Very keen but in a little pickle.

[MichaelMik]

Hello everyone,

Long time follower but first time poster, and might I just say this site is amazing! Ive learnt so much over the last few months from the wealth of information thats on offer, so thanks very much somersoftarians!

I'am looking very eagerly to buy my first IP, most likely close to where I live in Canberra. A little 1 beddy unit in Queanbeyan came up a few days ago for 120k in a great location close to the river and shops blah blah. But is already "under offer" does this mean I am probably too late? Can i still try to make an offer?

Also my other dilemma is borrowing capacity and I don't have any finance approved... I am only working one very part time job at the moment in the evenings, Ive worked there for over 3 years earning about $200pw but am obviously actively seeking employment elsewhere for during the day too boost income/servicability. I have 14K saved up already so I do have a small deposit.

Im just wondering if i could even think about applying for a loan at the moment on my measly income, and if the unit is rented out do they take that income into account? Also I live at home with my parents fortunately rent free, and have no other debts or dependants or anything like that and I own a car outright worth around 20k, could that be used as security or anything in my favour? (obviously selling it wouldnt be a bad idea lol)

Cheers in advance!

 

[Jamie M]

Hiya

Welcome aboard

You probably are too late with the Qbn property - no harm in contacting the agent to see where things are up to with the other offer though.

With the one beddie apartment - what size is it?

I haven't run the numbers but your borrowing capacity probably isn't going to be high enough as lenders will assign a minimum monthly living cost to your application which is circa $1200 p.m which is slightly higher than your PAYG income.

Cheers

Jamie

 

[MichaelMik]

Thanks very much for the quick response Jamie. The size is only 52m2 and im not 100% if thats including the carspace... I heard that banks may not lend as much if the unit is deemed to small, as in under 50m2. Is this true?

Thanks again!

Michael

 

[Jamie M]

No worries

The size seems ok.

I just don't know if the borrowing capacity is going to cut it.

Cheers

Jamie

 

[vaughan]

Also my other dilemma is borrowing capacity and I don't have any finance approved...

Work out your buying capacity first: speak to a good broker, I'm sure there are some here on the Forums that could assist.

Once you know your budget you can start shopping.

Obligatory strategy question: how are you intending to make money from this IP?

 

[MichaelMik]

Thanks mate, yeah definitely going to try get some more work for starters for improving serviceability and then go speak to some good brokers because it sucks seeing all these potentially good deals come and go,(which I reckon I have a keen eye for spotting) and not be in the position to jump right on them!

Im pretty young, so buy and hold is my strategy so by the time I'am 50 and have gone through a few cycles ill be absolutley laughing like a shark

I planned on buying this one beddy for below 120k after some haggling, doing a reno, and then revalue as I believe with a paint job, new carpet, new kitchen and bathroom,(Id try and do as much work myself as possible to keep costs down) it'd be worth maybe around 170-180k and renting in the vicinity of $200pw and then do a equity release and find the next IP.

Thats the plan anyways, gotta start building the empire somewhere!

 

[Corey Batt]

Thanks mate, yeah definitely going to try get some more work for starters for improving serviceability and then go speak to some good brokers because it sucks seeing all these potentially good deals come and go,(which I reckon I have a keen eye for spotting) and not be in the position to jump right on them!

Im pretty young, so buy and hold is my strategy so by the time I'am 50 and have gone through a few cycles ill be absolutley laughing like a shark

I planned on buying this one beddy for below 120k after some haggling, doing a reno, and then revalue as I believe with a paint job, new carpet, new kitchen and bathroom,(Id try and do as much work myself as possible to keep costs down) it'd be worth maybe around 170-180k and renting in the vicinity of $200pw and then do a equity release and find the next IP.

Thats the plan anyways, gotta start building the empire somewhere!

Good idea. The best thing you can do early on is increase your earning capacity, which can then be leveraged through saving and investing. There's only so much you can do on a small income.

 

[macca446]

Hi,
You seem to have the drive and ambition which is good but seriously need to earn more income before the banks will even look at you but keep positive .
Macca446

 

[vaughan]

Im pretty young, so buy and hold is my strategy so by the time I'am 50 and have gone through a few cycles ill be absolutley laughing like a shark

I'm going to be the Fun Police and suggest that now, particularly in Sydney, is a BAD time to buy. I cannot see any bargains, and the few "good deals" I see aren't in Sydney. I ended up buying regional recently to wait it out, and plan to buy regional again.

Things were VERY different just 3 years ago, and will likely be very different in another 3 years.

I'd be saving up and working on improving serviceability so you can pounce when the tide turns. You'll know when it turns because people will be saying it's a BAD time to buy.

 

[knightm]

Welcome! As others have said the fastest way to investing acceleration for you will be to raise that weekly pay packet.

Jamie is in Canberra and very good so if he cant get you a loan you probably just need to put a few months into the job hunt and move when the income comes up.

I wouldn't try Sydney at this point in the cycle and with your budget. Cheapies in Q or quality regional are your best bet.

 

[knightm]

I'm going to be the Fun Police and suggest that now, particularly in Sydney, is a BAD time to buy. I cannot see any bargains, and the few "good deals" I see aren't in Sydney. I ended up buying regional recently to wait it out, and plan to buy regional again.

Things were VERY different just 3 years ago, and will likely be very different in another 3 years.

I'd be saving up and working on improving serviceability so you can pounce when the tide turns. You'll know when it turns because people will be saying it's a BAD time to buy.

+1 for this

 

[MichaelMik]

Thanks yeah I'm absolutely addicted too property so ill stay commited

Yeah I have been looking regional as well, I got analysis paralysis but I recently could have bought a place in Dareton, nsw for 67k that was rented to long term tennants for $150pw.. I really should of just taken the chance as it would have been some nice CF+..

If you don't mind me asking where abouts is your regional property Vaughan?
Just curious where else to look Ive been sussing out kempsey, tamworth, lithgow, moe, portland nsw and vic. Just all over the place, as I probably would prefer a house over a unit any day as a bit more potential. Any opinions on any of these areas? I just look at the real cheapies obviously..

 

[vaughan]

If you don't mind me asking where abouts is your regional property Vaughan?

Not far from where you live.

Right now, Canberra is a bit depressed because of the recent public sector reduction. Rents are going down from what was a very good return, so some investors (who over-paid a few years ago to get the good yields) will be feeling the pinch and be wanting to get out. That's a good time to buy cheap, but buy ONLY if you can get something for a good price (in case the market drops further, you do NOT want to have paid above market).

Look at getting something that returns enough to pay for itself (neutrally-geared) to further mitigate the risk that prices may soften further in the short term. Don't go for high-yielding regionals because long-term capital growth is usually poor (and that's where you make the money, in the capital growth) and often the tenants will be high maintenance (I'm thinking parts of Wagga here, from the reports from others).

Avoid strata properties, buy houses. Do not even consider OTP. Go for a place that needs a bit of work: ideally get a place that LOOKS like it needs more work than it does.

In the mean time, help family and friends to do some renovations, yard clean-ups, gardening etc and learn how to do it yourself.

 

[MichaelMik]

Roger that, thanks thats all very sound advice and taken it all on board. I really just want to rush in and buy a property ASAP but deep down I reckon your right and I should probably wait and save more to buy something better quality. I'm very keen on getting the worst house in the best street I can afford

Also apparently ACTs hefty stamp duty is coming down in price a bit next year so thats appealing..

 

[mins]

If you don't mind me putting in my 2 cents here...

Firstly I agree 110% with the others, you need more income first. All lenders do take into account an amount for living costs and this does not include potential loan payments. On an income of $200 per week this is not enough to cover those living costs. Also I am sure that although you live with mum and dad now, you don't want to live with them forever so therefore your living costs would increase (ie rent, bills and/or mortgage perhaps kids etc). The banks also need to make sure that you can afford to pay the IP mortgage (factoring in a small amount extra for interest rate rises) if the property is not tenanted. Don't forget you will also have maintenance expenses, rates and perhaps a percentage taken out of rent income for agent fees.

In relation to the properties you are looking at, please be careful. They look good when advertised and cash flow positive. I drove past the house you are talking about at Dareton because I was looking at it. I would not buy that house regardless of price. I also looked at one in Tamworth which was very cashflow positive and got very excited but after EVERY agent in town (mind you this was about 12 agents) would not manage it, I pulled out. The cheap properties with good cashflow are around but they will require more work and money and usually attract tenants which could potentially cause you issues which on your current income I would say would be quite risky. I know the cheaper houses can attract good tenants too and this is why you need a REALLY good agent.

I am all for excitement and enthusiasm and not trying to dash your dreams. Heck I have bought 5 properties in 3 years lol. I just think you are putting a lot of effort into looking for properties at the moment and imo I would be putting the effort into finding a job with more income or a second job to increase your income before getting too excited.