Can I Afford An Investment Property? (Ep237)

Can I Afford An Investment Property? (Ep237)


Hi guys Ryan here from OnProperty.com.au and
today I’m helping you answer the question; Can I afford An Investment Property? There’s no point going out dreaming about
buying a certain property or a certain type of investment if you’re actually not able
to afford it. A lot of potential investors waste a lot of time looking at properties
that they really can’t afford and they could have been spending that time looking at potential
investments that would have moved them towards their financial goals. If you haven’t already signed up go ahead
and go to Onproperty.com.au/free and sign up for our weekly newsletter and you’ll also
get a copy of our free report showing you 10 real positive cash flow properties in Australia.
Again that’s Onproperty.com.au/free. So now we’ll go through some questions that you can
ask yourself or some steps that you can take in order to work out whether or not you can
afford an investment property and how much you can afford to spend. So the first step is actually to find out
what you’re borrowing capacity is; now there’s multiple ways you can do this you can use
the online calculators that are available however they aren’t exactly accurate. I link
up down below and I didn’t interview with a mortgage broker here on the goal coast and
we talked about those online calculators and whether that actually accurate or not and
the fact is that not exactly accurate and they also don’t provide you with any pre approval,
so when you go out and look you don’t actually have any formal approval so you’re not actually
sure that you can borrow that much. So you can try them to get a rough guide but don’t
take them too seriously. You can walk into your bank and you can talk
to them but that’s probably not the best solution either because there is over thirty lenders
out there and your bank might not actually be the best lender for you. So the best strategy
that I recommend is to talk to a mortgage broker you can simply get on Google and search
for mortgage broker in your local area or if you want Brad the broker who is the one
that I recommend as my mortgage broker to give you a call; go to Onproperty.com.au/mortgage
and he can give you a call, work with you and find out how much you can borrow but actually
take you to the next step of getting pre-approval on that loan. This means that when you going
out and you’re looking at properties you know that you have approval based on a valuation
of that property and so you can actually afford the properties that you’re looking at. Step number two: once you know how much you
can borrow is then to choose your price range just because you have a borrowing capacity
of six hundred or eight hundred thousand dollars that doesn’t necessarily mean that you’re
buying range is going to be six to eight hundred thousand dollars. Buying ranges will vary
depending first on what deposit you have, you’re going to need a minimum deposit of
five percent plus stamp duty unless you’re getting concessions on that. So depending
on how much money you can save that might limit how much you can borrow because obviously
to borrow a larger amount you need to save greater amount and the other thing that’s
going to determine what price range you want to look at is how much can you actually afford
to spend? This is a property you’re going to be living
in yourself you need to work out the mortgage repayments as well as all that other costs
with owning your own home like Council rates, insurances, water, electricity all of that
sort of stuff to ensure that you can afford this property, because even though the bank’s
may lend you six hundred thousand dollars you purchased a property at the higher end
of the spectrum and then find out you can’t afford it well that’s going to be very difficult
for you in day. So choose your price range based on your deposit based on how much you
can afford. Step number three: is to go ahead and do a
cash flow analysis and so this is when you look at a property that’s going to be an investment
especially if it’s going to be a house, you know, you still want to do a cash flow analysis
to see whether or not you can afford that house but the cash flow analysis will be you
know, you won’t have any rent coming in, but a cash flow analysis on an investment property
is you want to analyze the rent coming in as well as the expenses going out and work
out whether your property is positive cash flow if so by how much and then also whether
your property is going to be negatively geared if so by how much and can you afford that. You know, I’ve got a video which again I will
link up to below on I can calculate whether property is going to use positive cash flow
or not but the easiest way to do it is to use the advanced property calculator which
is a tool that I upgraded myself just got up Onproperty.com.au/APC for Advanced Property
Calculator and you can see that in action and maybe you want to get access to that and
use that. Its and extremely powerful to show you an estimate of the weekly view cash flow
property is going to produce. This is important because you want to know what you going to
be paying or what you’re going to be making from a property before you go ahead and invest. Step number four: is to assess based on your
cash flow analysis whether you can afford that or whether you want to afford it maybe
you can afford that hundred dollars a week negatively geared property but that doesn’t
necessarily mean you want to go ahead and invest in that depend on your financial goals
and your strategy maybe you want hold out for different property that doesn’t cost you
so much all that makes you money. Step number five: is if you find out that
you can’t afford a property let say it’s too negligently geared or let’s say you’re purchasing
your own home and you realize that you cannot afford it the next step is to look at either
a cheaper property or a property with a better rental yield. With cheaper properties obviously
you’re going to have less of a mortgage which means less expense on that property. Now obviously
this is going to vary from property to property if you buy a property that needs major renovations
of major maintenance that it can cost more than a more expensive property but you made
your expense which is going to be a mortgage is going to be less on a cheaper property. So you may not be able to afford a property
in a certain price range but if you go lower down maybe you can afford those repayments.
Also if you increase your rental yield then you have the opportunity of the rent paying
more of your expenses and therefore the cost of owning that property is less or it could
actually flip and become a positive cash flow property where it’s actually paying you money
every month even after covering the expenses. this passive income can then be used to pay
down the mortgage can be used to reinvest or it can be used to put towards you life
style or to save as deposit for the next property. Step number six: is if you still finding out
that you can’t afford a property after you done this is repeat steps number three and
number four and that’s go ahead on these cheaper properties do a cash flow analysis again and
then assess whether you can afford it and if it’s still too expensive either move lower
to land or find a property with a high rental yield. If you’re looking for properties with
high rental yields and you’re struggling to find them you might want to check out on property
plus which is my premium membership website you can check that out at Onproperty.com.au/plus
and every single week I list new high rental yield property’s that are highly likely to
generate a positive cash flow and I also go through and list a bunch of different dollar
points about that property things like; previous sales price, historic cash flow, historic
capital growth trends in the area population growth or decline the area, vacancy rates
and all the sort of dollar that you made to make a wise investment decision. So that’s something that you need help with
then check out on property plus at Onproperty.com.au/plus. Step number seven: is to; once you worked
out what you can afford is to then create a savings plan in order to save your deposit
because you will need a deposit in order to purchase an investment property. If you’ve
already own your own home and you got equity you may want to look at equity loans in order
to purchase that next property without needing to require saving a deposit. However if you
are going to get those equity loans make sure that you know that you can afford the extra
repayments because obviously an equity loans is still a loan and brings with it extra levels
of debt. So I hope that this helps you answer your
question: Can I afford an investment property? Really you need to go and speak to a mortgage
broker find out exactly how much you can borrow and then work out how much of a deposit you
can save and what’s type of property you can afford using the steps I mention in doing
that cash flow analysis. Until next time stay positive.

2 thoughts on “Can I Afford An Investment Property? (Ep237)

  1. Hey dude, I'm not Australian, so please excuse the question if you're famous there – but could you please give us a brief overview of your property portfolio

  2. Hi Ryan. Have you got any videos about renting out individual rooms in your house. When I'm done with this cosmetic renovation – still have got a lot of painting and other work to do, I was thinking i could let out two of my bedrooms. Also do you think not having a dishwasher is a big deal – just because there were no dishwashers in the 70's and it wasn't practical to put one in as just did a cosmetic renovation in the kitchen.

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