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Hello. I'm new and in need of advice.

Discussion in 'Introductions' started by Kate406, 23rd Jan, 2016.

  1. Kate406

    Kate406 Member

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    Hi everyone,

    My situation is: I'm 24 living in Melbourne, inheriting a property when I turn 25 with a value around $850k. I would like to set up my 'dream team', and get 100% clear on how much I can safely borrow as I'd like to buy two properties, one as an IP and one for me to live in (though renting out the other rooms so it still provides an income for the mortgage). Eventually, I'd like to turn this into a bigger portfolio, but this is my short term plan.

    I work in the entertainment industry, so my employment is not consistent and on average I earn about $35- 40K a year. I am half way through a course at Tafe, and am living at home until I can buy my own place.

    I've been reading wealth creation, and property investing books, doing my own maths on what I can do and reading this forum has been very interesting.

    I am in the market for a great accountant and mortgage broker, so any recommendations would be very welcome :)

    Thank you for your time,
    Kate.
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi Kate

    Welcome aboard.

    An owner occ might not be feasible at present given your current level of income - it may also prohibit you from purchasing IPs.

    I assume you're looking to leverage the equity in the property you're inheriting in order to purchase more?

    Cheers

    Jamie
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Hi Kate

    Welcome

    You are right, you will need some careful planning with that income to equity "mismatch"

    Plenty of great brokers here in Vic that can help you through that in a structured manner

    ta
    rolf
     
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  4. Kate406

    Kate406 Member

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    Hi Jamie,
    Thank you!
    I was hoping for a 3 or 4 bedder, then renting out the other two or three rooms, so it still can produce an income, with me only picking up the minimal/ left over amount needed for the mortgage payment.
    Yes, I'd like to leverage it to build a property portfolio.

    Hi Rolf,
    It is so mismatched!
     
  5. Nemo30

    Nemo30 Well-Known Member

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    Is the property you are inheriting owned outright? Ie no mortgage?

    What are you doing with it? Renting out?
     
  6. wylie

    wylie Moderator Staff Member

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    ... and if so, are you not better to move into that house and use the equity to buy other IPs?
     
  7. Kate406

    Kate406 Member

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    There is no mortgage on the property that I'll be inheriting.
    It is currently being rented out, via a real estate agent.
     
  8. Kate406

    Kate406 Member

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    The house is in NSW, where I grew up, and I live in VIC. I'd like not to relocate to a different state :)
     
  9. wylie

    wylie Moderator Staff Member

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    If you move the tenants out at the end of the lease, you have no debt on your PPOR. All debt will be on the IPs. Or stay at home and rent all three? Is it a house you could live in?

    Edit: Just read that it is in different state. That changes things.

    You could keep the tenants, buy two more with the equity, and rent somewhere with friends whilst you are young and single.
     
  10. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    A broker (a Rolf suggests, plenty of great ones around) will be able to look at the numbers in a bit more detail for you so get in touch with one as a first step to see what's possible.

    Gut feel is, like Jamie said, a PPOR might not be a possible with your current income situation and either way, would cripple your borrowing ability for investments. Might be a case of staying at home, starting with a single investment and going from there. As your income grows, so too will your borrowing capacity.

    The up-side is the property you're inheriting will be bringing in income-probably almost as much as you earn in your line of work.
     
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  11. Nemo30

    Nemo30 Well-Known Member

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    curious whether rental income would count towards servicing.
     
  12. Kate406

    Kate406 Member

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    I have been looking forward to getting my own place for such a long time, this was a bit of a sad reality. Is it because I won't be able to claim anything?

    The ROI on the house at the moment is 3.34%, not nearly as much as you'd expect for something worth $850K. It is an old house though.
     
  13. Kate406

    Kate406 Member

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    Do you mean servicing of a loan?
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds like the house is held in trust for you atm, have you sought legal advice on whether it possible to keep the trust going? It can be very beneficial if you don't inherit.

    And/or is this a property you would like to live in?
     
  15. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    The banks will basically look at your PPOR debt, assume your repayments are almost twice as much as they actually are, then look at your total income and probably say "No".

    If the same amount of debt is for an investment, they'll also factor in the rental income it produces (and maybe negative gearing) into your ability to make repayments. So you'll be able to borrow more.

    Given you're not on a fixed salary, lenders will be even more cautious with how they view your ability to repay loans, too. They are a lot more comfortable when you have a fixed amount coming in, rather than a varying income.

    I ballparked a 3.5% rental return on the property.
     
  16. Nemo30

    Nemo30 Well-Known Member

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    Yes. If you have rent of say $500pw coming in and no debt, could it be included (or partly included) as income? I have no idea, was a question for me as much for you :)

    Anyway, as above, speak to a broker.

    I've personally used both @Jamie Moore (posted above) and @Corey Batt as brokers and highly recommend both. But plenty of great brokers on here, you're spoilt for choice.
     
  17. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Don't forget that the rental income from the inherited IP will count toward servicing, which should be reasonably significant on a place worth $850k.

    This might make servicing for a PPOR more feasible.
     
  18. Kate406

    Kate406 Member

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    Thank you for that advice. If I bought it under a trust, and the parent company was held by myself and another person- would that be considered as a rental?

    Yes, I'm not a great loan candidate with my line of work :)
     
  19. York

    York Finance Broker Business Member

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    Yes you can. :)
     
  20. Kate406

    Kate406 Member

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    It is in another family members name in trust to me, not an actual trust entity.
    I grew up in it, and I don't want to live in it again, too many memories :)