Sorry not sure which thread to put my question in

[Evad]

Hello everybody
This is my first post and I am maybe what you might call “inexperienced” in property investment although a certain part of me has what we call “analysis paralysis”. So if I ask silly question please let me know or bear with me. I do remember my Microsoft trainer saying that “the only stupid question is the one un-asked” Anyhow.

I have my PPOR, a 2 bedroom unit in Townsville purchased around 2 years ago and an outstanding mortgage of around $167,000. I haven’t checked but I think the place may be worth around $210,000 now and I would like to suggest that that may be a under estimation but I really haven’t had it revalued.

I have now found an opportunity to purchase my first IP. I guess my line of questioning is how to structure all this.

My initial thoughts were to access the equity in my place. Let’s say for arguments sake that that is 40G and then obtain a completely separate second mortgage keeping it under 80% using the deposit secured by PPOR. SO again for arguments sake 40G deposit which is 20% of $200,000 which will be the purchase price. I understand that these figures may vary depending on the circumstances.

Is this the “preferred” way to do this? Or what other strategies may be also used to acquire the IP

And then secondly I rack my brain trying to think of all the extra costs that may be involved.

Can someone maybe provide me with a list of all the things to think about and how do I find “round a about” estimates of each cost so I can analyze the numbers and see whether this will be a good investment and project the growth and incomings and outgoing as such.

Things like
Landlord insurance, stamp duty, house insurance, rates, maintenance, being unoccupied,

I guess once I’m on my third or fourth then these things may become second nature but any help would be very much appreciated for my first acquisition.

Thank you so much to anyone whom may have some ideas.
Evad


"If it's Meant to be it's up to ME"

 

[The Y-man]

Welcome aboard.

The loan thing sounds about right: do a cash draw down from your current property, and use this as deposit.

First step - see a lender to confirm the amount you are wanting to borrow is well within your means (according to a lender's test)

Costs (my costs are based in Victoria, so will vary depending on where you are buying): allow for stampduty (varies on state), conveyancing (about $600-$1000).
Landlord insurance about $200-300 pa
House insurance - can't remember, but not much.... depends on building

I'd say all up, have about 10% of the purchase price available for the "up front" costs.

Maintenance - rule of thumb $1,000 pa
Rates - depends - check council.... could be as high as $1000 pa?


Unoccupancies - well, this is basically your interest payments (assuming IO, it's the interest rate x loan amount / 12 per month) and incidentals...


Cheers,

The Y-man

 

[Evad]

Thanks Y man.

So is that pretty much it then
Land lord insurance, stamp duty, House insurance, Maintenance, Rates and Un-occupancies

Also what is conveyancing. I did a brief search on the net but where do the actual costs come from this part.

I like the 10% part as this gives a ball park figure. Would this say 10% be included in the load itself?

Also i have been to the bank once before about accessing the equity and I remember the loan officer saying that he couldn’t give me a separate loan as the equity and also wanted to charge interest from the date the money was given to myself. My suggestion was that I will be charged interest as soon as I draw down the money.

What I’m getting at and I’m sure we all go though it is that how can I advise these guys that, (well, they work for me) in a nice way of course as it seems that if you don’t have 15 mil in the account then they seem to think they can walk all over you.

What would be some suggestions as the type of loan for this deposit and recommended (lack of) fees I would want associated with this equity draw down and as per above asking or advising “ no this is the way I would like it done please” without being too arrogant and not quite having the money in the bank “yet” to have them fall over themselves to help me.

Thanks again for the previous prompt reply.
Evad

 

[Raddles]

Hi there
conveyancing is the description of when a solicitor/conveyancer checks out the title to what you are buying and conveys it to you when settlement occurs.
You would also need to have building & pest inspections done to check out the structure of the Ip and whether there are any pest problems.
Then depending upon the type of IP - there may be other inquiries to make.
Will let the brokers on the site comment upon the best way to finance the deal
thanks

 

[boomtown]

My advice is after everything has been accounted for - have a $15k cash reserve in a bank account. It helps you sleep at night and means you dont have to make hasty decisions with tenants.

 

[Lukey13]

I have now found an opportunity to purchase my first IP. I guess my line of questioning is how to structure all this.

Hi Evad

Good to see a fellow Townsville investor on SS. I would be curious to know what you're looking at as your first IP and what your thoughts are on the local market.

Luke

 

[Evad]

Hi Evad

Good to see a fellow Townsville investor on SS. I would be curious to know what you're looking at as your first IP and what your thoughts are on the local market.

Luke

Hey. Well my (hope to be first) came about as a matter of luck although i would not say that someones passing is lucky. And it is a strata titled unit.

Not entirely sure on the market. I never seem to be able to take all that stuff in. But i guess i think Townsville has some growth still to come yet. How much? not sure. There maybe a saturation of inner city apartments soon also wouldnt you think.

Apart from all the stuff going on in the world and around the country they just seem to keep on building up here. Roads, shopping center upgrades, units, apartments.

 

[Sunfish]

Be aware that there is talk that Century may go into care and maintenance while Zn prices are so low. I can't help on strata titled stuff, don't watch it, but there is a feel to me that Tvl has peaked, a bit like Perth did.

But I'm a perma-bear.

 

[Lukey13]

Hey. Well my (hope to be first) came about as a matter of luck although i would not say that someones passing is lucky. And it is a strata titled unit.

Not entirely sure on the market. I never seem to be able to take all that stuff in. But i guess i think Townsville has some growth still to come yet. How much? not sure. There maybe a saturation of inner city apartments soon also wouldnt you think.

Apart from all the stuff going on in the world and around the country they just seem to keep on building up here. Roads, shopping center upgrades, units, apartments.

I tend to agree with you about the strength of ongoing development in the area - in fact I'm continually amazed at new projects popping up all over the place, but like you am not entirely sure on the future of the market.

I am however seeing plenty of properties available with rental yields of >6% at prices quite reasonably discounted from early 2008 prices. Holding costs of some of these would be very low with the way interest rates are headed. Tempting...

I also agree with you that there is a bit of saturation of CBD units. However in saying that I've also seen some that are quite heavily discounted. For instance I saw an 11th floor T1 apartment sell in the mid $500s whereas others are still asking for prices in the mid to high $600s. Now that's quite possibly a good deal (or at least close to 2006/07 prices). But it sure is a lot of biccies for a unit.

In saying all this I've also seen my PPOR in Mundingburra lose around $20K value from early 2008 prices. But that's all part of the game, isn't it.

 

[BayView]

Evad, welcome. You'll have a lot of fun here at SS.

Just on the equity in your property, if it's value is around $210k, then your useable equity is 80% of it's value, less any existing loans you have.

That means you can use $168k, but you still owe $167k.

You have no useable equity right now.

You will need to both decrease the debt and maybe wait until the value of the unit has increased before you can access more equity, or save a cash deposit first.