Hi guys, I'm going to start by saying I'm already in love with this site and it's amazing members.
My name is Danny and I'm 24 years old, I have an IP which I bought for $306,000 a year ago, I have $50,000 in available funds in addition to the 20% deposit I paid to begin with, my partner also has an IP which she paid 315,000 for with a 20% deposit and has $20,000 in available funds.
We want to use our equity to keep buying property but can't understand how it will work if we buy another one this month because we won't have any available funds to buy again in a few months. Or is that not how it works?
I apologise if that was a little hard to understand
Thank you
Danny
Can you give figures of IP worth and loans as your figures are not clear.
Have you paid an extra $50K off the loan or is it elsewhere? Where are your partners funds?
Do you have a PPOR or are you renting?
You also need to find out how much you can borrow.
If you buy under market then reval (do a reno etc) then you can withdraw that equity of the next one.
Hi Danny
To try and explain in simple terms, equity is:
"The difference between the current value of the property and the amount owing on its mortgage".
So let's say you bought a property for $300k, you borrowed $260k initially, but have paid some of the debt off and the mortgage debt is now $240k, and the current value of the property is say $350k, then your equity is $350k – $240k = $110k.
You can use this imaginary money that you fashioned out of thin air just by waiting for the house to go up in value by re-financing. For example, you might apply for a new loan with a new bank, who will set up the new loan for investment purposes. In the process of setting up this loan, the new bank pays out the old bank and thus removes the original mortgage. The imaginary money becomes real money available for use in investing. The new bank dumps into a giant offset account until you're ready to buy, and you simply withdraw the cash and use it as deposit and stamp duty on an investment property purchase. Nice
You also appear to have even more cash available, as you mentioned.There are two awesome mortgage brokers that frequent these forums that would sort it out for you in a jiffy, and you'd have your hands on all that imaginary cashola. They are Richard Taylor (userid Qlds007) and Jamie M. Get in touch with one of them and you'll never look back!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thank you both for replying I really appreciate it. We were told yesterday by the bank we can borrow $650,000 which is great, but what I don't exactly understand is how can I buy more property after I use all my equity to buy the next IP?
Yes sorry, Its valued at $306,000, I paid a 20% deposit so the loan was $244,000. I have paid off $50,000 all together. My partner bout her property for $315,000, it's still valued at that price and she paid a 20% deposit so the loan was $252,000. She has paid off $20,000. We both live with our parents rent free, my unit is rented for $340per week and hers for $$380per week.
So yours is worth $306K with a mortgage of $194K? It is easier to just say that if I've interpreted correctly.
So yes you have $50K + $20K to spend. When you say you've paid it off do you mean you have directly paid down the loan or put it in an offset account? For future reference always put money in an offset account that way you can do what you want with it. Paying down a loan also makes a big difference if you wish to purchase a PPOR one day. If you pull the money out of the IP it won't be tax deductible.
So how do you buy another after this one? you buy well and reval (as I mentioned) or add equity in some way (reno/subdivide etc) or wait for CG.
Have you considered buying cheaper properties. That way you could buy 2 and usually the yeild is higher. A low yield will slow you down too as banks look at your serviceability.
Great info thanks. Yes we are looking at houses worth less than $300,000 few hours north of Sydney and also west of Sydney. We have been finding a few run down potentials with rental returns of above 7%. Do you recomend I look at any areas in particular? Broken Hill is Standing out so far in Terms of rental return but I'm far from experienced and still need to do a lot more research.
Hi Danny,
Have you tried the Mount Druitt area – the rental returns are 7% and there are some good properties on offer.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
You also appear to have even more cash available, as you mentioned.
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