116 | Q&A – How Guarantor Loans Actually Work, Fixing a Joint Venture, Investing in WA and More

It’s Q&A Time!

Now, we answered a few questions in the last episode but realised we wouldn’t be able to respond to all of your questions at this rate, so we’ll be doing a Facebook Live very soon. Stay tuned for that!

On another note, there’s an exciting announcement at the end of this episode so make sure you stick around. And here are the questions we’ll be answering today:

 

• Question on Guarantor Loans from Kate:

My partner and I earn a combined gross income of roughly $130,000 annually. We have a small amount of savings – about $5000 (remember we’re getting married). But really nowhere near the amount needed for a deposit on our first home.

Listening to your episode about guarantors got me thinking. Is it possible to borrow the full amount for an invest-grade property in Newcastle? Do banks really loan 105% with interest only repayments so that we can continue putting money into an offset account? Or are we better to wait and rent and continue saving?

My parents have been lucky enough to own a home in Sydney that has enjoyed the crazy house price growth. Their home would be worth at least $1.5 million at the moment. How long would my parents need to be guarantors – would it be until we had saved 20% of the loan? Perhaps in our offset account? Or would it be until the full amount was paid down?

My dad is from the generation of debt is bad and avoids risks. If you thought this was a smart move, do you have any tips on how to explain the risk/benefits so that he can understand?

 

• Question on “To Hold or Sell” from Warren:

Hi ‘couchers’, thank you for your entertaining, informative, and thought-provoking podcasts.

I’d like to know what your thoughts are on rescuing a situation where someone has an investment property they’ve had for 10 years that isn’t performing. Cut the losses and look to replace it, or hang onto it? (I bought this place at age 20 on apprentice wages, it was all I could afford). Thanks!

(Specifics: paid $195k, current market value $240k, current rent $270/wk)

 

• Question on Property Investing in WA from Daniel:

My partner and I recently bought a duplex (2 bedrooms, 1 bathroom, 2 living rooms, 475 m2) in Spearwood for $400,000. We have $112,000 equity in the property and $73,000 cash in our offset. Our salaries are $50,000 pa for my partner and $71,000 pa for myself, and we do not plan to have children for another 5 years.

There is an opportunity to buy the second duplex (also a 2 bedroom, 1 bathroom, with a small granny flat at the back) for $385,000. The site is zoned R40 on 950 m2 (we see a 4 property potential), 3 km from the new Port Coogee Marina, the North Coogee development estate and the potential South Fremantle Power Station development bringing 6,000 new high-density houses/apartments into the area. We are 300 m from the local shopping centre and 5 km from the satellite employment hub of Fremantle (Bryce’s old hood). It ticks all the lifestyle boxes bar being near a train station (it is currently challenging to access the freeway to the Perth CBD).

My two-part question is:

1. I am currently weighing up the opportunity cost. What is your inference of Spearwood as a potential “wave rider” suburb piggy backing off the growth of the coastal development? Do you feel that it would have long-term, consistent capital growth or a short-term upswing, followed by a flattening capital growth and thus be better to buy into a blue-chip area?
2. As a first time investor, would it be wise to buy the adjacent duplex and land bank the asset, then develop the land after we have acquired several more properties in our portfolio or focus on the subdivision straight off the bat?

 

• Question on Joint Venture from Tristan:

I am in a bit of a bind and require some help. I currently have 4 properties. PPOR, a house in country VIC (Nathalia) that my father rents, a house in Frankston (that’s had 10% growth in 5 months!) and the front house on a subdivided block in Seaford.

The last 2 properties were purchased with friends as tenants in common.

I wanted to try and get another property with just my wife (as my friend has changed his plans a bit) and so I spoke to a well-regarded mortgage broker, and they told me that the banks have changed the rules and that now they take the full loan amounts of the split properties and only half the rent!?

This destroys my serviceability. I am now not sure what to do, my friend is moving interstate and will not be ready to buy again for 2 years (which I think may turn into 5 years) and I am keen to keep purchasing.

Should I concentrate on paying down the debt on my PPOR (280k worth 750k) or look at selling one of the joint houses (to gain the serviceability)?

 

And here are the Free Resources mentioned in today’s podcast:

• Property Research Site | LocationScore – Register your interest here
• Kids Savings Calculator – Download here
• Video on Buying a Property with Someone Else – Watch here
• Fact Sheet on Guarantor Loan – Download here

 

If you liked this Q&A episode, don’t forget to rate us on Apple, Spotify or our Facebook page.

Any questions or ideas? Feel free to drop us your thoughts here: http://thepropertycouch.com.au/topics/ and it could be featured in one of our future episodes!