Should I invest now or wait

Hi guys I’m looking for some advice.
Looking to buy our first IP
Our borrowing power isn’t a issue but I ’ve had a few valuations on my PPOR and I have exactly 20% equity and any savings I have is for our wedding, we have asked 3 banks and no one will release equity over 80%. if we do a combined loan and we go to 90% we could buy a property in Bendigo for $350k and pay the LMI, does this seem like a good idea as it will get us in the market? If we were to save the deposit it will take a while as we are saving for a wedding first, any options would be great, thanks

 

I am not sure that there is a clear cut answer to this. People have personal preferences and a lot of it depends on your personal risk aversion.

For myself, the first 2 homes (PPOR and 1st IP) were both rediculously high LVR's and both had LMI attached. It worked out brilliantly for us. But it doesn't for everyone. Would I do it again? In those same circumstances at that point in my life, absolutely. But at this point in my life, no. But my position is significantly different now, and I am in a much better position now to structure things so I wouldn't have to.

I think what you need to do is run the numbers. Not just the numbers on the IP, but also your personal home budget, to figure out if you can afford it with the extra costs (ie LMI) invloved. How will carrying this IP impact your day to day living? This is very important, as with a high LVR, you may not be able to bail and sell quickly, if something happens and you are suddenly left feeling the pinch. At least with a lower LVR you can sell, even if at a moderate loss. (Obviously not anyone's goal when investing, but I always like to figure out exit strategies and consider worst case scenario's before I ever enter into any investment. Hope for the best, plan for the worst.)

You also want to be reasonably sure that the market you are buying into, is on an upward trend. Again, sometging you really want with any IP, but more important when that LVR is high. So make sure you know the market like the back of your hand, so you can feel confident in your investment.

Having said all that, you mention a wedding, but not how far that is away. Nor what your partners thoughts on this are. It 'may' be best to wait until after the wedding. Or not. You also need to consider whether you plan on children within the next couple of years. That could impact your decision too. It may mean you want to get a loan secured now, before you have an extra dependant dragging down your borrowing capacity. Or it may mean you want to wait, because you will be dropping from double income to single income for a period of time. (Again, different people are going to have different approaches to that.)


If it were me, and all the numbers stacked up, and I was confident in the market and my own finances, then I would jump on the oppertunity sooner rather then later. LMI is a cost I like to avoid when I can, but it isn't a reason to run by itself. And I can tell you from personal experience, if it is a good investment, then 10 or 15 years down the track, that LMI amount you initially paid is barely going to be anything in comparison to the future equity.

Good luck whatever you decide.

I forgot to mention about loan structure. Don't cross collateralize if you can avoid it at all. You will save yourself a lot of headaches down the track. If you have no other options, it may be best to consider waiting.

 

Thank you, really appreciate the detailed answer and definitely puts it into perspective well

 

Talk to a broker. They may have a solution with another bank.

Failing that, its a personal choice. Me personally, if i could use some of the money to get into the market and still have the wedding with maybe some small sacrifices, then I wouldn't wait. If it would mean postponing the wedding, well only and your partner can know whats right for you. If she views a wedding like most women do, then i'd say the decision was made long ago

 

Oh there are heeeeeaps. Some even take out massive loans. Others, their Papa and Mama chuck in a lot of cash for the wedding.

My friend who is not wealthy and getting married, used a chunk of her savings to buy a $10k dress.

It's not as uncommon as you might imagine. The whole wedding industry is a big, big business.

I had about 140 people at my wedding. I told my parents they could only invite 10 of their friends. That's it. I'm not wasting money on their cronies. The rest of the folks were significant to us, not my parents. I didn't ask a cent from them either. Paid for it entirely ourselves.

 

Wedding-investment depreciates @ 100% per annum! And the ROI is 0% (if you 2 are already living together).

Prop markets currently are appreciating @ 20% per annum and on top of any cap growth, you would also get an income of say 4% per annum.

Do your maths and choose wisely!

 

Like to see you convince the misses of that

 

well, perhaps a cut-price, drive-through Vegas style wedding! But really, asking for advice on a prop forum - choice is pretty simple, especially in midst of a super boom cycle. If the OP asked the question in 2018, perhaps getting an elaborate wedding out of the way might have been a better choice!

 

My question was never should I have the wedding or not, that’s non negotiable, if I cancel the wedding my borrowing capacity would go down considerably as I wouldn’t have a fiancé anymore lol question was should I pay the LMI and take my PPOR to 90%lvr to get the IP or should I wait

 

Just pay the LMI. On 90% loan of a house on $350k is nothing and its tax deductible.

Otherwise like others have said whats your important to you as a couple? A wedding or a property? If it were me I would be holding a small wedding with family only and buying an IP. A wedding to me is a waste of money - but your Mrs probably disagrees with that.

Waiting it out the house will probably grow faster within 1-2 months more than what you would save on the LMI.

 

Paying Lmi gives you the opportunity to get into the market earlier, please don't see it as a negative.

However paying lmi for an investment property is only viable if you can recoup the cost via capital growth in the short term.