[esnamMember@esnamJoin Date: 2006Post Count: 8]

August 24, 2007 - 4:00 am

Servetus – correct me if im wrong but put simply it sounds like your strategy involves borrowing against the increasing equity to purchase more propertes keeping your lvr at a comfortable level. However it is my understanding that this will only work with certain lenders, as you say they do not require to show income. 

(this does not work with the big banks as they still take into account your income and serviceability – and thus your normally restricted to 2-3 negative geared properties on an average income before you reach servicability ceiling.) 

Are you saying that as long as you have the (20%?) deposit for the loan they are willing to lend you the money as long as you claim that you can make the repayments? or do they just valuate your properties and are willing to lend the max amount as long as you declare that you wont struggle – (up to the 2.5mil that you said?)

Terry why do say you have to be careful with which banks you use? are you talking about the big banks or the other mortgage lenders?

[esnamMember@esnamJoin Date: 2006Post Count: 8]

February 8, 2007 - 4:16 am

hi debbie, i was asking myself the same questions as yourself before i noticed your posting. I too have a mining town property thats boom in south hedland, and was thinking of selling that to pay off my debts also.
my general thoughts were – i think the mining towns have peaked (for now, until the next 7-10year boom) and i do believe we are headed for a down turn, and i also have a negative geared property. If you sell i believe you would lose about 25- 30% approx of your profit (please correct me if im wrong – 50% of profit is CGT and then you get taxed 47% on that CGT (depending on tax bracket) = 25% off profit then + selling cost etc)

you would then take that profit in put it into your negative geared property. For me its like swapping your positive cash flow mining property with a property in a good location and better chance of capital gains (which is now a positive cash flow after you use profits to reduce debts).

my main concern is if interest rates go crazy again like15% type crazy. +ve geared properties will not be affected that much though so it is safe to hold, but how many -ve geared properties can you hold? (not many)

but im still just as confused as you
all the best

[esnamMember@esnamJoin Date: 2006Post Count: 8]

December 11, 2006 - 3:06 am

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good luck with all your investment

[esnamMember@esnamJoin Date: 2006Post Count: 8]

November 8, 2006 - 11:01 am

equity is important because it allows you to use the greater amount of equity to purchase more houses. The way the banks work is generally they will lend you 80-95% LVR. So for instance you have the $200K and paid of the 50K with no growth in value then your LVR is at 75% however if its gone up 50K to $250 then your LVR is at 60%. If you bought another house with using only 50K equity it would probably push your LVR over 80% which means you would have to pay the LMI fee, whereas if you had 100K equity you wouldnt have to pay this fee.
correct me if im wrong anyone

[esnamMember@esnamJoin Date: 2006Post Count: 8]

November 7, 2006 - 5:11 am

hi correct me if im wrong but this is from my experience. that was my thoughts about 2 years ago, buy as many +ve cash flow properties as possible, but in order to buy a lot of properties (65 as you say in your case) you need 2 things! income and EQUITY!! just because properties as self sufficient (+ve geared/+ cash flow) doesnt mean the bank will allow you to buy as many as you want (maybe 2-3?) you still need to consider LVR and paying LMI. Buying high return properties with give you the servicability but having little equity will reduce the number of people willing to loan you the money. (you may be able to go to non-major bank money lenders, but im not sure what their lending criteria is!) it didnt stop me buying, but you just have to do it steadily! realistically 1-2/year? thats what i think, let me know what you think? good luck