High equity low income help

[Hels]

Hi guys.

I'm wondering if anyone may have been in a similar position as us & have found away around it??

We have just finished renovating our first house. We have approximately $395,000 worth of equity (I have had a registered valuation). But we are on one income as I am home with 3 kids.

That means we have plenty of equity to buy an investment property but we fall short on servicing a 2nd mortgage.

Does anyone know anyone we could speak to that could help? We have done it once really well & are keen to do it again.

We are in Auckland.

Thanks heaps!

[Leftette]

Find a property where the rental income covers the mortgage?

[Maccachic]

What happens between tenants how will you cover the mortgage or major repairs?

Speak to a broker.

[Hels]

We would want to renovate & sell a few to get some cash in the bank to cover those types of costs.

We have enough cash to renovate & sell but I wouldn't want to take the risk of a house being empty at this stage.

[Leftette]

Then perhaps your circumstances make it just a bit too risky?

[Hels]

Maybe.

We have been looking at a house that $400k so we definitely have enough equity. It would rent for $390 a week so it's manageable.

Its just finding someone who will lend to us to get us going.

[Shane D]

Find a property where the rental income covers the mortgage?

Not that easy...

The banks uses the following calculations for serviceability of the loan
- deduct 25% rent (allowing for vacancies) ..silly I know but that is their rule
- base interest rate on 7%
- use principle and interest

Shane

[BigRedDog]

Yes some people have got around similar issues.

It is impossible to help out in detail without knowing your full story.

Do you have a mortgage broker?
If not - get a good one...

[Hels]

Not yet. I have been ringing around today to see who could help us. Hopefully that will come to something

The servicing is the issue. On the house I mentioned above we fall short to keep it as a rental.

We have the equity to buy it & the cash to renovate it. It's finding someone who will lend short term that is proving a challenge. I know the opportunity to add value is there. It's very similar to our house but on a much smaller scale.

Even tho we have the equity our mortgage is quite large. Typical for a young couple & definitely typical of our area (devonport) so I do understand. It's just frustrating cause we have done it now & I'm keen to get going & do it again!!!

[Wayne]

find a business partner maybe?

[Maccachic]

Have you actually worked out if you would make money on it? Don't forget tax.