Suppose you had some friends that were willing to let you borrow $350,000 for a couple of months without interest.
Which method would be best for obtaining a property valued at around $280,000?
a) Buy the property outright for $280,000 and then get a loan based on the value of the property.
b) Buy the property with a 20% deposit, and ignore the rest of the cash.
c) Any other ideas?
Thanks in advance.
For me personally, I would do: b) Buy the property with a 20% deposit, and ignore the rest of the cash. I would want to be in debt to my friends as little as possible, just in case anything stuffs up.
Interesting situation, I would try and borrow as little as possible because a few dollars between friends can quickly turn friendship into enemies, that is the last thing you want.
Care to explain how this exactly works, like if they give you enough money for the deposit, are you going to be able to save up enough money in a couple of months to pay them back? Sorry it just sounds like a bizarre situation, if you were able to save enough money in the couple of months to pay them back, then I would just hold off buying a place and then only buy it once you can afford it properly.
It's a hypothetical situation, whereby if you could obtain enough cash for a temporary period of time to purchase a property outright; would it be better to:
a) Purchase the property outright – then get an equity based loan.
b) Purchase the property via a standard home loan.
Ie. Is it better to borrow against the value of an all paid up property – or is it better to just go via the normal home loan route?
Depends on the buy in price of the property as money is made at purchase, in the short term.
You could potentially buy a property for cash under market value preferably and do a reno, get the property revalued and repay all of the money.
Not recommending you do this as I don't no your level of expertise and you would have to have all your ducks lined up and know what you are doing to pull it off but reckon its possible.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Option
If your overall financial strength works out and your eligible …Buy property at 90% LVR or more. Keep rest of the cash in offset to offset the interest till it's repayable – This will limit how much you borrow from your frd…esp given your frd will start to charge you interest later on
– Loan is a 30 years loan at standard rate
– Interest is deducible for tax reason if property is rented out.
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks heaps Shape – I like your suggestion.
Much appreciated.
Lots of issues with borrowing that much money – what if you or them died? The loan needs to be clearly documented. What if you became insolvent – they could lose their money.
What if you couldn't give it back? What if you purchased for cash and then couldnt get a loan
etc
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
Thanks Terryw … I was hoping for more of a focus regarding investment strategies – i.e. would it be better to?:
a) Purchase the property outright – then get an equity based loan.
b) Purchase the property via a standard home loan.
d) Buy property at 90% LVR or more – Keep rest of the cash in offset to offset the interest.
I think terry understands your question, he's just putting up his 2 cents on the potential legal issues which could be bigger than the potential upside.
Provided everyone is agreeable and it is well documented legally I would run with shape's suggestion personally, then add in the Reno and refinance Colin suggested.
Thanks tommytucker (and Terryw).
If your overall financial strength works out and your eligible …Buy property at 90% LVR or more. Keep rest of the cash in offset to offset the interest till it's repayable 
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