TerrywParticipant@terrywJoin Date: 2001Post Count: 16,173
The normal way.
I would suggest you set up a a LOC on the existing properties and then lend then money to the entity purchasing the new properties. Depending your your price range etc you may want to put down 20% deposit to avoid LMI or to go aggresssive and go for 90 or 95% loans.
BTW, the market and lending has changed dramatically in the past 10 years or so since that book was written.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,010
Firstly welcome to the forum and I hope you enjoy your time with us.
As Terry mentioned the normal recommended way is to take out a Line of Credit or equity loan against your existing securities and use these funds to as deposit and acquisition costs for the new investment property being purchased.
After a couple of years we revalue the investment properties and looking at taking the standalone loan back up to 80% of the increased value and use the funds to pay down the LOC enabling the funds to be re-used again for further deposits.
I purchased and still own 40 properties which i acquired over a decade to 2004 before i retired for the first time. 37 of these properties are fully paid off and the balance of the loan will be gone by mid next year so it can be done as per Steve's book however the market has changed and you probably need to adopt a slightly different gearing and repayment strategy.
As a Buyers Agent with representation in Qld, NSW and VIC we get asked regularly by clients how to structure their lending to enable them to purchase multiple properties.
I say to all of them with sufficient equity / cash resources and serviceability thru rental and personal income there is no reason why you cannot purchase a serious number of properties and live off rental income for the rest of your life.
Going forward however with no guarantee off capital growth you also need to focus on rental yield.
Yours in FinanceRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,010
No they will want information information on all of your own personal assets and liabilities. In norm where you own other property joint with your wife or other party they will allocate 50% of the rent (assuming it is an IP) and take 100% of the loan liability i.e PPOR repayment.
Hence the reason to ensure it is structured correctly with the right lender as otherwise your investing journey will come to a very quick end.
As for suburb information it depends on what you are trying to achieve from your acqusitions.
Yours in Finance
A few things to think about are:
1. Buying entity. You could potentially buy even more properties inside a smsf
2. Proximity to retirement age, will largely dictate strategy.
3. Proximity to retirement age, how much spare time you have and whether your time is better spent generating the cash as a CPA will dictate whether you should DIY or outsource the assembly of the portfolio.
It is a shame, sounds like your clients have bought properties that are not appropriate for smsfs. As you say, the property needs to pay for itself. I buy properties for client smsfs every single week. Low maintenance, high rental demand, good growth, and the properties pay for themselves. With a strict set of criteria the smsf can thrive. And laugh all the way to the bank.
Hi Jacqui, great. Thank you. I will get in touch with Richard.oc1Participant@oc1Join Date: 2012Post Count: 148
You could also develop the 5 properties. If you do the sums right you can end up with positive cashflow properties which would cost you less than market value and stampduty only on the original purchase of the land.
Food for though.
Hi Oscar, thank you for your advise about developments. How much would it cost approximately to obtain all permits, subdivision and construction of a two bedroom townhouse? And normally and practically how long would the process take from start to ready for rent?Don NicolussiParticipant@donJoin Date: 2005Post Count: 1,086
Hi Guys, as first port of call I would get some valuations done to see what the real equity position of your portfolio is in the eyes of a potential funder. To be serious you really have to look at investments and funding that don't rely on you wage income. Low LVR commercial real estate – but only if you have experience.oc1Participant@oc1Join Date: 2012Post Count: 148
The answer depends on a range of possibilities. As a guide a standard 3-5 unit site from beginning the town planning process to the handover of keys would range from 12-24 months. It depends on who is running the job, the complexity of the design, how smooth it runs through council etc etc.
Cost wise $1500pm for a decent finish. This still depends on where you are developing as each area tends to have a different level of expectation when it comes to the standard of finishing.
OscarDon. wrote:Hi Guys, as first port of call I would get some valuations done to see what the real equity position of your portfolio is in the eyes of a potential funder. To be serious you really have to look at investments and funding that don't rely on you wage income. Low LVR commercial real estate – but only if you have experience.
I’d be very careful about the method of this approach. I would not have a lender value a property they already have the mortgage over. You could find yourself in a spot of bother if they decide the property is worth less than what you owe them. Wouldn’t be nice to be asked to balance things by handing over a big wad of money.
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