Kevin: If you have a question for any of our experts, you can free call anytime on 1-800-300-206, and we’ll get it answered for you. Carly called recently, and here is her question.
Carly: I currently own one investment property. How do I go about purchasing my second one sooner?
Kevin: Thanks for that, Carly. To answer your question, I’ve got George Raptis on the line from Metropole Property Strategists in Sydney. George, what would you say to Carly?
George: There would be a number of things that I think you should take on board. First of all, you have to make sure you buy the right property so that you get growth and equity and it allows you the ability to borrow your next deposit. In a lot of cases, it’s just too hard to save it.
Another thing I’d like to suggest is make sure you are attractive to the lenders. In other words, have a good income, a good credit record, have all your accounts in order, no large credit card debts or any huge personal loans, and make sure you’ve got all your tax returns up to date.
Another thing is make sure you are achieving the right rental return for your property. A few extra dollars from your rent can determine the amount that you can borrow next.
Lastly, spend less than you earn. Save the difference and invest it.
Kevin: The first point you mentioned there about how hard it is to save for the next deposit, tell me a little bit more about what you mean by that, and how long does it take to build the equity to get the next deposit?
George: Obviously, a few things determine that – what happens as far as real estate prices are concerned. But also with regards to finance, I’ve spoken to a number of people where they would like to save a 20% deposit because they want to not have mortgage lenders insurance coming into effect. But I’ve found that in some cases, if they’ve saved the 10% deposit, they can take on the mortgage lenders insurance. In other words, they can add that on to their loan. In other words, it gets them into the market sooner rather than later. It’s just too hard to save another 10% deposit in a lot of cases.
Kevin: Yes. Take on that insurance is what you are saying, and don’t fret over it?
George: No. I call it cost of doing business.
Kevin: The other point you made there, too, was about making yourself more attractive to the banks, and you gave a couple of hints there – about making sure that your credit cards are under control and so on. Is it that simple or is it about having a relationship with your bank manager?
George: Having a relationship with a bank manager is good, but at the end of the day, various lenders all have different rules. I know for a fact that some banks will look at, let’s say, rental income for example. Some banks look at 100% of the rental income when it comes in to factoring in what sort of loan they’ll give you or how much they’ll give you. Some banks will factor in 90%, or some will even go as low as 80%. It’s very important to do your homework, shop around, and see what the various lenders have got to offer.
Kevin: You are a buyer’s agent, so you’re dealing with buyers all the time. How are you finding them in terms of their relationship with the banks, and what sort of preparation should they be going through? Should they be talking to you first, or should they be talking to their financier first?
George: Obviously, for me, it’s very important. It’s good to have the good relationship with the financier – don’t get me wrong – but in other words, if you don’t a property strategy in play when you’re going to have this conversation with a financier, it’s really irrelevant. I believe that’s putting the cart before the horse.
Kevin: A buyer’s agent’s role in all of this is to actually help Carly find the best property?
George: It’s about:
- Putting the strategy into place.
- Making sure she’s buying the right property.
- Does she buy it in her name? Does she buy it as a different entity?
It’s about dotting all the I’s and crossing all the T’s prior to getting out here and getting finance.
Kevin: As you can see, Carly, it’s not just as simple as knowing when to do it. It’s a matter of having that strategy in place, which is what George has mentioned.
George, I want to thank you for your time. George Raptis is from Metropole Property Strategists in Sydney. Great to talk to you, mate. Thanks for your time.
George: Thanks, Kevin.