Hopeless case..or not ?

[meljup]

Hiya
we have been looking at getting into our first IP for 12 months or so, originally we fell short with servicability, but now we have a higher income we are trying again..problem is we have lost $40k in capitL growth in that period.
We are basket case lendees...5 children loads us with sevicability issues, one of us is a discharged bankrupt (3 years), on the plus side a combined income of 100k, and valuation assessed equity in our family home of 80k.
We want to buy at the low end of the market, properties for 16-170 k with rent at $180 pw.
No deposit..
Getting loads of no's but determined not to give in this time..
Is this a hopeless case ?
Any ideas ???
Cheers

 

[alexlee]

Can you really afford to service any more loans?

 

[meljup]

yes, I am a very strict and disciplined budgeter.
I have been over the figures many times.

 

[alexlee]

Assuming you want to borrow 105%, you're going to be down at least 5k a year. How much realistically can you save? The fact that you don't have a deposit suggests that either the savings plan isn't working or you haven't given it enough time to prove that it works.
Alex

 

[meljup]

well, it is going to be tight, but then, is it worse letting the market leave us behind.
I am more concious of the market entry getting further away from us.
what I would like to know, is of any higher risk lenders that may look at us.
I am busy trying to find a way around the brick wall, and I don't take no for an answer.

 

[casper007]

what I would like to know, is of any higher risk lenders that may look at us.
I am busy trying to find a way around the brick wall, and I don't take no for an answer.

Problem is that most of the high risk lenders have been tangled in the Sub-prime mortgage fiasco and are wary about risk lending.

Until that sorts itself out ... maybe practice the disciplined savings plan by setting up an offset against your PPOR and wait it out

 

[meljup]

Thanks everyone..food for thought

 

[lizzie]

i'm with alex and casper in that i think you need to show your "discipline" before you buy, by trying to save some sort of deposit - unless you are using your spare funds to pay off bad debt (in which case i would continue to do so).

if you're not paying off bad debt, then budget, save and (if you have a ppor) put it in an offset. if you don't have a ppor then put it in a high interest saving account like ing.

otherwise, if you don't practice before you get an ip, you could get yourself in a worse pickle.

 

[jingo]

Hi Meljup,

I tend to agree with Alex and Lizzie,

Running an IP is costly, and you need to allow for the ongoing expenses (rates, shortfalls between the rent and the loan, water bills, repairs, insurance etc). Not to mention allowing for periods when the property may be untenanted or where tenants fall short in their rent. (Yes, this is the fun part!).

I understand that you are concerned that the market is moving, but from your point of view if you had a higher deposit or a buffer of some kind (cash) it will make things easier.

I don't think it is worth the stress on you and your family at this stage - especially with 5 children to support!

Regards Jason.

 

[meljup]

Yes thanks'
Life wasn't meant to be easy, and I guess we are the only ones who know whether we can handle the stress or not.

So if I choose to ignore the wise advice..Is there anyone here who can see outside of the square for me ?

And I have no debt, other than my PPOR, no credit cards, no personal loans.

If I put away the same amount for a deposit, that I would be spending on the IP, it would be 18 months before I have enough, in that time, the property could have increased by at least double that amount.
I would prefer to borrow at risk, than lose money, but I have no aversion to risk taking.
I understand how the "ideal"
way to do it is, but I am after plan B advice.

Can someone explain to me how to have an offset ?, my lender now does not have a website (old RAMS).

 

[skater]

I'll stick my hand up & agree with the rest. Try & save some more first, so you have a traceable savings history.

 

[thedude]

Hi Meljup,

Would you lend money to you? If so why?

I have no doubt you can probably source someone to lend you the money, however your terms would likely be very different to a loan from the mainstream. Higher rates, less flexability.

I understand your eagerness to get into the market asap, but there's no point getting in if you cant stay in.

 

[jingo]

I understand your eagerness to get into the market asap, but there's no point getting in if you cant stay in.

Well put the dude, that is really the key to it. If an investor enters the market, and then is forced to make a quick exit, it is very costly, and in most cases the investor is left in a worse position than the one they were in before they began 'investing'.

'Investing' (as opposed to gambling/speculating) is all about being very well prepared for the risks associated with the asset class that the investor is considering entering into.

Meljup, we are not trying to quell your desire to invest in the property market, but with 5 children to support and money still owing on your PPOR, and no safety net (cash) to fall back upon you are leaving yourself wide open to the risks involved. (Not to mention purchasing in a market that has possibly peaked!).

We are only passing this onto you, because we know that it is not all smooth sailing.....

Hope this helps.

Regards Jason.

 

[JBR]

Meljup,

With 3 years discharged you may struggle to get through LMI.
I believe Liberty has a good rate up to 90% more than 3 years bankrupt and they don't use PMI or Genworth. Subprime may mean policies are tighter but a possible option. You would need to refi your Rams facility though...or talk to a broker to see what options are out there.

 

[meljup]

Ok Thanks
What I am going to do is both, I will continue to look at finance options, and set up an offset account as soon as I can arrange it, either way we will be moving forward.
Thanks for your advice..

 

[redsquash]

how much can you save a year?
That may change the advice you are receiving.
If your PPR lost 40 k in capital gain in 12 months why are you so sure that waiting is not a good move . The extra time may be a help with more savings.
How long are you prepared to negatively gear.

 

[GoAnna!]

meljup

When you speak about the losing $40K i presume you mean opportunity rather than an actual decrease in value of your PPOR?

Have you done the actual cashflow projection taking into account tax deductability? How much does that require of you cash flow each week? Have you also factored in some potential interest rate rises?

Have you applied to take out a LOC against your home to provide for the deposit and purchase costs?

Its great that your situation has improved, that you are free of credit cards and person loans (most never achieve that) and that you feel ready to buy now but from a bank perpsective it would be hard to sell your situation if you currently have no savings at all. Where would the shortfall come from? How you you pay for that hotwater system when it suddenly fails?

Only you know your full situation but if you can't convince your fellow investors who are reasonable comfortable with risk I can see why you are getting nowhere with the banks.