Which book?

Discussion in 'Property Investment - Other' started by angel0death, 8th Aug, 2012.

  1. angel0death

    angel0death Member

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    Hi. I'm just starting to look into investment properties, and I'm wondering if there is a good book out there to give me a good idea on investment property strategies, what to look out for, how to structure it to maximize tax returns, etc. I'm not sure if there is an up-to-date book which details the above based on the australian market.
     
  2. Aaron_C

    Aaron_C Finance Broker

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    Is there anything specific in mind you are looking for? You can start by reading this forum.
     
  3. angel0death

    angel0death Member

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    So, I'm fine at the moment with looking for a good rental property. That's available in this forum and magazines.
    But, what I'm trying to understand is how to leverage my current PPOR to purchase an investment property. So, how do I find out how much I can borrow from the bank? And, if it isn't enough, how can I increase that amount?
    Then, how do I need to structure my loan for my investment property and my current PPOR to maximise tax deductibility.
    Also, how do I make sure that my investment property, and future investment properties won't take up all of my salary just to hold them.
    Stuff like that.
     
  4. Aaron_C

    Aaron_C Finance Broker

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    You would need to speak to a broker to work out how much you can borrow, how to structure the deal, and see how you can extract the equity from your PPOR to leverage into investing.
     
  5. Player

    Player Live Every Day

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    Go to the Property Finance sub-forum and have a read of some threads that may relate to your queries. By reading you will also note there are a fair few knowledgeable mortgage brokers.

    You need to see a mortgage broker (who is also an accomplished investor) to help you with your path.

    I notice you're in Melbourne. If you must have one in your city, PT Bear, Kristine, Aaron C and others are all very giving here of their opinion/views. Read some of their posts from the Finance section and contact them. I am sure they will assist you more than any one book.

    Scour these forums also. There is a wealth of info here.

    ** EDIT **......beaten by Aaron :)
     
  6. angel0death

    angel0death Member

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    Thanks, guys. Will read through the forums you've suggested.
     
  7. Jamie M

    Jamie M Mortgage Broker - Oz Wide

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    Without brown nosing - Jan Somer's building wealth through investment property is IMO one of the best books for explaining the fundamentals for someone starting out.

    There's a heap of info on here as well.

    Cheers

    Jamie
     
  8. angel0death

    angel0death Member

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    Thanks, Jamie!
    Will check out that book.
     
  9. Rolf Latham

    Rolf Latham Member

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  10. redwing

    redwing Progress Not Perfection

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    The Wealth Power of Property by Fred Johnson and Brett Johnson, is well worth a read and you can do so here
     
  11. matto_

    matto_ Member

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    Plenty of spreadsheets (also on this forum) would help work out a number of the items you are asking about.
     
  12. karina

    karina Member

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    How to leverage.
    The strategy I used to build my portfolio was as follows.
    Approach existing lender to "top up" my existing loan to 80% of current valuation. (80% is the loan to value ratio if you want to avoid paying mortgage insurance). You can go above this ratio but will most likely pay mortgage insurance if you do.

    Lets look at a basic example. Lets say your current property is valued by the bank at 500k and you owe 250k on it. (Your LVR, loan to value ratio would be 50% of the valuation/property value). You could borrow up to 80% without paying LMI (lenders mortgage insurance).

    80% of 500k is 400k so your maximum loan amount without paying LMI is 400k

    If your mortgage is currently 250k you could potentially "top up" your loan to 400k in this example. (without paying LMI)

    This leaves you will 150k to buy your second property.

    You could approach bank "B" and take a new loan to 80% of the value of the second property and use 20% from your 150k "top up loan" to make up 100% of the purchase price.

    All of this is assuming that you meet the banks servicability criteria and they believe you can pay the additional borrowed amount.

    You could even ask your existing lender to do a loan split for the 150k to keep your investing loan and personal loan seperate. Many lenders can provide a seperate loan ID for the investment portion. Just make sure you don't spend these funds on personal items. This makes it easier for accounting purposes.

    Now to make sure your investment properties don't take income from your salary you really need to target positive cashflow properties. Remember to factor in all expenses not just the mortgage when calculating cashflow, insurance , strata fees, council rates , property management fees etc.

    There are some good authors who write about investing in positive cashflow properties. I would recommend books by Steve McNight and Robert Kiyosaki. Rich Dad poor dad, is one of my favourites.
     
  13. angel0death

    angel0death Member

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    Thanks Karina. That is a good explanation for a newbie such as I. Will scour this forum and read books.
     
  14. M.Investigator

    M.Investigator Banned

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    To figure outhow much you can borrow, it's best to speak to a mortgage broker about your specific situation. They're usually free to work with for you because they make their money from commissions from the lenders (if and only if you actually decide to get a loan with them).

    Regarding tax deductibility, I'd suggest talking to your accountant. Very valuable advice from them.

    With regards to making sure that your investment properties won't take up all of your salary to hold them, that's where positive cashflow properties can be helpful. These types of properties actually give you money month after month because the rental income is more than the expenses to hold them. So it actually won't affect your salary income. In fact, they will increase you monthly income - that's why I love them.

    But do bear in mind that there are other investing strategies - so it really depends what you prefer.