Start of journey. Too many questions. Opinions/suggestions would be much appreciated.

Hi all,

Wanted suggestions/guidance in relation to my current scenario.

Current PPOR. 2 br villa unit in Murrumbeena, VIC. Renting a room out too. Last valued by NAB at 530k 6 months ago when I refinanced for a better rate - currently on 4.38% interest only payments. 424k owing and 21k in offset. Another 10k in managed funds.

Looking to purchase first IP. A prop with a land component would be ideal. Interstate might be the go and if so will probably need a BA. Brisbane seems to have potential upside but pockets of Melbourne seem attractive. Melbourne is more a familiarity thing though.

1) Need to raise more equity. Obtained a desktop val from ING a couple of weeks ago which came in at 550k - 4.29% interest only. Unsure about ING. I'm wary about getting the structure of one's loans correct prior to purchasing IP(s) so what are people's thoughts on ING?

2) Looking to do a kitchen reno early August using some offset funds which I think should add value. Would it be best to seek a further val from ING or another institution after this is done then commit to a refi and purchase an IP?

3) Based on my income, I figure I would have capacity to borrow for a property worth about 350k-400k on 90% LVR (assuming I can use the equity release and some other funds to come up with a deposit and purchase costs etc). A property with development potential or cg potential that can be rented out easily would be ideal. Any suggestions of suburbs in Vic or Qld that may be of interest in that price bracket? I understand I may need to consider slightly higher LVR.

5) Any suggestions on avoiding LMI? My understanding is that certain professions may be exempt via certain loan products. A guarantor is not an option unfortunately.

4) Any recommendations for BAs in QLD or VIC who conduct business in the suburbs within that price bracket?

5) Lastly, any suggestions for a good accountant seeing that it is tax time?

I know this is a lot to put out there. Apologies in advance if it is all a bit convoluted.

PS: I suffer from analysis paralysis.

 

Hiya I'm fairly new to this game. I'm buying my second IP interstate.
I did think about a BA but feels good getting out and learning.
If you don't have time use a BA but you'll feel great getting out and researching yourself.

 

I used Property Zest for my recent purchase in Greater Brisbane. You are best to do some research yourself on localities and arm yourself with some knowledge and buying preferences. That will ensure you get the most out of a BA service. Allows you to bounce ideas. That worked for me anyway.

 

Where are you buying @Tranquilo? Going for Frankston?

 

That you Roy?
Haha followed the herd to Logan way. I'm actually going this weekend too.
Been up a couple of times but the numbers haven't worked.
But not a waste. Got a great PM when things go ahead and also called in to see Rolf.

 

I've been listening to these podcasts. Everyday Property Investing and it is good to hear a recommendation on here as I'm considering using them.

Do you mind to share your journey with Zest, what you bought? the experience and whether you were ultimately happy?

 

Heya,

Answering your finance questions:

1. ING for an investment portfolio are a painful process. Releasing equity/any sort of variations is very difficult. I'd suggest looking elsewhere. Its hard to say without a full picture, but its reasonably safe to say that its not the right place.

2. LMI exemptions are usually for those in the medical industry. Westpac do allow it for lawyers, accountants, certain types of engineers, celebrities and athletes - with varying restrictions (usually a $150k income and working in that field).

3. I'd suggest there may be some value in planning out the finance side of things from the outset. If you're paying LMI and your looking to grow a portfolio and draw out equity over time it can save you a fair bit going to lenders that give you flexibility to draw out equity (and manipulate valuations to your advantage). This is where ING fall short - both in terms of cash out policy and their borrowing power calculator which can restrict you over time.

4. Happy to PM my accountant details (his very good for myself and my clients). Alternatively hit up Paul from the forums - encyclopedia of knowledge.

Cheers,
Redom

 

I'll be using Property Zest and starting in the next week or two. Are there any tips you're willing to share?

 

I prefer not to share the specifics of the property, however I bought an ex-housing commission property in Deception Bay that had been privately owned for over 20 years. Not far from the water. It's been recently renovated and I'm having some minor works completed at the moment. It should be a good investment. I'm in the process of finding a tenant now.

I'm very happy with the service and plan to use them for my next purchase.

 

Yeah its me!
Sounds like you're getting things together so you'll be ready to run when you do find the one.
Going up alone or with fellow PChatters?

 

Just myself and the Wifey. Wouldn't want competition if something was good. Maybe have found one that's why I'm heading up. It's a bit pricey but at the moment it's the only way numbers will work. The bottom end of the market to hot. Went through 10 opens the other week and ran into Michael he went through more same story nothing at bottom end left.

I'll let you know how I go

Max

 

Thanks for the replies @Redom @Tranquilo @wombat777 and others. Will keep Property Zest in mind. Also thanks for the info on ING.

 

"Many investors see LMI as a business cost which alows them to build their portfolio much faster. I am not of the avoiding LMI camp so i will let others comment here. "

How does this work?

 

Some professions (such as doctors) are offered higher leverages without paying LMI by some lenders.

For most people the options are a) buy properties with a 20% deposit (or more) plus costs or b) pay LMI and obtain finance with less deposit, therefore allowing someone to purchase more property, at an additional cost.

Scenario a) buy a $500k property @ 80%, $400k loan

Scenario b) buy two $500k properties @ 90% + LMI (~2%, $20,000)
Gives two loans of $460k ($920k total) and $1m in property.

By using LMI the person in scenario b will make a lot more if the market moves up, but losses will be greater if the market moves down. They have also added $20k to their cost base. For many people, especially starting out, they accept that it is too difficult to come up with 20% deposits all the time and accept they will need to pay LMI if they want to grow their portfolio quickly. Hopefully it is obvious this can be a double edged sword and you should consider the pros and cons carefully.

 

Perfectly explained by Hodor.

 

I totally agree with Redom - avoid ING, they will strangle you particularly if you're paying LMI.
If this is the start of your journey, please see an investment savvy mortgage broker to make a plan for you moving forward. It can save you thousands of dollars in both opportunity cost and actual cash.

 

It really depends on your knowledge and buying preferences. Make sure you have worked out your investment strategy in terms of what type of location and property you want. Use the BA for guidance and to bounce ideas. Each night I was reviewing property details and deciding what I preferred, including for some properties they had inspected. During the property search and buying phase I was also feeding them with additional properties I wanted to look at.

Make sure you prioritise your lists. If you think a property is a good investment get them to focus effort on that before someone else snaps it up. There is quite a bit of buyer activity in Brisbane at the moment.

Be prepared for disappointment. Properties can go on market and be snapped up quickly - there is generally no indication on the real estate website until contract has gone unconditional. A good indicator is a disinterested real estate agent, although some are just disorganised and don't return calls.

 

Thanks @Jess Peletier and @Leo2413 . Much appreciated again. Seems like ING is definitely a no-no for the long term plan. Do you guys think it would be best then go ahead with the kitchen reno and then do a full val with a another lender (will get a savvy broker involved) and then look to release some equity?

Once I know how much equity I can release, it will probably follow that I will find out my borrowing capacity for the IP and start investigating suburbs, areas, properties and BAs.

 

Looks like your on an 80% LVR. Perhaps start off by doing a desktop val with a lender thats suitable (CBA if possible comes to mind) - sometimes they overshoot big time.

If its low than consider doing your reno + full valuation to extract out equity.

But if its purely a 'equity release' play - than you may possibly benefit from a good val result from a computer!

Cheers,
Redom