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Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of MartineMartine
    Participant
    @martine
    Join Date: 2004
    Post Count: 38
    October 9, 2004 - 11:51 am

    Hi All
    Can anyone help me with my queries please.

    I purchased a block of land for $35000 now valued at $80000, owed $10000, used the equity to buy another block for $137500 and build for $135000, borrowed $282500 to pay off initial loan and finance new venture, now valued at $360000.
    1. Do I need to refinance to release the first block of land so that I have this for future equity?

    I aim to rent the house for $200.00 per week with loan repayments at approx $500.00 per week, capital gains is good.
    2. Is this a negative geared property and how can I make it more neutral or positive?

    With the current loan of $282500 and out of pocket repayments of $300 per week after receiving $200 per week rent.
    3. I assume that I would have equity in my first IP if I release it from the bank but how do I manage another loan to buy my third IP without being too much out of pocket? I also plan to rent this one out.

    I have read Steve’s books and some other investment books they are all great and make sense but I am having trouble understanding how to work out the negative, positive gearing especially when there is a capital gains and equity. I hear that people can invest on an average income with little out of pocket, is this True?

    Thanks for your help
    Martine

    Profile photo of Mobile MortgageMobile Mortgage
    Member
    @mobile-mortgage
    Join Date: 2003
    Post Count: 913
    October 10, 2004 - 3:50 am
    Originally posted by Martine:

    Hi All
    Can anyone help me with my queries please.

    I purchased a block of land for $35000 now valued at $80000, owed $10000, used the equity to buy another block for $137500 and build for $135000, borrowed $282500 to pay off initial loan and finance new venture, now valued at $360000.
    1. Do I need to refinance to release the first block of land so that I have this for future equity?

    Providing you have enough equity and the loan is portable, you may be able to transfer the security across to the 2nd IP,

    I aim to rent the house for $200.00 per week with loan repayments at approx $500.00 per week, capital gains is good.
    2. Is this a negative geared property and how can I make it more neutral or positive?
    With the current loan of $282500 and out of pocket repayments of $300 per week after receiving $200 per week rent.

    You are negative geared, Interest only repayments may help increase cashflow,

    3. I assume that I would have equity in my first IP if I release it from the bank but how do I manage another loan to buy my third IP without being too much out of pocket? I also plan to rent this one out.
    From a lending institutions perspective, (depending on your level of income) serviceability may be problem on future debt, a higher return on investment may be an option,

    I have read Steve’s books and some other investment books they are all great and make sense but I am having trouble understanding how to work out the negative, positive gearing especially when there is a capital gains and equity. I hear that people can invest on an average income with little out of pocket, is this True?

    Thanks for your help
    Martine

    Regards
    Steven
    Mortgage Broker

    [email protected]
    http://www.mobilemortgagemarket.com.au
    Ph:0402483216
    Ph:1800 820 500
    VICTORIA

    PLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.

    Profile photo of MartineMartine
    Participant
    @martine
    Join Date: 2004
    Post Count: 38
    October 10, 2004 - 10:47 am

    Thanks Steven
    I appreciate your assistance, I will review the loan docs to see where I stand with these.
    Martine

    Profile photo of SonjaSonja
    Member
    @sonja
    Join Date: 2004
    Post Count: 338
    October 10, 2004 - 10:53 pm

    Hi Martine,

    Would you consider selling to vacant block? I’m not sure what your plans are but vacant land, while providing equity, will not help with servicability on a new loan.

    Regards
    Sonja

    Profile photo of MartineMartine
    Participant
    @martine
    Join Date: 2004
    Post Count: 38
    October 15, 2004 - 11:10 am

    Hi Sonja
    The plan is not to sell but build another rental home on the block, this is the reason why I want to release the title so I can obtain another loan.
    Thanks Martine[cap]

    Profile photo of KrisHKrisH
    Member
    @krish
    Join Date: 2004
    Post Count: 2
    October 17, 2004 - 11:14 pm

    I’m new to Steve’s strategies, but it would be worth considering that unless you are keen on building on the first vacant block of land, a good option to reduce your negative geared rental (wow, that’s a large weekly loss to cover!) would be to sell it, realise the capaital gain, and either put the proceeds onto the big loan to reduce the weekly debt, or do some serious homework and find a cople of positive cashflow properties to offset the loss. I’d probably go with the latter option, then you can almost have the best of both worlds.
    What you might find, as Steve suggests in his books, is that most people can only afford 1 or 2 negative geared properties – how much “extra” cash do you have to support these week in week out? Keep in mind that unless you do something substantial, that weekly liability won’t go away quickly, it could take years.

    Just a thought. Hope it helps.

    Regards,

    Kris

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