Last year I bought an investment property with my sister.
We are currently living in it (for 6 months) as we utilised the FHOG.
We anticipate to get new tennants in the property early next year. (we also had a depreciation scedule set up for taxation purposes
Once that occurs i would like to figure out my option to utilise the equity in the property to help me buy either another investment or a home to live in.
The property was bought in June Last year for 340k and there is 248k remaining on the mortgage. (the loan we set up was a 3 year variable economiser loan).
Although I have not had the property valued as yet, I am sure the value of the house has gone up in value
As I am just new to this business of property investing, I would like to learn more about what are the best options to obtain another property and is it neccassary to change my current IP loan structure to maximise my ability to get another property.
Thanks
Look at what a line of credit can do. Do a search on this forum on LOC or line of credit for numerous postings on the subject and then go and ask your lender if they have such a facility and what costs are involved..
Hi Nicole
Welcome to the forum.
If this property is going to turn into an investment property in the future, you should convert the loan to 'interest only' with an offset attached. If the loan is with CBA (you mentioned economiser) it will cost $300 to switch to 'interest only' and their offset (the MISA) will be free to set up. Note – the MISA is a bit of a pain in the bum when it comes to offset accounts (it's….well….differen't). If you do a search on MISA you'll see other comments.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Yes we rented the property initially for 11months then we moved in for 6 months due to the FHOG and will move out again in February so we can get new tennants in. The loan is indeed with CBA.
Regarding the interest only loan with an offset account, how does that structure benifit a investment property.
I would assume but will definitly check with the banks that an interest only account allows the option of a variable or fixed structure.
Hey Nicole
With the interest only loan. It gives you greater flexibility – basically, think of the offset as being the place where you park all the principle repayments. If you have a $100k loan, and place $10k in your offset, you're effectively paying interest on $90k ($100k loan minus the $10k in the offset). However, if you want to take that $10k out (ie. because another investment deal has come about) – there's no dramas, it's your cash – no need to redraw, access equity, etc. Just take it out and the loan goes back up to $100k. In the mean time you would have benefited from lower repayments.
Secondly, an interest only loan on an investment property has tax advantages. Particularly, if you have a non-deductible mortgage (ie. the family home). You're better of making extra repayments into an offset attached to your non-deductible mortgage (family home) while keeping your deductible debt at it's current level (ie. not paying it down).
The general advice I give clients with multiple properties is to set up all loans as interest only (investments and home) and place an offset account against the home loan (PPOR). Continue to make regular repayments into the offset (at least the equivalent of what the principle would have been) – the offset is also a great place to park any spare cash.
Hope that makes sense.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks for the info Jamie, i understand the way it works no.
I currently dont have a PPOR , just the investment property. So im not sure if it is in my best interest to buy the next property as a investment or PPOR.
I would go another investment property and rent somewhere to live.. and the max price will depending on available equity for funds and your servicing capacity. In fact if you buy well i.e. pos geared in a good growth area you will maximise your servicing and do really well.
thanks for the info Sue,
If i made just an assumption i would estimate the equity would be between 100k-150k.
As this is a joint investment property, i am unsure if it will affect my ability to use the equity in the house.
your information is much appreciated.
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