Commercial vs Resi?

Hey everyone!

Just wanting some opinions based on what you would do in my position. I'm quite young, but not attracted to resi yields. I'll be buying at 100% LVR, due to using only equity and no money down. My rate is 7.44%. If you were in my position, would you purchase residential or commercial. Also, what state would you be most attracted to purchasing from?

{Note from mods: merged with duplicate thread, so there is some discontinuity}

 

Sorry man completely forgot the amount. I have 750k from my parents property that I can use.

 

What sort of budget are you looking at?

 

No mark-up. Thing is, I wanted commercial because of yield and tenants paying outgoings. Residential, as much as CG is usually better than commercial, yields are not.

 

Unsure what this means. Like negative gearing?

 

If you cant save how will you handle the negative cashflow? How are you paying stamp duty?

 

I can handle negative cash flow, and I have enough to cover stamp duty and other fees (aka BA fees).

 

But yields aren't usually the primary goal for resi investments anyway.

We don't know much about your position yet. You're only mentioned that you're young and have a lot of equity available.

What else do you have going on financially, and where do you want to go?

 

I'm currently self-employed, and I have the available capital to handle negatively geared properties. I just don't like how easy it is to cap out on the amount you can borrow for residential. It's much easier to gain positive cash flow in commercial, and my aim is to lower the LVR enough to gain positive cash flow as quickly as possible.

 

No as in, what amount of $ are you looking to spend on a commercial property, what's your budget?
Have you sat with a decent Mortgage Broker to work out what you can even afford to borrow for Commercial lending?

What does this mean? How are you accessing this? Are they providing it to you in cash or is that just the amount of equity they have available in their property?

 

If you're effectively borrowing 100% to get into commercial, what sort of cashflow are you looking at?

 

Do you have a main residence and a future potential main residence (so you can move into it and sell the first one CGT free). You can't live in a commercial property, generally, so residential is more flexible in this regard.

 

Residential
Melbourne

Your next one can be commercial. If you aren't keen on the potential growth to come out of Melbourne resi, then look at A REITs. Good yield, probably at the bottom of the asset valuation cycle. Growth prospects ahead and with liquidity. No one should negatively gear a commercial property especially when starting out.

Not advice............

 

The budget is up to 750K. Haven't sat down with a broker it's been purely phone conversations so far. This 750K is pretty much it. Borrowing more is for the future at the moment 750K is the complete limit for the moment.

This is purely equity. I'll be accessing it through a refinance. It's the amount of equity they have in the property.

 

When you say thats all of the equity, so the property is worth 1m, and the loan is 250k? Something like that? Can they get a 100% lvr loan?

do your parents qualify for the loan? Have you found a bank that will allow that much cashout?

 

In that case it is more complex and something you should seriously consider how to reduce risk to your parents. Commercial is much more risky than residential.

Best to get legal advice before locking things in.

 

Right, so simple starting question, how is this going to work, if you're not on title of your parents property? You want to secure the debt against their property vs securing against the property your purchasing, do they understand the risks and ownership and borrowing structure required to do this?
You cannot borrow against their equity unless you're on thr title and they would also have to be on any application for finance...

First thing I would be doing if I was you would be to speak with a good Broker about this, and your future financial goals with regards to investing in property. Run some scenarios with the Broker to see how you get property number 2, 3, 4 etc. I believe your assumption about borrowing capacity with regards to commercial property vs residential could be different to what you believe. Most people don't focus solely on yield when investing in property, for a reason.