Thursday, 17 July 2008 12:12 PM
Buying an
investment property can sometimes prove exhausting and confusing,
making a step by - step guide to the purchasing process is a valuable
tool for any investor, weather your new or an old hand!
Here are 7 helpful guidelines to get you on the right track to investing:
1.Build a team of experts to support you
You
can't be an expert on everything and when it comes to property you
can't do it all yourself. Call the team at the Toowoomba Home Loans
Centre and get the right advice to get you started!
2.Establish the right entity to buy your property in
Decide
whether to buy the property in your own name, your spouse's, child's or
partner's name, or in some form of trust. Choosing the wrong entity
could see you paying more tax. We can help
3.Establish the right buying strategy
Decide
whether a negatively geared property, a cash fl ow neutral property, or
a positively geared or cash flow positive property would most benefit
your financial position. And which can your current finances support? Just ask
4.Establish your buying rules
Narrow
down the type of property you want to buy. Ask questions such as: Will
it be a house, townhouse or unit? How many bedrooms should it have? Is
a garage a must? How many bathrooms should it have? What yield should
it provide? Find out more here
5.Find the property
Use the internet and local agents to track down a property that matches up to your buying rules. We can help you work this out
6.Crunch the numbers
Factor
in the purchasing costs, property expenses and likely rental income to
come up with an estimated net weekly loss or income from the property.
See whether it fits with your buying rules. If not, see if you can make
it fit. We can help
7.Negotiate the price
Money you
save through negotiation is money in your pocket rather than the
vendor's. In a booming market, set to achieve a 5 to 10 per cent
discount; in a flat market, look for 10 to 15 per cent; and in a bust
market try to achieve 20 per cent plus off the asking price. The team at the Toowoomba Home Loans Centre can help you every step of the way
so call us today to help you unlock your dream!!
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Thursday, 17 July 2008 11:40 AM
Equity, this word is used all the time in property and lending businesses, but
what exactly is EQUITY????
This report will reveal to you how Equity works PLUS How to use this Equity.
We will show you an example and answer some of borrowers frequently asked questions.
Equity in short, is the difference between the saleable value of a property and the amount of money still owed to the lender. What you need to do is subtract a minimum of 5% of the value of the property as well as the loan balance, then what you have left = Equity. An example is:-
Example Property Saleable Value = $350,000
Less 5% of the Saleable Value = $ 17,500
Less current balance of mortgage = $150,000
EQUITY VALUE $182,500
This Equity Value can be borrowed against to allow you to invest in additional properties or it can be drawn as cash funds to provide a deposit for the purchase of an additional property. Why do I have to leave 5% value and Why would I want to draw cash and not just borrow against my existing property??
Firstly, the answer to this question "Why can I not use the full 100% of the value of my property?" Very few lenders will lend borrowers the full 100% value of their property. They like to retain a minimum of 5% of the value of your property, to provide a buffer zone, which means if the property was sold there would be enough to clear the debt . It is important to note that with loans that have less then a 20% equity buffer, Lenders Mortgage Insurance (LMI) will be taken out by the lender to cover the lender against any loss incurred ( see separate web article What is Lenders Mortgage Insurance ) . This is again to protect the lender however, the premium for this insurance, is paid by you the borrower and for investment property purchases is tax deductable ( always check with your accountant for the latest ATO tax rulings).
Secondly, "Why draw cash and not just borrow against my existing property?" This choice depends on, to some extent, your long term goals regarding investment properties. If you choose to just borrow against your existing property to purchase another, this means, that you will have to use the same lender to borrow the funds for the additional purchase because they hold the current mortgage and will be using the value of both properties to secure both loans. However, if you draw cash you are free to choose another lender, because each property is secured independently ( called stand alone in lending terms) from the other. This may be a better structure for you personally as it will allow you to sell either property without having any impact on the remaining property. There are several variables that may effect which way you proceed. Things like, how long you intend to keep the properties, before selling either one or all of them, or if you intend to use future equity on either properties to buy yet another property.
Our very experienced lending team are only to happy to provide you with any information you may need, to enable you to make an educated decision and choose the right path to suite your personal requirements. We are dedicated to help you achieve your goals and will show you all the alternatives you have available to help you make the right choice.
Call us anytime 1300 308 105 and make a FREE, no obligation appointment to discuss your needs.
We Look forward to hearing from you .
Filed Under: Investing | 1 Comments