FAQ 84 What does my first deal need to be?
This process should be used to produce your written investment plan
To answer this question the investor will need to get their finances assessed by Wizdom Loans (finance and strategy review – FSR ,FAQ 8 ) This will define the starting point from a finance perspective. It will be different for each and every Investor. The FSR will reveal 2 aspects of the investor\’s finances
1) The available EQUITY as either redraw/LOC secured against one of the investors assets or cash or assets that are available to sell.
2) The investors maximum borrowing capacity based on their job income and any other income such as rents from existing investment properties.
Each of these figures will allow a maximum purchase value ie. From an EQUITY perspective it may be possible to purchase a $400k property but from a borrowing capacity perspective it is possible to purchase a $600k property.
WHICHEVER IS THE WEAKEST IS THE ONE THAT WILL NEED TO STRENGTHENED WITH THE FIRST DEAL
The second deal should be planned at the same time. Adjust the equity and income positions after planning the first deal and ask the questions
- Which is now weaker Equity or Income.
- With these financial positions can a second deal be completed to strengthen the weakest financial position.
IF A SECOND DEAL CANNOT BE UNDERTAKEN BECAUSE OF INSUFFICIENT EQUITY OR BORROWING THEN A RECONSIDER OR ADJUST OR ABANDON THE FIRST DEAL OR MAYBE CONSIDER DOING A JV DEAL AS A SECOND DEAL.
There are deals which combine both types in one purchase. It can be good to consider these deals as ideal starter deals as they minimise in/out costs and provide a lift to both aspects of finances.
This is like a game of chess – before moving consider the moves ahead.
The choice of actual strategy will be up to
1. The investor location.
2. The investor personal preferences and skills.
3. The investor risk profile.
4. The investor turn around time – short or longer.
