i currently own my own home and do have equity in this house, but i am on a low income at the moment, im wanting to invest in a rental property. Or at least try and make the equity i have in my home work for me to better my financial situation can anyone explain to me how this can be done.
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Need advice: I want to invest into a rental property
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This rang warning bells with me.
Buying a rental property means upping your debt a lot, though with rent to cover the increased mortgage. Would you be able to survive if you had no tenant for a month? If either house suddenly needed thousands of dollars of repairs? If the tenants trashed it and did a runner?
Have you considered lower-risk possibilities, like taking in a boarder? Or putting a granny flat out the back of your place and renting it out?
If you do want to buy a rental, talk to a mortgage broker. They'll let you know how much you can spend. Then you can start looking.
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Dear I will recommend that first of all you have to measure
RISK ANALYSIS
BACK DRAWS
DEBT
RENT VALUE
You are already at a medium income to survive as you describe after investing to rental property may give you a good feed back and required debt amount ......
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Investing into a Rental Property
Rental investments, as you know, require a great deal of planning and research in order to sustain a positive cash flow.
First off, get a clear picture of your financial status. There will be vacancies where there will be no income stream. Do you have the time to deal with the maintenance and repairs-will you do it yourself or hire a property manager?
Speak to a mortgage broker, accountant, insurance broker (costs of property insurance, what does it cover), REALTORĀ® (market situation), local government offices (by-laws) and your local Landlord/Tenant Board (rules) who can all add valuable insight.
And who better to ask for advice/tips are other successful landlords/property owners-pick their brains.
I like the advice of starting small-perhaps renting out basement if possible. Is selling your
current home and buying a home where there is potential to rent out a basement feasible
(again, check if basement apartments are legal in your area-all it takes is one
complaint).
By doing your homework, you can be better prepared and avoid jumping into a money pit. It can be a rewarding experience if you plan right and a bit of luck certainly helps too.
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Can I also suggest getting more knowledge about rental property investment, property investment is a long-term game, if you don't want to buy any books, just visit your local library and get a good book on property investing, there are heaps available.. Take your time with your decision, as there doesn't look to be any boom around the corner..
Also about from setting your own short-term & long term goals.. Take advice from someone who already has the result you are after..
Good luck.
I'm getting back to this property webinar on at the mo....
Cheers
Grads
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Most of the books out there, from what I have read at least, are very idealistic and rarely based on fact when it comes to the numbers they quote and use. Alot of them also fall into the trap of using inflationary gains as a mean of investment.
As a home owner you'll be aware of the costs involved with home ownership. Use that knowledge and apply it to any cost modeling you doing.
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Have you any idea of what price range you are looking to invest in?
If so check out what kind of property you can purchase for that range (trademe is a good start), then take those findings to the rental section in TradeMe to find what kind of rental return you could expect.
From there you can complete the figures to see if it is affordable or not.
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Maori Auctions,
there are some good deals around undoubtedly. If you have equity to use as a deposit and the rent can cover the cost of the loan you may very well have a chance of finding lending.
This deal below is a good one I think:
Here's an example of the thinking required: and we are currently purchasing this in Rotorua: purchase price: $143,000; current valuation $170,000 - so 16% below value. Really it is currently in rentable condition but there is plenty of room for improvement to gain a better rent for it's location and size.
However we are going to do some work and spend approx. $15-17,000 (interior paint, new vanity in bathroom, new kitchen, paint external woodwork - windows, build a double carport and deck). I have walked the valuer through and explained what we will do and from this I have been told we can expect the value to increase to approx. $230,000...... 70,000 more than what it will cost us and we will end up with a 70% LVR.
Currently it will rent for $240 and after reno $280; this is from an independent property manager.
As a %yield currently the property has a gross yield of 8.72% (52weeksx240/purchase price), (which all said and done is not too bad).
After reno the gross yield will be: 9.1%, and we will have created 70,000 in equity.
A mortgage of 143,000 will cost 11,056 (@6% P&I)
rates and insurance approx $40 per week = 2,080
So if we borrow 80% of the purchase price our loan will be - 143kx80% = 114,400
So our loan @ 6% will cost us: 8,814 per annum, so this plus the rates and insurance will be covered by the rent (52wks x 240 = 12,480)
After the reno we will be able to revalue the property and refinance on 80% of the current value = 230k x 80% = 184,000
which will allow us to pull our 20% plus the reno costs back out. (though we are going to keep the LVR at 70% because we can)
The initial 20% is coming from equity.
Good luck.
Talk to a mortgage broker and see what your position is.Last edited by The Property Store; 21-05-2011, 10:12 PM.
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Howdy maori auctions
The deal property store has just outlined has most of the figures for you to analyse, and come to some conclusions.
What you could do, is use this example and post back where you see this type of deal fitting in with your own risk profile; and also what you see as the major risks in the plan outlined.
Not saying it's not a good deal, but there are a couple of obvious assumptions made that need to be fully understood in respect to your own circumstance and risk tolerance.
So, assess this deal, comment back here and ask for comments.
You will get some valuable advise.
Good Luck.
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