澳洲Australia property Newbie Scenario Sense Check | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hi All,

Long time lurker, first time poster. Firstly, thanks to all the posters sharing their knowledge and experience. It's helped enourmously in us getting to this point!

My wife and I have been trying to put the wheels in motion to start investing in property. We've been reading as much as we can and spend plenty of time on the REA site. We know we are still very green and feel like fish out of water, but feel like every month that goes by is another month lost. After all, it is "time in the market". We're hoping that we're now ready to actually jump in and purchase our first IP.

Current situation:
PPoR: 3 bedroom house in Greensborough, Owe $270,000, Last valued Dec 2009 at $485,000
We've been to the bank and established that they will lend us $300,000. (We're happy to start with keeping our LVR at around 80%)

Our plan at this stage:
We aim to buy and hold. We'd like to purchase in the next month or so and then hopefully be able to purchase a second IP in another year or two? and so on. So really the main reason to try to get "the best" first IP deal is just to make our ability to get IP2 quicker. Longer term it will sort itself out right.

We really want to have minimal input from our pocket, therefore a higher yeild is preferable, we'd be happy if we end up paying around $100 per week, but of course we'd like it all and are keen for at least some capital growth :) So a bit from both camps is the ideal.

We have tended to look at houses, generally they are 3br weather board types, but are open to other.

Based on the $300,000 cap and a reasonble yeild, we've narrowed down our search at this stage to a few Geelong suburbs: Lower $ – Newcomb then Belmont. Higher $ – Manifold Heights, Newtown, Geelong West (Need to be units in the later suburbs) or Albury (Close to the center of Albury)

We're leaning towards Belmont area over Albury as the yeild seems to be better. Roughly, $300k 3br houses are fetching around $260 per week rent in Albury compared with $320 in Belmont as far as I can tell. The 10 year median price chart is a little healthier for Belmont also (via REA Suburb Profile).

Aside from these areas fitting our requirements, we also like these areas because: We have family and friends in Geelong and I used to live in Albury so we are comfortable with these locations and there more often. We're basically never in the east which is why Frankston and Dandenong etc have been off the radar. We're also wondering if we should have Melton, Hoppers and Werribee in the mix? Not that I want to start another thread/debate on these. That said we'd like to decide on a fairly narrow suburb range to keep the property hunting time managable. Melton does seem to fit the profile though.

Basically I would be interested on general thoughts / sense check on this plan and whether we're on the right track or if it's full of holes?

Thanks!

Shannon.  

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Nekcarccm said: ↑
Current situation:
PPoR: 3 bedroom house in Greensborough, Owe $270,000, Last valued Dec 2009 at $485,000
We've been to the bank and established that they will lend us $300,000. (We're happy to start with keeping our LVR at around 80%)Click to expand...
Are you saying they'll lend you an additional 300k for an IP? What LVR will the new loan be at? Where is the deposit coming from? Are you talking about refinancing the PPOR and use the excess as a deposit? Or cross col?

Nekcarccm said: ↑
We're leaning towards Belmont area over Albury as the yeild seems to be better. Roughly, $300k 3br houses are fetching around $260 per week rent in Albury compared with $320 in Belmont as far as I can tell. The 10 year median price chart is a little healthier for Belmont also (via REA Suburb Profile).Click to expand...
With a 300k property yielding about 5% gross, 3% net, 105% effective LVR @ 7% interest and not much depreciation, my guess is you'd be out closer to 8-10k a year. Which isn't necessarily an issue as long as the capital gains more than covers it, but you said you wanted to keep it to about $100 a week.  

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Hi, Thanks for the reply.

alexlee said: ↑
Are you saying they'll lend you an additional 300k for an IP? What LVR will the new loan be at? Where is the deposit coming from? Are you talking about refinancing the PPOR and use the excess as a deposit? Or cross col?Click to expand...
Not sure if this answers your questions? Have spoken with the Bank and discussed on paper at a high level, but haven't done anything official yet. My question was to the Bank "Based on the equity in our home, how much can we borrow for an IP" and the answer was $300K

The discussion was along the lines of:
The deposit will be from the equity in the PPoR.
The bottom line will be:
Total Owing: $270K (PPoR) + $300 (IP1) = $570K
Total Value: $485K (PPoR) + $300 (IP1) = $785K
Total LVR: 76%

Not sure about refinance v cross col? But I don't think it was refinancing the PPoR loan. Could it be that the loan for IP1 would pay back the deposit taken out of PPoR? (I could have that completely wrong)

Thanks again.  

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Nekcarccm said: ↑
Based on the $300,000 cap and a reasonble yeild, we've narrowed down our search at this stage to a few Geelong suburbs: Lower $ – Newcomb then Belmont. Higher $ – Manifold Heights, Newtown, Geelong West (Need to be units in the later suburbs) or Albury (Close to the center of Albury)

We're leaning towards Belmont area over Albury as the yeild seems to be better. Roughly, $300k 3br houses are fetching around $260 per week rent in Albury compared with $320 in Belmont as far as I can tell. The 10 year median price chart is a little healthier for Belmont also (via REA Suburb Profile).

Aside from these areas fitting our requirements, we also like these areas because: We have family and friends in Geelong and I used to live in Albury so we are comfortable with these locations and there more often. We're basically never in the east which is why Frankston and Dandenong etc have been off the radar. We're also wondering if we should have Melton, Hoppers and Werribee in the mix? Not that I want to start another thread/debate on these. That said we'd like to decide on a fairly narrow suburb range to keep the property hunting time managable. Melton does seem to fit the profile though.Click to expand...
What have you defined as a reasonable yield? Other than the yield and your comfort zone with these areas, do you have other reasons to believe that these are good locations to invest in?  

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Nekcarccm said: ↑
The bottom line will be:
Total Owing: $270K (PPoR) + $300 (IP1) = $570K
Total Value: $485K (PPoR) + $300 (IP1) = $785K
Total LVR: 76%

Not sure about refinance v cross col? But I don't think it was refinancing the PPoR loan. Could it be that the loan for IP1 would pay back the deposit taken out of PPoR? (I could have that completely wrong)

Thanks again.Click to expand...
The bit that doesn't make sense is the 300 value on IP1 with a 300k loan. You need to get that clear. I think your bank is talking about increasing the loan on your PPOR by say 75k to 345k, and your new IP has a loan of maybe 240k.  

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Nekcarccm said: ↑
The discussion was along the lines of:
The deposit will be from the equity in the PPoR.
The bottom line will be:
Total Owing: $270K (PPoR) + $300 (IP1) = $570K
Total Value: $485K (PPoR) + $300 (IP1) = $785K
Total LVR: 76%

Not sure about refinance v cross col? But I don't think it was refinancing the PPoR loan. Could it be that the loan for IP1 would pay back the deposit taken out of PPoR? (I could have that completely wrong)

Thanks again.Click to expand...
This doesn't make sense. Assuming that you're using equity in your existing ppor to fund the deposit for a $300k property (and borrowing at 80% LVR to avoid LMI) for the new loan it could look like this:

Total Owing Against PPOR: $270k (existing loan) + [$60k + purchasing costs of IP] (equity)

Total Owing Against IP: $240k

Since you need to account for purchasing costs for the IP, the amount of equity you'll need from your existing property will be more than $60k (i.e. you'll be owing more than $570k overall). Doing this you shouldn't be cross collateralised, however, depending on the bank you may still be subject to the "all monies" clause.

Based on what you've said, you have $215k of equity in your existing property. You may decide to take out more equity against your current property to use to fund the deposit for the IP and hence lower the LVR on the IP.

Alternatively, you may refinance the existing loan. You can then repay the existing $270k you currently owe and use the excess as the deposit for the loan for the IP.  

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norwoodman said: ↑
What have you defined as a reasonable yield? Other than the yield and your comfort zone with these areas, do you have other reasons to believe that these are good locations to invest in?Click to expand...
Ideally 5.5% yield ($320 per week rent on a $300K purchase). Whats attracted us to consider the area:
- Median prices around $300K
- Yield of ~5.5%
- Strong historical growth for a regional location
- Good quality local shopping strips
- Still close to the center of Geelong
- Improved access back to Melb via the new ring road
- Well supported by the public transport that Geelong has (buses)
- Better quality streets and houses (compared to say Whittington, Breakwater, or lower again, Norlane, Corio)

Thanks Alexlee, I'll need to go back to the bank and get a better understanding of what they're proposing.  

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Thanks Norwoodman. I see that I've left out the purchase costs in my numbers. I had a look at the online calculators and they suggest the purchase cost to be around $15K (Assuming no LMI)

Thinking through the numbers more, does this make more sence:

Equity in PPoR:
Current owing = $270K
Current Value = $485K
80% of $485K = $388
Avail Equity = $388 - $270 = $118K

IP:
Purchase Price = $300K
Purchase Costs = $15K
Total Cost = $315K

To get the IP to 80% LVR need to use equity from PPoR to cover:
$60K (20% of $300K to get it down to 80% LVR) + $15K (purchase costs) = $75K

Therefore:
Owing on PPoR = $270K + $75K = $345K (LVR = 71%)
Owing on IP = $315K - $75K = $240K (LVR = 80%)

I'll need to find out more from the bank RE the loan options. (and read more!)

Thanks.  

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Hi Nekcarccm,

Thought i would make my first post too. As my wife and I are in a similar situation, thought i would reply. I won't offer advice as i am still learning also, but I can share my recent experience with the banks in evaluating our position.

Like you, we thought we would look at property. We have good equity in our home and thought its no good sitting idle. So we sat down with our bank to assess our situation. I looked at RE.com.au and the local papers around our area. I would think our house is worth 480k. The bank valued it at 465k. we owe 20k. They will lend up to 80% of this so as i see it we have around 350k for investing, taking into account the 20k we owe. So we are going to set up two loans of around 120k (allowing for 20% deposit, costs and a buffer) each with 100% offsets and Interest Only. This will be for the deposit and costs etc of two IP's.

The IP's will be valued by the bank and they will loan 80% of this value. As you would be aware, there are a lot more factors involved, but I hope this helps with the home equity at least. Good luck with the research.

Regards,

Maxx  

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Hi Maxx,

Thanks for the info, yeah I need to get my head into more of the details on the finance side of it.

Sounds like you're in a good position to jump in. Do you have a plan yet RE your strategy and locations etc? Are you planning to buy now or wait to see what happens in the next few months?

Cheers,
Shannon.  

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G'Day Shannon,

We're buying two new homes on the outer ring of Melbourne, but in different suburbs with a buy and hold plan in mind. Then I'll review later in the year to see if we can do more.

Don't be pressured by thinking you have get the timing right. Do the research, talk to people and when you're ready. You're ready.

Cheers,

Maxx  

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Well done on your journey so far. One thing i havent seen mentioned yet(unless i missed it) is what is going to be best for your financial situation and what you are trying to achieve longer term. Get is right from the start and it is one regret you wont have.

See an Accountant so you maximise tax benefits and asset protection etc.

If you dont have one, I picked up a good one from i think this forum(maybe PI.com)

http://www.gatherumgoss.com/

In Blackburn - worth the drive from Greensborough

Disclaimer :I have nothing to gain from recommending them other than i am a very happy paying customer of thier services  

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Thanks myoung. At this point in time we want to keep it pretty conservative, the longer term plan is to continue to buy and hold over the next ~10 years. The goal is 5 IP's plus our PPoR over the next 10 years. But we'll revisit that as we go.

Our next step is to see both a Mortgage Broker and our Accountant to make sure we get the correct loan and tax set-up.  

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Nekcarccm said: ↑
Thanks myoung. At this point in time we want to keep it pretty conservative, the longer term plan is to continue to buy and hold over the next ~10 years. The goal is 5 IP's plus our PPoR over the next 10 years. But we'll revisit that as we go.Click to expand...
To what purpose? To generate cash flow or capital gain, or both? Check some of Rixter's posts about "strategy" and reference to property being a vehicle.
Our next step is to see both a Mortgage Broker and our Accountant to make sure we get the correct loan and tax set-up.Click to expand...
Great move!!  

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