However, it’s probably worth showing you how to establish what funds you actually have available to invest upfront.
It’s certainly not a complicated process — but a vital one , nonetheless.
You see, many investors tend to overestimate (and will often even underestimate) the amount of the funds they may have available. And that immediately impacts upon the value of the property you can acquire.
There are two Key Mistakes you can make.
- Unwittingly underestimate your Equity.
When starting out, many Commercial property investors tend to only consider the amount of ready cash they’ve got on hand. Whereas, you will generally find you have access to considerably more than you think.
You might already have a home you own, and perhaps an apartment as well — even though there may be existing mortgages involved. By talking with your Finance Broker (who should already be part of your consulting team), you will most likely to be able to restructure your current borrowings.
In that way, you can release additional funds to add to your available equity.
- Overlook some of your Acquisition Costs.
On top of the purchase price, you also need to allow for things like … stamp duty, legal costs, a valuation and so on.
Depending upon in which State you purchase, your “on-costs” will range between 6.5% and 7.5%. Therefore, I suggest you allow 8% on top of the price — to provide for a comfortable safety margin.
You need to remember that your loan is based on a percentage of the property’s value. Whereas, the on-costs need to come out of your own pocket. As such, you need to ensure there are no surprises when the time comes to settle on your property.
Bottom Line: Trying to factor in all of this can become a little confusing. Unless of course, you do it on a regular basis; or already have access to some software, to handle these calculations for you.
So if you’d like some help with this, you can just go across to where my Clients are given what they need to handle both of these calculations, at the same time.
In the process, you will gain even more valuable background information. Plus, you can also bookmark the webpage for your ongoing use, with any further acquisitions.