Hi,
We currently own 2 IPs in Sydney and are currently renting. We bought IP#1 in 2008 and IP#2 in 2010 (using equity in the form of a LOC from #1). In the future we would like to move closer to my family in Brisbane so i’m thinking it might be time to look for IP#3 in Brisbane that would eventually become our PPOR.
In the current market i don’t expect our current IPs to have increased in value greatly so i’m not sure if this would be risky or even possible! Anyway these are the figures:IP#1
Loan amt $314K
Current est value $410K
Current rent $400/wkIP#2
Loan amt $326K
Current est value $390K
Current rent $390/wkFuture IP#3 purchase price appx $450K rented at appx $430/wk
So what i’d like to know is how much equity can we use (is it too risky refinancing each property at 90% LVR???) and how much of our own cash should we use ?? There is also the option of doing a quick reno with the aim of increasing the equity in IP#2 but we’re busy people and would like to avoid that at this stage if possible!!!
Sorry for the long post but any advice is will be greatly appreciated!!!
Cheers!
KHi K
It looks like you have enough equity to cover the next purchase – which I'd (personally) be inclined to use over cash due to it being deductible and cash being a good risk mitigator.
Whether you should sit on three properties with high LVR's comes down to your own risk profile and what you'd feel comfortable with.
From an equity point of view, it looks like the deal could be done. From a borrowing capacity point of view – there's not enough info to advise.
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]
It seems that you are able to get the third IP, but that being said it all happens with how comfortable you are with the extra debt. I know some people do not like the extra stress that comes with extra debt, other people do not see it as a risk and are comfortable to take it on knowing the tax benefits and believe the capital gains will make it a worthwhile investment.
But looking at the numbers – your current debt is $640k, your weekly income from rent is $790/week. The interest repayments per week would be $800 per week (assuming 6.5% interest rate). So you are $10 per week out of pocket, however I assume the rent was gross return, so really you may be about $150 per week out of pocket? Depending on your disposable income it will really see if this is sustainable or not.
If you do go for the extra property, that will give you $1,090k in debt, with a rental income of $1,220/week. The interest repayments would be $1,362 per week. So now you are $140 per week, and again assuming this is gross rent, you may be more likely about $350 per week out of pocket. And again look at your disposable income to see if you can afford to maintain these loans.
Keep in mind to factor a rise of 2% in the interest rate assumptions to see if you can still afford to sustain the loans.
Whilst as Jamie mentioned there is enough equity on the surface without more detailed information it is difficult to provide an accurate assessment.
I am not sure which part of Brisbane you are looking at but 450K doesnt get you much these days.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks for your input guys! Its given me the drive to contact the mortgage broker tomorrow!
Our borrowing capacity was calculated to be appx $480K on just an online bank calculator so i’d need to confirm this with the broker. The previous purchases have given me confidence that we can manage high LVRs particularly with secure jobs and i’m comfortable with debt, especially when its a worthwhile investment. and as you said, if we hold on to our cash, we will have that to service the loans.
Am i right in thinking equity wise we can access $55k from IP#1 and $25K from IP#2 (with 90% LVR)? And i’ll convert the mortgage for IP#2 to a LOC aswell?
Cheers,
KHi richard, we’re thinking of around the Keperra/everton park area which is quite affordable- my parents are in Mitchelton. Just a quick look on realestate.com there are quite a few suitable properties.
What details in particular would help to make a more accurate assessment?K
K,
In terms of structuring, yep, most lenders will allow a max 90% LVR for cash out, so those amounts you have are correct if the valuations are right. You need to be aware that LMI will be charged with the increases though. Whether these charge can be capped onto their respective loan depends on your lenders policy.
In accessing the equity, I would suggest a split on each loan with either LOC or IO loan for the new funds, so it doesn't get mixed with other funds and will be nice and easy for tax purposes calculations, especially considering the third property will be a PPOR in the future.
Hi K
Keppara was recently voted as one of Australia’s Top 100 suburbs so if you buy in the right part probably can’t go far wrong.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yeh richard, we lived there for a little while 6 years ago so hopefully we know the area well enough to avoid the undesirable parts!
We were most likely going to use a buyers agent since we will be long distance buyer – can anyone recommend a reputable BA in Brisbane?
Thanks,
KKRH83 wrote:We were most likely going to use a buyers agent since we will be long distance buyer – can anyone recommend a reputable BA in Brisbane? Thanks, KAndrew Allen – http://www.allenrealestate.com.au/
We share a few mutual clients at the moment – all are happy.
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]
Jamie beat me to it.
Andrew is a good operator and you cant go far wrong there.
Give him a call and see what he suggests.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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