ok still saving for deposit for first home.. but I’m thinking ahead!
Say Ive got my personal debts cleared, and my partner and I are living in our first home.
Is it just a matter of paying the loan down so that the equity acts as the deposit for a new IP?
Yep, it’s as simple as that [suave2]
Well, that’s one option anyway. You might want to do a forum search on buying an IP first v’s buying a PPOR. There are plenty of other threads devoted to the steps involved and all that.
That is one way.
You could look to make some improvements to your home that will add value. Ideally you do not want to spend a dollar that will make a dollar – rather spend a dollar that will make $3. you will need to research this as to what will add the most value (will the work you do add value?)
Eg Buy house worth $180K. you could paint it, replace floor coverings, work on garden, relaminate kitchen cupboards (rather than replace) etc. you do some of these and spend $8000 on this. A bank valuer may come around and revalue house at $220K – which means your home has increased by $40K and if you refinance you could draw down $32K (80% of increase) and boom there is your next deposit. (now consider how quickly you could get this work done – you may even be able to get it done before the settlement date)
Be warned tho – you spend time and effort on things which will increase value in a valuer’s eyes – not your own.
But this strategy is very heavy geared towards the old saying YOU MAKE MONEY WHEN YOU BUY, NOT WHEN YOU SELL. Bottom line – pick up a property from a desperate seller.
Compare this to saving money and putting it into your loan. At an extra $1000 per month it will take you up to 2.5 years to achieve the same value increase in a flat market. And that is 2.5 years you may lose in other opportunities.
Buy, add value, refinance, redraw and use as deposit for next place, buy add value, refinance, redraw etc etc etc
Works for me
OSS
Old school Skata, 8 weeks ago we borrowed all the money for an IP and renovated. I went back to the bank and now can buy another one, but we used the equity in our ppor and iP to get this further loan. How do you redraw? Do you use the same bank each time, Is what we’ve done normal? I would like to ‘redraw’ but I was just grateful to get another loan. ( I hope I’m making sense)
Hi Inez,
Basically, a redraw facility allows you to redraw the principle and any extra repayments you deposit into the loan,Most lenders have products with redraw facilities available, some lenders do charge a fee per redraw and others offer a redraw facility with no fee, certain lenders have a minimum/maximum amount per redraw while others do not.
Check your loan documents or contact your bank to see if you have a redraw facility available on your loan. Cheers.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Nice work inez.
I use the same lender. I explain to the lender what my plans are, provide them with figures and sales figures on other properties in the area for renovated homes. Bank gives me finance and line of credit and when the work is done, i apply back to the bank and ask for a variation on the loan limit. Bank then commissions valuer to revalue, bank then makes available 80% of whatever increase in value is there. No need to supply bank with all that info as per original application as they have it on hand. Usual costs for the valuation are about $300. I initially went through a mortgage broker to seek a list of lenders firstly.
After reno work done, rent usually goes up, this supports new valuation – additional funds are placed into redraw facility. I redraw for another deposit on investment property.
OSS
Thanks very much guys.
Originally posted by Old School Skata:Be warned tho – you spend time and effort on things which will increase value in a valuer’s eyes – not your own.
EXACTLY..Replacing a roof at a cost of $4000 that has major faults will not increase the value of your IP too much, but spend that same $4000 in the Kitchen or Bathroom and you’ll surely get added value IMO..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorUp to a point Redwing,
My personal philosophy with all buildings has always been look after the roof and the roof will look after the building and stop further damage and more importantly painful whinging from tenants. The 4K you spend on the roof might save you 20K damage next winter. Wet timber for termites, stains on ceilings & walls / mold / etc etc.
I agree that the roof is out of sight out of mind and one of those nasty structural things, but it sure is handy in keeping out the weather, which is the root cause of most of your subsequent troubles.
If I had the choice of replacing a roof with major faults, or fluffing up the kitchen and bathroom, I’d go for the roof option every time. get the valuer round in 6 months time when the growth on the land has swamped the bathroom reno by a factor of 4.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Sorry Dazzling I should’ve been more descriptive; I was thinking about a property we’d looked at recently that needed work, including a lot of work on the tiled roof (loose and cracked tiles, possible water damage )as well as internal renovations and work in the gardens.
The next property at about the same price had a beautiful roof but also needed internal renovations and work in the gardens.
My choice after weighing up other pro’s and cons was the second property as most people ‘expect’ a roof to be sound, spending additional money on the first property as opposed to the second didn’t seem worth it, I wasn’t for a minute considering spending money on a kitchen or bathroom to the detriment of a problem roof ..
Gotta be more careful when I post..[blink]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator
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