All Topics / Help Needed! / Getting Started Property Portfolio

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of glengaryglengary
    Participant
    @jamesbi
    Join Date: 2014
    Post Count: 45

    Hiya everybody

    I want to get some pointers on how to get the ball rolling on starting my very own property investment portfolio :)
    Just speaking out loud and assuming everything runs smoothly -If I buy my first home will I than use the equity on that home to purchase my second home, Will that involve a cross collateralization or could I just set up a new loan? From there will I rent that property out and when capital on that home grows will I use that equity and continue to buy another and so on …. ?
    I know I am missing out on a lot of factors but I just want to get a basic principle idea, how do you guys on this forum do it , it’ll be great to read some experiences, people like you guys and Steve Mcknight inspire me. I can’t wait to start my property journey.

    Profile photo of EngeloRumoraEngeloRumora
    Participant
    @engelorumora
    Join Date: 2010
    Post Count: 618

    Live and breath real estate. Be patient and don’t jump into anything.

    Ask questions of investors who are where you want to be. The only cost you will incur is coffees and lunches haha

    As the saying goes “Make a passion an obsession and you will never work a day in your life”

    • This reply was modified 5 years, 11 months ago by Profile photo of EngeloRumora EngeloRumora.

    EngeloRumora | Ohio Cashflow
    http://ohiocashflow.com/
    Email Me | Phone Me

    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hello

    Purchasing a PPOR and using the equity to fund the deposit/costs on an IP is a good strategy – and one that a fair few of my clients adopt. Here’s an article I wrote on the strategy.

    If set up correctly, it doesn’t need to involve cross collaterisation at all. You just need to set up a separate loan split which will be used to cover the deposit/costs on your IP and then a third loan to cover the remaining balance against your IP.

    So it will look something like this:

    PPOR
    Loan 1: PPOR loan
    Loan 2: Equity release to cover deposit/costs on IP

    IP
    Loan 3: Remaining balance needed for IP

    For your second IP purchase, you could look to either release equity again against your PPOR or your first IP – it just depends on where it’s available.

    You may also have some cash you’re willing to use for another purchase. In that instance, we’d look to inject those funds into your PPOR loan and “reborrow” them to make them deductible. But I don’t want to overwhelm you just yet :-) We can save that for another day.

    My advice is to set yourself up with a good team – that usually involves a good finance person, accountant and legal person. That way, you can worry about finding properties while they worry about the finance/structure.

    Hope that helps.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604

    The strategies mentioned above are sound. You can use a home equity line of credit (HELOC) in order to borrow against your existing PPOR or first IP.

    My suggestion to to focus on the first property and make sure that is good. Take is step by step, and the first step would be to get your first IP. From there, it gets easier to get more propertie ssince you’ve already done it the first time.

    Profile photo of Simon Romijn | Stepping Stone ™Simon Romijn | Stepping Stone ™
    Participant
    @simon-romijnsteppingstonewealth-com-au
    Join Date: 2014
    Post Count: 2

    Dear Glengary,

    Starting your property investment portfolio by buying a first home is sensible. Have you however asked yourself why you want to build a property portfolio beyond building your wealth? Ultimately your property portfolio is a means to create wealth. This wealth, in turn is the source of the income needed to support your lifestyle particularly during retirement.

    Building a property portfolio has been a well-trodden and successful road to build wealth and generate income for retirement. Over the last 20 to 30 years investors in capital city property markets have generally done very well. Investors have benefited from a range of factors that have largely played out: an unbroken 20 year period of economic growth, a massive mining boom, the structural decline in interest rates and the increased participation of women in the work force. Property investment can still be attractive but it is getting harder.

    We believe that there are attractive property investment opportunities in inner city areas undergoing gentrification. This typically means people with higher incomes are moving into areas, buying or renting a mix of new builds and renovated properties. We also believe you should consider your life goals, your expectations, your circumstances and how to manage risk?

    Simon Romijn | Stepping Stone ™ | Stepping Stone
    http://steppingstonewealth.com.au
    Email Me | Phone Me

    Financial Planners & Investment Property Buyer's Agents

    Profile photo of ChrisA1ChrisA1
    Participant
    @chrisa1
    Join Date: 2011
    Post Count: 172

    The strategies mentioned above are sound. You can use a home equity line of credit (HELOC) in order to borrow against your existing PPOR or first IP.

    My suggestion to to focus on the first property and make sure that is good. Take is step by step, and the first step would be to get your first IP. From there, it gets easier to get more properties since you’ve already done it the first time.

    Agree in principle. I like to make sure my IPs are doing the work rather than using the PPOR as a big credit card. As soon as you can, refinance the IPs and keep them on the line, rather than keeping the PPOR’s credit maxed (I appreciate that the loans against the PPOR turn from non-deductible to tax deductible). If it all goes pear-shaped, you could sell the IPs and at least you still have a roof over your head!

    By also keeping your IPs working, you will always be thinking about strategies to improve the IPs (eg are they still in a growth area, can you manufacture some growth to get equity etc). I realise this is slightly off track for this thread, but I thought I would throw in something as you start your path.

    Englo also makes a great point – talk to lots of investors and find out what is happening on the ground both in strategies and market movements. A good place to start may be http://www.propertymeeting.com.au/ if you’re in a capital city. These aren’t the only meetings in property investing happening but can be a start to meet like-minded people close to you.

    • This reply was modified 5 years, 8 months ago by Profile photo of ChrisA1 ChrisA1. Reason: More info

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of EessjEessj
    Participant
    @eessj
    Join Date: 2014
    Post Count: 1

    Hello

    Purchasing a PPOR and using the equity to fund the deposit/costs on an IP is a good strategy – and one that a fair few of my clients adopt. Here’s an article I wrote on the strategy.

    If set up correctly, it doesn’t need to involve cross collaterisation at all. You just need to set up a separate loan split which will be used to cover the deposit/costs on your IP and then a third loan to cover the remaining balance against your IP.

    So it will look something like this:

    PPOR
    Loan 1: PPOR loan
    Loan 2: Equity release to cover deposit/costs on IP

    IP
    Loan 3: Remaining balance needed for IP

    For your second IP purchase, you could look to either release equity again against your PPOR or your first IP – it just depends on where it’s available.

    You may also have some cash you’re willing to use for another purchase. In that instance, we’d look to inject those funds into your PPOR loan and “reborrow” them to make them deductible. But I don’t want to overwhelm you just yet :-) We can save that for another day.

    My advice is to set yourself up with a good team – that usually involves a good finance person, accountant and legal person. That way, you can worry about finding properties while they worry about the finance/structure.

    Hope that helps.

    Cheers

    Jamie

    Hi Jamie,
    Will repayment be made on LOAN 2(Equity release to cover deposit/costs on IP) once this loan is taking out even though it equity from his PPOR?

    • This reply was modified 5 years, 8 months ago by Profile photo of Eessj Eessj.
    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Once the funds are used and balance owing, interest will accrue. As the loan would IO and on a monthly cycle, the next payment cycle interest would be charged.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

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