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to LMI or to NOT LMI

Discussion in 'The Buying & Selling Process' started by sauber, 15th Mar, 2016.

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  1. sauber

    sauber Well-Known Member

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    VB
    hey all,

    I'm looking to buy my first IP in another state and im wondering if i should take out LMI or not?

    i'm thinking townsville, i'll have about 50k of equity pulled from my property after refinance,


    Sauber.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Paying LMI is a personal waste of money. It's there for the banks benefit but you have to pay it.

    If the funds you've got will acheive your goals using an 80% lend, that's clearly the best option. Financing without LMI is easier and cheaper, but you need to put more of your cash into it.

    If you need more funds to acheive your goals, then borrowing 90% and paying the LMI will preserve some of your cash for the next deal and hopefully get you there a bit faster than if you had to directly save the money.
     
    sauber likes this.
  3. sauber

    sauber Well-Known Member

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    Thanks Pete.

    I gathered that and i don't wanna pay LMI whatsoever which might mean id have to save a little more then...or buy something small to start as an IP.
    Sauber
     
  4. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    legallyblonde and sauber like this.
  5. sauber

    sauber Well-Known Member

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    Thanks Dave :D
     
  6. spludgey

    spludgey Well-Known Member

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    Just make sure that you know what you want before you buy. Townsville seems to have been fairly hard hit by the decrease in mining activity. So make sure that the vacancy rate isn't too high and that there's population growth.
    One thing that you have to also keep in mind is that some QLD councils charge investors three times the rates as they do owner occupiers. Then add increased insurance premiums due to cyclones and your returns might be lower than you anticipated.

    I've got two in Rockhampton, so unfortunately I know what I'm talking about.

    As for your actual question, I used LMI for my first four (I think) properties and I'm glad that I did, as my journey would have been a lot slower otherwise.

    Now I wouldn't be using LMI as I've got a sufficient asset base not to need it. Plus I'm no longer able to get finance with LMI anyway.
     
  7. sauber

    sauber Well-Known Member

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    hrmmm intresting.....thanks for your input, thats helped quite a bit :D