your second point banks will keep a facility open for you for a period of time but I have never bothered. The new property will still need to pass a valuation.

 

[Propertunity]

Hi Matt,
I can't help on the finance questions - but one of the many brokers on the forum here could.
As Jingo said, I too like your plan - go to it!!

 

[matto_]

Great 1st post. and good to see you have put a fair bit of thought into it.

the ideas you have laid out sound really good. Manufactured growth. With reno's just be careful of over capitalising.

 

[Shahin_Afarin]

G'day all,

My first post, I've been waiting a long time for it!

I'm just looking for some general advice/help/feedback as I begin my property adventure.

First of all, I absolutely love this forum, I've lurked around on here for years reading hundreds and hundreds of threads/topics and even though I've never yet posted, it has been an awesome source of information and inspiration.

I decided 5-6 years ago that I wanted to throw all my energy into property investing as an avenue to improve my familys future because I love the whole property process. I knew we weren't yet ready so since then I've spent countless hours studying anything and everything to do with property investing.. (Books, seminars, subscriptions, this forum) and I still love it.

Ok so here's where I'm at right now... I'm from Geelong, 29, married with 2 young ones, a qualified carpenter and have just recently become a registered building practitioner. We have a PPOR with a loan of 280k, valued at minimum 400k, and just ticked over 50k in the bank (offset acct). I think I'm ready to begin!

I would love to just get stuck into acquiring, but we're not located in an area we want to live long term. My lovely wife has always had in mind a town a bit more coastal, so first and foremost I want to keep her happy... I know it's a bit soppy.. The only problem is I've got it in my mind that I don't want to increase our loan on a PPOR, so to find a suitable block and build in that town we need an extra 100k capital to keep the loan at the same amount.

At this stage I think my preferred strategy is to buy/improve/hold, but for the next couple of years my plan is to sell our PPOR, buy, complete good basic renos, live in for the time required to avoid CG, then sell to raise the required capital to get where we want to be. I think I'd need to repeat this process at least twice.

For at least the first project the in-laws have asked us to stay with them because they have the room. This I think is a perfect kick start because of the low costs, and the extra help for my lovely with the boys as I'm planning to do everything I legally can myself so won't be home much.... What do they call it good old sweat equity? I know it's not ideal but I think it's how I have to start to get ahead a little.

I would love some feedback on any of my plans if anyone could be bothered, sorry for rambling on a bit!!

A couple of quick questions also sorry..
-I'm pretty sure that owner builders generally require a higher % deposit compared to those that have contracts with a builder. But does anybody know what the rules are if I am the builder? Can i write up my own contracts? Or would they still class me as an owner builder?

-I've heard of a product/service that banks offer, but don't really advertise because it's a lot of stuffing around, where I can sell the PPOR, but instead of paying off the loan, roll the loan plus the surplus into a term deposit and pay the gap on interest. This option would be nice rather than re-applying for finance. Does this even exist or am I barking up the wrong tree?

Thanks in advance for any replies,

Matt

Hi Matt,

Different lenders have different policies when it comes to 'owner builders'. Some lenders do not accept owner builders period and the remainder like Westpac have a lower LVR of 60%. So yes you will require a higher deposit.

Re your second question not sure if I understood it correctly but is sounds like you are referring to an offset facility which is linked to your loan account.

 

[travelbug]

A couple of quick questions also sorry..
-I'm pretty sure that owner builders generally require a higher % deposit compared to those that have contracts with a builder. But does anybody know what the rules are if I am the builder? Can i write up my own contracts? Or would they still class me as an owner builder?

Matt

Do you mean when buying the house or getting a loan to do the renovations? If you are buying the house and it's livable then the renovating won't come into effect. You'll just get a normal loan. No need to mention that you will renovate later. But if you need to borrow the money to do the renovating then that's different. I don't know about that.

When we bought a burnt out house (obviously not livable) we applied for a loan and said we were doing the reno. No they said we don't lend to owner builders. So we got my BIL (a builder) to write us a quote. Then it was OK.

 

[Aaron_C]

Owner builders are a dirty word in the finance industry. The reason being that owner builders have very bad cost control whereas registered builders with a fixed price contract generally stick to it (because they have to contractually) and so the bank knows exactly how much it is going to cost.

 

[clamp23]

Hello all happy Sunday,

Thanks to everyone for your prompt, encouraging replies!!

Sorry I meant to elaborate a little more last night with my questions, but forgot, think I was a bit tired, and had already rambled too much!!

With my question about owner builders finance I'm actually wondering about down the track a couple of years when I come to build our final PPOR. Do you think that me writing up a quote/contract as the builder would be good enough for the lender to not class me as an owner builder, therefore not requiring a higher % deposit... Or do you think they would ask for a quote/contract from an independant builder?

After thinking about this a bit more though, if everything goes according to plan and I don't have to increase the PPOR loan for our final place, I shouldn't have to worry how much of a deposit is needed anyway as either way I'll have it covered.

With the reno's in the meantime, I won't be telling the bank of my reno plans as I'm hoping to not be doing anything structural enough to require permits etc. anyway, because as matto suggested I want to be careful of over capitalizing, which in itself is easier said than done sometimes, especially when my lovely is witnessing my brother and his wife do just that at the moment with their extension/renovation.. Top of the range fittings/furnishings everywhere like the $1200 a pop vanity basins they thought looked so pretty on 'The Block'.. Makes it tough but I'm pretty sure she's on board!

With the 2nd question about the loan rolling over to the next property, I had heard of it but have no idea if it is actually possible.. If you can do that it would probably work perfectly for our situation until we rolled it over into the final PPOR with the same loan..

Anyway, sorry for rambling again, and thanks again for your replies and help!

Matt.

 

[Rolf Latham]

With my question about owner builders finance I'm actually wondering about down the track a couple of years when I come to build our final PPOR. Do you think that me writing up a quote/contract as the builder would be good enough for the lender to not class me as an owner builder, therefore not requiring a higher % deposit... Or do you think they would ask for a quote/contract from an independant builder?

You can get these away at LVRs > 60 %, getting somewhere near 75 % depeding on a bunch of things.

Final PPOR................how old are you again

ta
rolf

 

[Rolf Latham]

With the 2nd question about the loan rolling over to the next property, I had heard of it but have no idea if it is actually possible.. If you can do that it would probably work perfectly for our situation until we rolled it over into the final PPOR with the same loan..
.

portability is a possibility with most lenders, just make sure you use a lender that will allow a term deposit as temp security, since otherwise you need to go for a back to back settlement, which may not be ideal.

Obviously, if there is any "build" or prgress payment component on the OLD loan, the rolled over loan wont have that, however, you can add on to an existing ported loan to do further work on a progress payment basis.

t
rolf

 

[clamp23]

Thanks Rolf,

We're currently with westpac so I'll contact them to see if that's something they offer.
Good point with the final PPOR too... I probably should have called it our 'settle into and enjoy for a while and who knows what might happen later on' PPOR. I'm not quite ready to build in a retirement village just yet!!

Matt.

 

[Rolf Latham]

Thanks Rolf,

We're currently with westpac so I'll contact them to see if that's something they offer.
Good point with the final PPOR too... I probably should have called it our 'settle into and enjoy for a while and who knows what might happen later on' PPOR. I'm not quite ready to build in a retirement village just yet!!

Matt.

WBC are fine with Ports, but are so so on owner build

ta
rolf

 

[clamp23]

Thanks again for the info Rolf... It's strange I've read thousands of your posts watching on from the sidelines, but now it's actually me you're helping out!!

All the best, Matt.