Sleepless without IP...

[THEHEATH]

Someone mentioned stacking shelves at a supermarket at night as a second job. Apparently it pays around $25 an hour, and it might negate the need for you to put your child in day care (saving more $$$).

Maybe look at other forms of investing where you can start off with a smaller loan in the meantime (ie. the sharemarket). Obviously you have to be very careful in these times and keep in mind the time frames you are looking at, but there could be some good buying opportunities in the short term. But just don't rush! If it feels like you are taking a gamble or aren't really comfortable or familiar with it then it becomes risky, and isn't really worth doing. Just some more ideas.

 

[happy]

Thanks everyone for your help. The whole situation is quite clear for us now, thanks to you guys.

Y-man - I was aware that borrowing 107% means borrowing 7% more than the property's worth, but thanks for your concern.

Next thing i'll do is see family assistance and check how many hours I can work without affecting payments too much. I suppose there's not much point in working 20hrs a week if I only end up with a couple of bucks extra.

My husband and I have decided to sit tight and save for now - very boring, but as you have all pointed out, necessary in this climate.

I will keep lurking on here in the mean time and hope we dont miss out on low interest rates and bargain buys!

 

[RumpledElf]

I imagine we're one of the 'low income people buying property all the time' you mention. I'm your age too. We went lodoc but still declared a sub $40k household income and we have two kids. We have considerably more disposable income per month than you do, though, but banks don't take your *real* spending patterns into account when making loan decisions. They'd lend us up to $140k, and we didn't even come close to this limit. We didn't get the FHOG on the house for exactly the same reason as you - my partner has never owned anything, but I bought my first house in 1999, we're defacto and probably could have pulled a dodgy rort to get it, but didn't.

We got a 110% odd loan for the house with no money down (and then topped it up more to fix/subdivide) BUT it was secured against my PPoR, and because we bought it as a mortgagee sale we got it at about 30% less than the bank valuation, which helped. The area the house is in is full of people who won't buy houses that need any kind of work, so it had been sitting there for ages without selling. Even our hairdresser had had a look at the house and declared it 'too much work, why would anyone want to buy that?'

We have now morphed into evil specufestors and intend to flip the house as soon as we've had it for a year and the new financial year rolls over, assuming council approves the subdivision for the house. We should make about 130% paper profit on the entire deal (we could also have kept the house as a very positively geared IP but chose not to), which will translate to a massive cash injection into our business, a paid-off PPoR and a 700sqm block of land we can hang onto for no particular reason.

So once you've got that deposit, choose the right house and you too can become an evil specufestor and then roll around in your ill-gotten riches!

 

[Lamingtons]

Happy I think you will be more sleepless if you went for 110% finance.

Why don't you start a high interest savings account. Get into the habit of putting in $x every fortnight. At the end of the month anything left over just chuck it into the account? You'll be amazed how fast the deposit grows.

 

[murtagh]

Happy,

if it helps .. you're not the only one doing the boring saving thing at the moment.

Probably the only good part about being at this level is that small changes in your situation can look very impressive. In the past six months our net worth has gone up 150%! Not many people can say that, particularly for the last six months.

So make up a little "net worth" spreadsheet, and check in on it from time to time. You'll be surprised at how while it feels like "nothing" is happening, your situation is improving.

Tracking your progress over time can provide a little "oomph" to the motivation, right when you need it.

 

[Edmond Dantes]

Totally agree with Murtagh,

Before buying my first IP couple months ago (I don't own a PPOR - I rent -), I had my spreadsheet updated monthly with my "net worth". I had to put my TV and my $3000 car in my "assets" rows because I basically had nothing. Seeing your net worth and your savings grow and grow gives you a very good motivation and definitely a better position to buy.

-Andrew

 

[BayView]

150K over 30 years IO @7.5% is around $430 per fortnight, less rental income of around $300 per fortnight (worst case) = $130 out of pocket per fortnight.

Is this right?

Don't forget to factor in that you will lose around 20% of the rent to holding costs per year. This also allows for some vacancy. Low maintenance and low vacancy will improve the %, but don't count on it.

Also, don't assume an interest rate of 7.5% for 30 years - that's way too long a time frame.

I think historically the average for rates is around 8-8.5%?

 

[Gools]

Happy,

rather than locking yourself into either Lets Buy Now or Lets Save Now, why not just keep looking for bargains and if one turns up next week, next month or next year buy it!!

I bought a bargain last year right in the middle of when the Adelaide market was going totally nuts. It cost me $165k and is now neutrally geared. I would hate to think I would have missed it because I had decided just to sit back and save. Keep one eye open at least.....

A little story (but not relevant for you in this market).
My parents bought a house in Northern NSW a couple of years back at auction. Nice place, lake frontage and a short walk to the beach. A woman came up crying to them after the auction telling her story of how she was about $10k short of buying property there a few years back and had decided to save for 2 years. Well she had saved her money and guess what, she was $150k short of buying that place.
As I say, not relevant as the market has slowed down since then.

Keep an eye out for bargains.
Save as hard as you can.
Don't be in a hurry to buy just anything.
Do your research and be sensible.

 

[Alex P Keaton]

get a 20k credit card.

I have been looking at all the options to be able to buy sooner. From joint ventures, to my parents helping me, to the idea of perhaps investigating vendor finance. Using a credit card or personal loan maybe another option I can investigate. I'm just tossing things around, trying to find a way to get my deposit together faster! and also if it is suitable for me.

I'm curious about a few things

If you did get a 20 k limit for a credit card


1. My limit is 1 K atm, I dont think any bank would grant me a $20 K card


2. If I had a 20 K cc then it would dramatically effect my borrowing power! How do you get by this problem. Do you put through all your paperwork first for the loan and then at the last minute quickly apply for this $20 K?? so that you have your deposit ready and waiting for you?


3. If I had a 20 K cc and used that for my 5% deposit I would work hard to pay off the cc so I dont have too much interest to pay unless I could get a cc with a 0% IR somehow. I would be able to pay off around $1000 a month probably. Would take ages to pay it off!!


4. Once your 0% cc IR term ends can you transfer over to another cc with a 0% IR?


Has anyone tried this?? Have you used a CC to pay for your deposit?
Is this a silly thing to do?


I think if you know what your doing and investigate it could be an option. Would like to hear from people who have used cc in this way. Also would like to hear from people who have used personal loans to finance their deposit.

 

[Perp]

If I had a 20 K cc then it would dramatically effect my borrowing power! How do you get by this problem. Do you put through all your paperwork first for the loan and then at the last minute quickly apply for this $20 K?? so that you have your deposit ready and waiting for you?

No, you don't engage in fraud! Using a personal loan or credit cards is viable, but only for people with high incomes (ie ample DSR).

Vendor finance is possible, particularly on commercial properties, and may be an option for you. You may get a lower LVR on commercial, but on the plus side, vendor finance is much more common, and commercial lenders are more accustomed to lending for purchase with a vendor finance component.

When buying residential, you're usually dealing with "less sophisticated" vendors, and they usually don't understand vendor finance, and/or have an accountant or bank manager or solicitor who advises them not to do it. One notable exception is that many developers will provide vendor finance if they're desperate to move excess stock, or if you buy multiple properties, or a particularly-hard-to-offload property.

Given that you're starting out and seem more comfortable with residential, I think your best bet would be to "keep an ear to the ground" and sniff out developers looking to offload properties in a hurry, and see if you can get vendor finance. If you're savvy, you can benefit from "quirks" such as their requirement to achieve a sales target in a quarter, or get cash out of the properties to move to the next deal, etc, and can use that to negotiate vendor finance. The 80% cash they'll get at settlement from your bank will at least give them a sale, and some cash to inject in the next development. If you're buying the first in a street that they've developed, they may be willing to grant vendor finance if you pay a strong price, so that they have a comparable sale to point to and argue to future buyers that the values have been set at $xxx. (Obviously you have to be certain that paying that price still makes the investment good for you, too.)

Commercial property does have different dynamics and risks than residential, so obviously you should only venture into this domain if you've thoroughly researched it and determined whether it's appropriate for your circumstances.

 

[RumpledElf]

I have been looking at all the options to be able to buy sooner.

I wouldn't walk into something risky just to buy sooner. Perth is coming down, I have a relative with a house there who can't sell it and complains that every week that passes his place is worth less. He's bleeding money, particularly as it was a forced sale of something he bought in 2007 with an ex.

I have zero options to buy sooner. I can't do squat with this house until it is subdivided (well I could but I'd lose $50k), and I can't do squat with the equity in my old house until it sells. I don't have the cash to subdivide. So, we sit, we wait, we plot and scheme what to do next. This house is nice but it is WAY too small so I'd buy a bigger place tomorrow if I could, but I can't. I'd start building a new place tomorrow if I could, but I can't. C'est la vie.

 

[yorke]

Perth is coming down, I have a relative with a house there who can't sell it and complains that every week that passes his place is worth less. He's bleeding money, particularly as it was a forced sale of something he bought in 2007 with an ex.

Not all of Perth is coming down, some areas are still going up and if he bought in some long established suburb then he's probably not doing too bad even if he bought at the peak of the boom in 2007

OTOH if he bought in one of the new estates on the outskirts he's screwed for at least another 2-3 more years as developers release more blocks nearby. To boost sales and lower prices developers have halved land sizes so now he'd have to compete with brand new H&L packages on 350sqm blocks selling for $100k less then they were 2 years ago. Maybe he could look at subdividing the place himself.

 

[Nathan]

Kim5,

Sorry short on time will come back later.

a) perth i was looking other day, still seems quite high amd quiet busy in bread n butter areas.
b) 220k card many diff ways to get it.
c) Am i correct you had a savings goal and put massive % into your other house? if that was case this would be a more prefferd way of raising finds for deposit.
d) what sort of price you looking @ as a purchase price?

Nath.

 

[Alex P Keaton]

My stats

90 K equity in my ppor worth $270 K.

Savings in Offset $26 K

Want to have $50 K saved (by 1/3/2011) before buying $280 K unit.


280 K
5% deposit - $14 K
LMI - $ ?
Stamp Duty - $8 K
Settlement & other costs - $7 K
Total $35 K & $15 K leftover in my offset as my buffer

 

[Rob Williams]

Nice stats, Kim. You still haven't updated your signature (goal).
Don't make me remind you again!!

 

[Alex P Keaton]

Nice stats, Kim. You still haven't updated your signature (goal).
Don't make me remind you again!!

gday

........

 

[silversands]

Hi Happy, just read your recent post elsewhere in the forum. Things sure changed for you in less than 10 months huh! Great!
From a situation where the bank wouldn't loan you enough for a $150k in a time when there were more favorable lending conditions - to now, when you think you will qualify for $400k! Even under tougher and tighter lending conditions!
Did you end up going to work?
Just wondering how you stumped up a deposit so much quicker than you expected to?

Jo