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  1. #1
    Join Date
    Nov 2011
    Posts
    445

    Default Financing first investment property

    hey all
    i've made an offer already on my first investment property, but im still waiting on my mortgage broker to get back to me about how much money I can borrow. I'm pretty sure that i'll be able to borrow the amount I offered, but what can I do to make the job of my mortgage broker easier?

    should I give him the letter of intent and the acceptance from the seller as proof to show the purpose of the loan?
    What ahot sharing with the broker a letter from the real estate agent giving estimates about projected rental income?
    anything else?

  2. #2
    Join Date
    Sep 2008
    Posts
    7,581

    Default

    pretty dangerous game

    an clauses in your offer, like subject to finance?



    or would you just pull out...
    have you defeated them?
    your demons

  3. #3
    Join Date
    Nov 2009
    Location
    North Shore Auckland
    Posts
    565

    Default

    Matt.....if you are borrowing for an IP then the bank will almost certainly want to know what the rent will be.....banks usually add about 80% of the rent to your income, thus increasing the total amount you can borrow.

    So yes, get estimates about projected rental income......but what an agent says is not always what the property will rent for...............use your common sense.....and check on trademe etc to get a feel for what the current rent should be.

    And the mortgage broker/bank might want to at least sight the agreement.....banks might want you to get a valuation depending on the address or some other factor

    Another thing.....never ever tell the real estate agent/bank/broker/laywer that you are buying for the capital gain.

    This would make you a developer and thus all gains for any property you buy/sell will be taxed

    Remember.....you are an investor......buying for the "continuous income stream"

  4. #4
    Join Date
    Nov 2011
    Posts
    445

    Default

    thanks for the tip ahar.
    eri - yes I did make the offer, but I made sure to put the "subject to finance clause"
    been organising with my mortgage broker, and the financing seems to be going well.. just waiting on the loan application now
    Last edited by donna; 05-09-2012 at 11:31 AM. Reason: removal of hyperlink - no links to commercial sites as per the forum rules thanks

  5. #5

    Default

    Good work Matt, i'm just about to settle early next month on my first rental property too. Was a bit of a drawn out process but I got there in the end. I'd be interested to hear more on how you've found the process to date. Any issues you've found? I ended up using equity in my current home as deposit, but thinking about it now, it might have been a better idea to just take a loan out of the equity and keep the two properties disconnected. Anyone have any thoughts on this? Does it matter?

  6. #6
    Join Date
    Nov 2011
    Posts
    445

    Default

    one issue that I've come across is the issue of how to borrow even more if I want to buy even more properties. I'm still unsure how and what needs to happen so that my borrowing capacity doesn't get capped. How can I ensure that lenders will continue to lend me more money to buy more positive cash flow properties to build a portfolio of several properties?

  7. #7
    Join Date
    Nov 2009
    Location
    North Shore Auckland
    Posts
    565

    Default

    IMHO you will only be able to find finance if ....


    • your properties have a great yield.....this I believe to be the biggest and hardest obstacle to overcome
    • you are not too highly leveraged, i.e. you've bought at a discount, and/or property values have gone up
    • AND you have a good income...from other sources that is.....banks don't like "rent dependant" PIs


    In fact finding finance to buy further properties is a problem common to most PIs

    But it can be done.....lots of folk have done it

    Some go to successive banks to obtain additional finance...... and some don't tell the whole story....this is to my mind is a risky strategy.

    It's not too hard to for a bank to check and discover what your other borrowings are and remember, banks can call in your mortgage at any time.

    Lie to them at your peril

  8. #8
    Join Date
    Nov 2011
    Posts
    445

    Default

    at what point do lenders consider you "ren dependent"? and how much of a good income do you need from other sources?

    Thanks!

  9. #9
    Join Date
    Nov 2009
    Location
    North Shore Auckland
    Posts
    565

    Default

    Quote Originally Posted by mattinvestor View Post
    at what point do lenders consider you "ren dependent"? and how much of a good income do you need from other sources?

    Thanks!
    No idea sorry.......just know that's what my mortgage broker said to me....he was commenting on situations where the rent was high compared to income from "other sources" such as a job.

    Of course I think I'm considered to be "rent dependant" because I don't work.....just live off my investments

  10. #10
    Join Date
    Nov 2011
    Posts
    445

    Default

    thats my aim!.. just live off investments.... bso what's you're strategy to be able to borrow more and invest in more property??
    Do you then put some of your income aside and invest them in other asset classes such as stocks, bonds? Curious what's your strategy to be less "rent dependent"


 

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