Safe to put in offer with finances not sorted? // Lender Recommendations?

[Anon_]

Hoping I could get some financial advice. I actually want to put an offer in TODAY because the properties I am looking at are going to sell very quickly and I want to be one of the first to get in. The thing is though I do not have any of my finances sorted yet and this will also be my first purchases so I have no prior knowledge of possible outcomes (maybe risky). I could put 'subject to finance', but would prefer not to because i feel this might stop me from getting it (it's a really good buy). I would have tried to call some places today but everything would be closed.

What I want to purchase is 2 investment properties at an offer of $136000 each. I am self employed and last year I made $120000. ISSUE is I do not have a proof of income from 10/11 saying what I have made. This is because the tax deportment still has not finalised my tax return. Being self employed, what I do have however is my PAYG (quarterly tax submissions) which shows my quarterly figures of sales minus expense (equals income). Would this be acceptable? I do have previous years to submit but my income for these are less than half what I am earning now. But I do also have $140000 saved in my Ubank savings account. Going on these figures is it certain to say I will have no problems obtaining a loan?

As to my understanding also, the best thing for me to do is get an interest only loan which comes with an offset account. I want to try to avoid any added costs such as bank/loan insurance.

The biggest question would be if you think I would have any problems with getting a loan because i would prefer not to put the 'subject to finance'. But also if anyone has any lenders recommendations based on what I said, that would be awesome also.

I'm sure I would have no problems going with my bank 'Peoples Choice CU' because they can see all my finances, but their rates aren't great. http://www.peopleschoicecu.com.au/328/home-investment-and-line-of-credit-loans.aspx

 

[kathryn d]

Since you have the funds to pay cash for one IP, make one unconditional, and the other conditional on finance.

 

[Aaron_C]

You can use your BAS as proof of income without having done your tax return. But not everyone accepts this. Otherwise you'd have to go lo-doc.

 

[pennyk]

Why do you think the properties will sell quickly?

Most properties at the moment are not selling quickly, so you have time to organise finances etc. Are you buying through an investment group/ is the agent putting pressure on you?

If I were you, I would get my finances organised first, confident in the fact that there will be an equally good investment opportunity once you have the finances in place.

I'm concerned that you are rushing into something, without knowing whether this is really a good investment opportunity for you.

I dont think its ever good being a novice investor making decisions under pressure.

 

[Timocracy]

Slow down, you'll get yourself out of a million bad deals for every one good deal you miss out on.

What type of property are you buying? 136K, is it rural? student accommodation? inner-city bedsit? hotel room? Anything that cheap will have some major drawbacks, you may or may not be aware of. What were the latest sales of comparable property's? Body corp fees? Rates?

Why not put "subject to finance"? It's there to protect you, how much of a discount can you get for unconditional?

"People's choice CU" sell lots of different products other then there own.

 

[Mick C]

I hope your not going for a 95% LVR loan ...self employed can have a few issues in terms of what the bank will accept as income +how much ( ie 40% BAS rule)

How long have you been self employed?
whats the LVR?

 

[Anon_]

What type of property are you buying?

"People's choice CU" sell lots of different products other then there own.

The type of property is already considered and understood. It's a great buy.

But where did you read that about Peoples Choice selling other people's products? I've never seen that advertised anywhere. Why would a Credit Union who have their own home loans, recommend business to a competitor?

 

[Anon_]

I hope your not going for a 95% LVR loan ...self employed can have a few issues in terms of what the bank will accept as income +how much ( ie 40% BAS rule)

How long have you been self employed?
whats the LVR?

Yeah I'm aware of the problems with being self employed, but I've had my business for 5+ years so most issues should be avoided. 95% in my dreams maybe, but definitely not expected. LVR is one of the main things I'm trying to work out ASAP with comparing loans.
Was fairly keen with loans.com.au with one of their plans having a 10 year interest only, and 100% offset account but has a 80% LVR . Would have thought 90% being the way to go, but not sure if that is obtainable.

 

[Mick C]

The type of property is already considered and understood. It's a great buy.

But where did you read that about Peoples Choice selling other people's products? I've never seen that advertised anywhere. Why would a Credit Union who have their own home loans, recommend business to a competitor?

They don't recommend competitor's...they "Resell" and repackage it as if it's their own- White branding....

 

[Stangman]

Hi Anon, going by what you wrote in the first post of this Thread, i would think you would have no problems at an LVR of 80%? Surely that would make it a lot easier to obtain the finance.

Also, be aware that at these purchase prices your costs such as Conveyancing, Stamp Duty and all associated charges will total about 6.5K. That is what it has cost us for each property that we have just settled on in the area.

How did you go today?

Stangman.

 

[Anon_]

Just wondering also with the LVR and LMI... So because a high LVR is likely (or always?) going to mean you will need to pay LMI, generally would a lower LVR in the long run, work out more beneficial than a higher LMR which comes with LMI?

 

[Token Funder]

They don't recommend competitor's...they "Resell" and repackage it as if it's their own- White branding....

Not so much. They're an unusual model in that they are a credit union that operate as a broker for their home loan business.

So, yes, they do recommend Homeloans from other ADIs.

 

[nkirlew]

Just wondering also with the LVR and LMI... So because a high LVR is likely (or always?) going to mean you will need to pay LMI, generally would a lower LVR in the long run, work out more beneficial than a higher LMR which comes with LMI?

Hello Anon, I think you do need to get some advice as the answer to this question is not the same for each person. The amount of information provided by you will only allow for a generalisation.

So pick up the phone and talk to a broker or your accountant or a financial planner. I always like the subject to finance clause in an offer to purchase, along with some other subject to's: Pest, building ....

If who ever you are talking to is giving you good advice first they will have asked you a comprehensive set of questions. Together you can map out your path to wealth.

 

[Anon_]

So pick up the phone and talk to a broker or your accountant or a financial planner. I always like the subject to finance clause in an offer to purchase, along with some other subject to's: Pest, building ....

TBH after dealing with some shockers, I had planned to do it myself. - On one recommendation I got given the forms, and only after they have been filled and submitted was I told I was not eligible (wasted 3 weeks). Another was not even aware the first home owners grant was changing 1st July.

But think I had better do another search to find some good ones (In Adelaide). Thought it would be easy myself with all the comparison sites, but it's the specific questions where you need an expert.

 

[Rolf Latham]

But think I had better do another search to find some good ones (In Adelaide). Thought it would be easy myself with all the comparison sites, but it's the specific questions where you need an expert.

self diagnosis and self medication sometimes ends in a poor result.

from what I have read so far, youmay be very well served to slow down, take a step back and actually work out what you financial goals are and how property may work for those.

Once u have that worked out, work out what sort of properties will work for your profile ( this bit looks like like you may have done so far........or may be not)

Then once you have that worked out see how that works with your 1 3 5 and 10 years property goals.

determine what loan product you need...........(this I know u havent done to any great detail from the posts so far)

work out what lenders and mortgage insurers to use when, ie , or I use abc lender now, or later in my investing career when the other wont give me any more money.

Its not that you MUST have a broker to work that out, you can do it yourself with a bit of major work.

ta

rolf

 

[Anon_]

So because the tax thing... I can only get a 80% loan and not the preferred 90%. Not sure I want to spend an extra $28k of my own money though.

 

[Anon_]

I just can't wrap my head around this...

Is the actual loan % which you borrow irrelevant? If I borrow 80% and not the 90% I would have liked, is that going to have any impact whatsoever?

 

[Aaron_C]

The % you borrow is very, very relevant. Over 80% means mortgage insurance, and tighter lending criteria apply. Under 80% and the bank's policy is used - and this is generally much looser than any mortgage insurer.

 

[Anon_]

But in terms of the outcome in 10-15 years.. would one be better off with a 80% or 90% loan?

 

[JWR]

the property value won't change just because you put more money into it (i,e, buy for 150k today and worth 300k tomorrow)

But if you put 80% instead of 90% into it you have tied up more money - and effectively you could buy 2 properties instead of 1 by putting 90% into it - thus doubling your profits over the long term.

By putting 80% instead of 90% your cashflow will be slightly better but then you miss out on capital gains (in the hypothetical between choosing 1 or 2 properties)