Property 2 go time?

[keneth]

Hi,

Looking to buy a 2nd property, just wondering if people think it is viable to take the next step.

Currently have 70k in available cash.

Currently have. 2 bedroom apartment in st kilda returning 4.3%
LVR 85%
Fixed rate 3 years at 5.59 interest only
Property 1 - holding cost before tax, $5000 taking into consideration expenses and rental income.


Current income $60,000 before tax and my living expenses are about 20k per annum. I am renting at the moment and happy to continue.

I am saving about $300 a week, so thinking I'd rather use the $70k to purchase a second property.


Any thouts whether I am ready to do this? I would look at using a different bank as I don't want to use the same one and get the st kilda property revalued, as I just at 5.59.

I am thinking I need something that's cash-flow neutral to positive. Thinking something around the $350k mark with a yield closer to 5 percent as I don't want to be negatively geared...

Thoughts if I am in a position for P2.

I know I have to see a bank....

 

[Rolf Latham]

Hi,

Looking to buy a 2nd property, just wondering if people think it is viable to take the next step.

Currently have 70k in available cash.

Currently have. 2 bedroom apartment in st kilda returning 4.3%
LVR 85%
Fixed rate 3 years at 5.59 interest only
Property 1 - holding cost before tax, $5000 taking into consideration expenses and rental income.


Current income $60,000 before tax and my living expenses are about 20k per annum. I am renting at the moment and happy to continue.

I am saving about $300 a week, so thinking I'd rather use the $70k to purchase a second property.


Any thouts whether I am ready to do this? I would look at using a different bank as I don't want to use the same one and get the st kilda property revalued, as I just at 5.59.

I am thinking I need something that's cash-flow neutral to positive. Thinking something around the $350k mark with a yield closer to 5 percent as I don't want to be negatively geared...

Thoughts if I am in a position for P2.

I know I have to see a bank....

Hi Keneth

Its obvious you have the real life affordability because you can save 300 a week.

As to what your lender or a lender would assess might be different.

I would NOT use the 70 k cash I have. thatstax paid cash that you might want to keep aside for a PPOR one day

I would go to the lender that has the loan for St Kilda and get a separate variable equity loan to the same LVR that I took the loan out originally, and use that money for part deposit and costs. Sure there will be a little LMI on that, but it wont be much compared to the original loan.

ta
rolf

 

[vaughan]

I am thinking I need something that's cash-flow neutral to positive. Thinking something around the $350k mark with a yield closer to 5 percent as I don't want to be negatively geared...

To be cashflow neutral, your net return needs to be at least the current interest rate, ie around 7%, just to cover the mortgage costs. Then take strata, property management fees into account, insurance, etc... the gross yield needs to be more like 10% to get close to being neutral.

Also consider that you could get 5.5% return on your $70k cash just by putting it in the bank, guaranteed with no risk and no tenants to worry about.

So thinking about getting a return of "close to 5 percent" is way off target, imho.

 

[Aaron_C]

You should work out exactly how much you can afford as this differs across different lenders. Who are you currently with? It looks like a Bank of Melbourne 3 year fixed?

 

[matto_]

sounds like you have the right backing for prop number 2. How does it fit with your wider strategy?