Hi,
We currently have three properties;
- Our PPoR (valued at $250,000 – load paid off),
- Property 2 bought for $185,000, renovation cost of $30,000, revalued at $280,000
- Property 3 bought for $175,000, renovation cost of $55,000, revalued at $350,000
Total loan is $444,000
Property 2 is rented out on a short term basis grossing $20,000 per annum. We have just finished renovating property 3 and anticipate doing a similar thing.
My husband and I are self employed (which the banks seem to hate!)
I assumed that with $880,000 worth of property and $440,000 loan that we would have no problem in drawing out some of the profit to refinance our next property.
Excluding our PPoR – the value would be 630,000.
However, my finance broker said to purchase another property – the maximum scenario would be – we would have to put up another $30,000 cash to borrow $160,000. So we could only purchase a property for $190,000.
Does this sound right to you? Am I being too hasty in assuming I can purchase another property for a greater amount (or with no cash deposit) using the increased equity in our property?
We don't have any financial details (nor should you put it up) so it is impossible to say.
Best to get a second opinion from another broker. There are many ways to structure an application in order maximise an investor's serviceability (particularly one thats self employed).
Also lenders dont hate self employed – they just require more information. I just had a loan formally approved in 2 days with a second tier lender for a client that was self employed overseas!
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Without knowing your income details it's hard to determine whether the broker is giving you the best deal.
Self employed lending means you need to approach a lender that is more sympathetic to your needs and that is the value that a broker should bring. Provided you have the right information it should be relatjvely straight forward to determine your borrowing capacity and determine the most appropriate lender.
As the above posters have stated probably be best to get another opinion. It might cause some problems at tax time though with using equity from your PPOR for an investment. From memory yoú/your accountant would have to sit down and go over the interest for the investment deductions but it's a good way of expanding your portfolio
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
The Dark Knight wrote:As the above posters have stated probably be best to get another opinion. It might cause some problems at tax time though with using equity from your PPOR for an investment. From memory yoú/your accountant would have to sit down and go over the interest for the investment deductions but it's a good way of expanding your portfolioDepends how it is set up. Separate loan = dream. One big loan = nightmare!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Many thanks for your comments. I will seek further advice. Quick question though… Cant you use the equity in the two investment properties as a deposit for the third so you dont have to front up more cash for the deposit?
Thanks for your replies
Cheers
Gilly
Absolutely subject to the amount equity available in each property. Just make sure that the loans are standalone and the purposes are not contaminated.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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