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Serviceability

Discussion in 'Property Finance' started by Catweazle, 31st Jul, 2016.

  1. Catweazle

    Catweazle Member

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    Hello good people of PC. first post after several years reading along with PC/SS. What a great resource! I'm after others opinions as to how far you think I will get before serviceability will become a problem? Some details -
    Aged in mid 40's. No dependant.
    Self employed - low income of about $42K per year (taxable income)
    PPOR - I owe $113K with value at $180K
    4bed IP - currently being renovated with expected value about $150K (conservative). I owe zero on this property and should rent about $220/week if I keep it?
    No other debt or commitments.

    I would like to buy aggressively over the next few years with an initial goal to achieve about 30k per year in clear income from rents. Obviously with my income being so low all properties will need to be comfortably in the positive. What I don't want to do is buy another 1 or 2 properties and have to stop due to serviceabilty as I expect might be the case. Am thinking I might sell the IP and spend a bit on the PPOR (about $40K) which will increase value to about $300K (confirmed by valuer) and set up a LOC of about $50K to help with deposit and reno's for IP's which will then be paid off by increasing the mortgage so it is ready to go for the next one (reading back even I am confused!!). So, what do you think? How far will I get? Am I dreaming? Please be brutally honest!

    I should add, I am looking more in regional areas due to the low buy in and higher yields.
    Appreciate your opinions very much.
     
  2. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Low debt and a modest income - I wouldn't commit to a borrowing capacity on a self employed borrower without seeing their returns (90% of the time I see self employed borrowers being far off the mark from their income the lenders will assess).

    Selling IP to pay down non deductible debt could certainly be an option - borrowing capacity gain will be marginal at best as the income from the property will be lost in that scenario.

    Being SA you might not need to go regional to find strong yields - there's a significant group of investors on this forum who invest particularly in the outer northern suburbs and have positive cash flow portfolios.

    It'd be best to get your situation looked at in depth by an investment focused broker who can give you firm figures to identify which pathway gets your closer to your long term goals and model how far your borrowing capacity can be extended.
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Thought I was the the only one!

    Having a chance to look over financials also means we might find add-backs that can bolster servicing.

    @Catweazle - you've had an awesome broker above provide some great advice. Why not hit him up to see what is possible?

    Cheers

    Jamie
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Corey is local to you and knows his stuff.

    ta
    rolf
     
  5. Catweazle

    Catweazle Member

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    Was wondering about this, I actually consider my income to be higher than the taxable due to all the costs used as deductions that would be a living expense if I wasn't self employed. Do the banks consider this, as there is some double up?

    Have been reading along with the Elizabeth thread with much interest and am very keen on investing in the area eventually, the regional properties seem to come out in front with the income numbers alone which I thought might help with serviceability initially?

    Yep, this is exactly what I need, just don't want to waste anyones time if it is obvious now that this idea is dead in the water before it begins..........there is always plan B.
     
    Last edited: 1st Aug, 2016
  6. Catweazle

    Catweazle Member

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    Well I buggered that up!! Somehow my responses have ended up embedded in Cory's post? Hope it still makes sense........is there a how to guide somewhere??
     
  7. Bran

    Bran Well-Known Member

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    Edit your post, and cut your comments outside of the QUOTE marks and associated parentheses
     
  8. Catweazle

    Catweazle Member

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    Thanks Bran
     
  9. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    In the end it's not a waste of time getting the right advice early on - this is something we do for clients quite often. It's more important to find out what is possible in your current position, or what you need to do to get into the right position to meet your long term goals.
     
  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    @Catweazle Worth having a chat to Corey about your situation. I did for my own IPs and was the best thing I ever did.
     
  11. York

    York Finance Broker Business Member

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    +1 @Corey Batt. Speak to Corey for some clarity on your situation, can make a world of difference knowing what is and what isn't possible for you.
     
  12. Catweazle

    Catweazle Member

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    Thanks for all the advice, sounds like Corey's the man to talk. Will finish the reno's on IP first.