high rental yield does it mean anything with banks?

[tj22]

another random question haha,

2 scenarios both 80% lends

1st unit 100k purchase 200 rent 80 wk body corp 10.4% yield

2nd house 100k purchase 145 rent 7.54% yield

when trying to purchase both properties banks will ask for a rental appraisal / want to know what the current rent is etc (in this scenario they both have tenants paying those rent figures)

is the 1st property easier to get into because it'll show higher rent compared to the second property?

building a portfolio would it be easier with the first property?

thoughts?

 

[Hooray]

Forget the bank. Net the 1st property has the lower yield. You don't see that?

 

[tj22]

Forget the bank. Net the 1st property has the lower yield. You don't see that?

if we're comparing (net)

1st property is including body corp (insurance)

2nd property doesn't include insurance so say u allow 20 per week they both come in very similar.

also what does LOE stand for?

 

[D.T.]

Dont worry about LOE its a strategy for schmucks from a previous era thats no longer applicable.

Also, for your original question, dont worry too much about what the bank thinks. Choose the better investment (sounds like the 2nd) and you'll be able to propel your journey further.

 

[jerrybee]

Whenever you buy a property the higher the expected rents the better it will be. Agents know this and always quote unrealistic figures, after all it's in their interests to make sure you get that loan. It also makes it less likely you'll pull out if you see a big number.

I've always shut my mouth because a good rental appraisal letter only helps me get the loan, but no doubt it's going to come back to bite me in future refinances when actual rent never lives up to it.

 

[hugh72]

another random question haha,

2 scenarios both 80% lends

1st unit 100k purchase 200 rent 80 wk body corp 10.4% yield

2nd house 100k purchase 145 rent 7.54% yield

when trying to purchase both properties banks will ask for a rental appraisal / want to know what the current rent is etc (in this scenario they both have tenants paying those rent figures)

is the 1st property easier to get into because it'll show higher rent compared to the second property?

building a portfolio would it be easier with the first property?

thoughts?

Building a portfolio would be easier with option 2, but it doesn't necessarily mean its the best option

 

[Hooray]

Just go buy lots of high yielding mining town houses.

 

[Terry_w]

is the 1st property easier to get into because it'll show higher rent compared to the second property?

?

Generally yes because of higher income.

But there are a few lenders that will cap the rent for a new purchase at around 4% yield. Depending on where the property is located.

 

[tj22]

Generally yes because of higher income.

But there are a few lenders that will cap the rent for a new purchase at around 4% yield. Depending on where the property is located.

interesting, cheers for input

 

[Redom]

In terms of serviceability only - banks only look at the rental income and shave 20% of it (regardless of the costs of holding onto the property).

Note that for serviced apartments, which typically produce those yields and are at those price points, many lenders only take 50% of rental income instead of 80%.

As others have pointed out, its probably best to consider finance and be aware of the implications of your purchases, but not to have them as the first consideration of your investment decision.

Cheers,
Redom

 

[Rixter]

Dont worry about LOE its a strategy for schmucks from a previous era thats no longer applicable..

Strange how those adopting a LOE strategy have attained financial independence freedom, whilst others who were around in that same era are still chasing it.

 

[tj22]

In terms of serviceability only - banks only look at the rental income and shave 20% of it (regardless of the costs of holding onto the property).

Note that for serviced apartments, which typically produce those yields and are at those price points, many lenders only take 50% of rental income instead of 80%.

As others have pointed out, its probably best to consider finance and be aware of the implications of your purchases, but not to have them as the first consideration of your investment decision.

Cheers,
Redom

interesting, how would a bank know its a serviced apartment? etc once it gets to a 10% yield they just automatically take 50% off? :S

my scenario is just for a normal unit.

 

[Mick C]

1. Most Bank will cap the RY at 6.5% ( 7% for some) ....so even if you buy at 10% RY...they will cal based on their val report OR max 6.5% either way.

2. 80% of total rent taken.

3. Side note, 10% yield sounds like a service apartment/ studio or a very small regional town.

Becareful ....

Regards