Any advice for this sitaution:
I'm trying to get my mum to make some investments. All she does is save into a normal savings bank accounts (that's one step better than me mind you - im at uni making about 15k a year lol).
She is 53, a secure job as school teacher, makes about 70k pa. Has a ~600k house paid in full.
What property investment might she be able to do...?
Any advice would be greatly appreciated...
Dicko, your mum is in a very solid position to be investing. She should educate herself about how to go about it before jumping into anything but I'll give you a possible scenario based on her situation.
Banks will lend up to 80% of the value of a property - can even be up to 90-95% if you're prepared to pay Lender's Mortgage Insurance (which is usually in the $10-$25K range)
So your mum could, subject to bank approval, get a loan for $480k on her $600k property.
Most people would be thinking 'ok what type of property/ies should I be getting with this $480k?' Most would use the $480k to get one, possibly 2 properties.
I would take a different approach and use the $480k as the pool from which you get your 20% deposit and purchase costs for each of your investment properties.
Example
Go to Bank A and get $480k Line of Credit (LOC) with her $600k PPOR as security. The LOC is like a credit-card limit, except that it's home loan sized rather than $5k or whatever, and there's not necessarily any card attached to it. She would have a limit of $480k to use as she wants...if she only used $10k, she'd have $470k sitting there when she wants it.
Investment Property (IP) 1
$400k, plus $20k purchase costs (stamp duty, solicitors fee etc) - total $420K
Draw down 20% of the $400k cost ($80k), plus the $20k purchase costs from the LOC. So LOC balance owing would be $100k - available funds $380k.
You still need to come up with the remaining 80% for IP1. Go to Bank B, as mentioned they lend up to 80% of the value of a property.
Imagine IP 2, 3 and 4 at the same cost prices...you repeat the process....use the LOC for 20% of each IP plus associated purchase costs. Get the remaining 80% of each from Banks C, D and E. Do each of these 80% loans as interest-only.
The LOC would at this stage have $400k utilised with $80k available...you need to leave several thousand available as a buffer for when tenants leave, hot water systems blow etc. When her PPOR or any of her IPs go up in value she can visit the bank to draw on her increased equity. For example, if in a few years her PPOR increases to $700k, then she increases her $480k LOC to $560k (80% of $700k).
If she wants to sell, say IP3 in the future, then she only needs repay Bank C the 80% she borrowed. Whatever profit she's made she can do with as she pleases. If she has all properties with one lender, they will dictate exactly what level you should bring your loan balance down to, according to the remaining properties they have as security. They'll say 'yes we'll release IP3 as security but we require $450k to be applied to the loan from your $480k sale proceeds'...that might not be what you want....that's what I meant in an earlier post about structuring your finances correctly.
The biggest hurdle to achieving this is the capacity to repay...interest-only loans will reduce the repayments but there does come a point where the banks will say there is insufficient income to meet payments. A good mortgage broker can still get you loans, and if you do your sums well you can still meet repayments. A good mortgage broker and good accountant are handy people to have in your corner.
Goddamm, long post, my fingers havent had such a workout since last time I posted in the Hot Babes thread.