Looking at buying second IP before end of 2008. Help please...

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Leda
Member
@leda
Join Date: 2008
Post Count: 2
March 17, 2008 - 9:14 am
As of yesterday my wife and I now proud owners of our first investment property. With minimal knowledge of increasing a property investment portfolio, I am now wondering how do I move to the next step of financing our next investment property. My question is probably one of the basics but its one that I need to get my head around… so bear with me,
This is our situation.
Home valued at                    $440,000
I/P valued at                        $128,500 (brought it for $125500)
total value in properties    =   $568,500
from that total our equity =   $455,800 (80% of value)
Morgage on home    $305,800
Morgage on I/P        $130,000
                          = $435,800
Is it now my understanding this leaves us with only $20,000 in equity.
my question is; should we use this $20,000 to borrow approx another $80,000 to purchase a $100,000 property, or do we have to wait until we have $100,000 in equity to purchase a property. We are looking at $125 K – $145 K properties.
where does the 'flow on effect' occur when purchasing more properties??

Our Financial state as it is…
Combined income $7000 Nett
Home Mortage repayments – $2300 / month (P + I)
Investment Rental income – $620 / month
Investment loan monthly repayments $920 / month (IO)

Any comments will be greatly appreciated.
Regards,
Leda
Dean Lynch
Member
@dean-lynch
Join Date: 2008
Post Count: 7
March 18, 2008 - 3:23 am
Hi Leda, The equity in your property is the portion of the value that is not financed. If your property is worth $568,500 and your debt is $435,800 your equity is $132,700. Some lenders will lend up to 100% of the value of your property and they would require you to pay Lenders Mortgage Insurance or equivalent. This may give you some more room to play and I would suggest you consult your accountant about the claims that would be available. Your income position looks ok but without qualifying further I would be unable to give you a borrowing estimate.
If you have any other questions, please let me know,

Regards,
Dean Lynch
Principle Mortgage Consultant
Australian Mortgage Brokers
E: [email protected]
W: http://www.deanlynch.com.au
Leda
Member
@leda
Join Date: 2008
Post Count: 2
March 19, 2008 - 4:39 am
Thankyou for that clarification Dean. We have read a few tips about cross collatoralisation. Can anyone tell us why this is not a good idea in a few short points. All your help will be grealty appreciated.
Leda