Hi guys, I currently live in my own home. my house is worth $410K and i owe $314K. I would like to find a property to renovate then rent it out and Hold. Ii can then get it revalued access equity again and repeat the process. i am just wondering what type of loan structure would be suitable for something like this?
Hi Bugeye,
Yes there is nothing stopping you from purchasing a property and renovating it and then using the equity built within the property to fund for further IP purchases. You need flexibility in your loan structure in case you need to move lenders. This means a variable IO with linked offset.
One important question – are you doing the renovation yourself or getting tradespeople?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi bugeye
It's certainly doable – this is how I kick started my portfolio.
Providing your borrowing capacity is ok – you can tap into the equity in your current property which will act as the deposit/costs on your first IP.
After you've purchased the IP and carried out renos, you can have it revalued and if it's gone up, tap into the newly created equity and repeat.
Some things to note:
– You need to make sure your PPOR isn't crossed with your IP.
– You also want to use a lender that will enable you to access future equity in your IP with little hassle.
A decent broker should be able to advise and set-up.
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 Bugeye
Your strategy is one we work with for forum clients all day long so is nothing new.
Structuring your current loan to ensure you create a sub loan is important as you want to separate the 2 loans and definitely don't want to cross collaterise the loans.
Other issue will depend on the lvr on your future Ip's.
Whilst the lender may allow re-valuations and equity access if the loan is mortgage insured the insurer may place restrictions on the extra funds.
Finally of course persuading the valuer the property has increased in value is a separate issue.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hey bugeye,
That's a good strategy to go for, and in the long term can and will make you wealthy if you continue and repeat the process again and again.
A good mortgage broker can help you with the loan process.
Have you started looking for properties already? Found any good ones that suit your goals so far?
HI Bugeye,
Not a broker so take what I say with a grain of salt.
You cans et yourself up with a line of credit secured by your existing home. For example assume you can extend your existing loans to 90% this will provide you with a line of credit facility of approximately $55K as follows:
Current value ($410K) x 90% = $369K – existing debt ($314k) = $55K. *
The $55K then provides funds for deposits and purchasing costs.
* The $55K will be reduced by approx $7K or 8K (notional allowance for lenders mortgage insurance) Note it has been a while since I looked at LMI premiums so that may be out. I understand LMI premiums may have increased in recent months so look at the process rather than the numbers.
I would recommend you seek the services of a good broker who understands property investing and property investors. They will be able to help you set up your loan structures correctly from day one. A little bit of foundation work now will be invaluable as you move forward.
Hi everyone and thanks for the replies, ok so a few things i will tell you. The loan i have is a DHOAS home loan with NAB it has an offsett account and Department of veteran affairs pay me a subsidy of around 255-300 a month off my principal for another 11 years because i was medically discharged from the Army. I don't know if they are very flexible with making a new sub loan or to get a line of credit to access equity. i have a good mortgage broker in mind i am going to go see shortly though.
I have a casual job operating machinery bobcats and excavators that sort of thing. So i am sure i would be able to renovate the back yards and save some cost their and also with demolition side of things i can do all myself. I would be using Tradie mates to help with tiling.painting,electrical, all that sort of thing.
No i have not found any properties yet but am looking, I live in Townsville and their are some suburbs im interested in.
Im also interested to see how much borrowing capacity i have if i was to not redraw any equity.
I currently have a income of 55k before tax plus my casual job which averages out to about 400 a week after tax.
i have a car loan for my gf that owes about 15k and i have credit cards to a max of 8k. My home loan is $2218 a month
How much more could i borrow?
thanks for all the great advice guys i appreciate it.
Your broker will be able to tell you how much you can borrow across different lenders (different lenders lend different amounts). Based on some conservative assumptions, you can borrow well above $500k.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hey bugeye,
Its a good strategy to go for, Did u decided how much you are going to spend on your first IP? make sure stick to your budget.
Regards,
Sydney
bugeye23 wrote:i have a car loan for my gf that owes about 15k and i have credit cards to a max of 8k.
How much more could i borrow?
Hi Bugeye,
Part of being a successful property investor is being a proficient money manager – I, for one, would see some advantages to you and your borrowing capacity going forward if you managed to get rid of some of this debt asap.
Having personal loans and large credit card limits (used or unused) will be a hindrance to your borrowing potential.
As Shahin has mentioned your good local broker should be able to sort this out for you.
Assume that the Casual position has been going a while as some lenders like to see 12 months employment.
Sure you Broker will be aware but make sure your lender allows revaluation and "cash out" to at least 90% as many don't.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Well…
I am also looking for a house in london which must be fully furnished and based or two bedrooms with attached baths and a TV lobby.If you know any available apartments or can give me the info of expert real estate agents in London then it will be very grateful to you.
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