Finance for property in Port Hedland

Hi

I want to buy a property in Port Hedland that would be cash flow positive, does it matter what my income is as obviously I wouldn't be able to service the loan without renters. The property has a 3yr lease. Just wondering if any financial institutions would lend for this? I would have about 5% deposit but would have to factor in costs, LMI etc

Currently have 2 IPs, one is positive (holiday rental), one is negative. Renting ourselves.

Thanks

[Tony]

Hi,

There are lenders who would consider you given you have a few investment properties already. How much equity do you have in those current properties ?? The reason i ask this is, given Port Hedland is a mining town it's preferable (not a must) to have a 10% deposit to give the lender some more comfort in the proposal.

The reason banks want a bigger deposit in mining towns is because they are considered slightly higher risk. A closure of a mine or a change in government policy could have an immediate impact on the value of those properties. However one would think Port Hedland is considered a more viable location.

From your brief comments - i believe you may have a deal there. Please feel free to contact me the number below to discuss further.

regards

[Otto Dargan]

jam wrote:

...does it matter what my income is as obviously I wouldn't be able to service the loan without renters

Hi Jam

The banks assess your serviceability using your total current income, debts, the new loan and your new rent income. They don't just look at the new income and debt on it's own, they have to make sure you can meet your current repayments as well.

Rent income from mining towns is considered to be a higher risk and if you are too reliant on it, particularly if you have lots of properties in one area, then this may be a concern.

It is very much a grey area, I hope Tony was able to help you with it.

Thank you both for your help and advice. Decided PH is too expensive to get into, looking at Emerald now instead.
Considering a family trust - this would need to be set up prior to making an offer, right?

Thanks

[Tony]

Hi jam,

Yes banks generally want the trust to be setup. But speak with your accountant and see if that is the right way to go. Good luck.

Do a good market research to know about the all positive cash flow property areas, where you can buy a property. One more important thing makes sure about the area that it should be in demand for tenants.

The Banks wont care when the Trust is established (within reason) as all they will want to do is peruse the Deed to ensure that it contains sufficient powers to allow you to borrow etc.

The people who will want to see it established prior to going to Contract is the Qld OSR (Stamp Duties office) In Qld you cannot purchase using and or nominee so it is important to ensure that the name on the Contract is correct as any variation down the track can trigger a second Stamp Duty liability.

In regards to lenders many will want to try and charge a higher rate of interest or not offer special offers when buying in Trust however as someone who specialises in such loans we deal with many lenders who treat them as normal entities.

Of course i am assuming you are looking at buying in a DFT rather than Hybrid.

Yours in Finance