Forums / Property Investing / Help Needed! / Borrowing for first investment

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  • Profile photo of JamesBJamesB
    Participant
    @gwiz8
    Join Date: 2014
    Post Count: 5

    Steve recommends in his book that you should only borrow 80% of the total purchase price and fund the rest through personal income, savings. What if you dont have the extra 20% saved, how do you get started. I own a unit worth around 450, 000 and a 230, 000 dollar loan, does the eqity in this property help?

    Any advice would be great :)

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    Hi James

    Welcome to the forum.

    Yes. You can use equity in this property for the 20%. This would allow you to borrow 100% without LMI.

    Cheers
    Andrew

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,173

    WHile you have non deductible debt you would want to borrow 103% of the purchase price of any investment property. If you were to use cash you are virtually throwing money away each year.

    You would do this by borrowing against another property – but do not use more than 1 security for 1 loan.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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

    Hi James

    Agree with Terry – best to borrow the 20% deposit and costs against your current property. Set it up as a second loan – and then take out a third loan to cover the remaining 80%

    Please make sure you keep both properties separate and not cross collaterised.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Hi James

    Welcome to the forum and i hope you enjoy your time with us.

    Ensure that the sub loan secured against your PPOR is a separate loan and then you can look at a standalone loan on the new IP.

    With the equity you have in your PPOR you could always look at increasing the sub loan and looking at investing in a higher cash flow investment at the same using the increased income to pay down your non deductible debt.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of PLCPLC
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    @plc
    Join Date: 2012
    Post Count: 400

    Agree with the others.

    With the figures you have given, you have about $130K to play with in equity with your current property (before incurring LMI). However structuring this equity release is critical to give yourself the maximum deduction possible come tax time.

    This is where a decent broker can be a enormous benefit.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
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    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of JamesBJamesB
    Participant
    @gwiz8
    Join Date: 2014
    Post Count: 5

    Wow,

    Thank-you everyone for all the great advice, I know where I’ll be coming form now on to get guidance :) Looking forward to getting to know everybody!

    speak soon :)

    James

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Pleasure James and most of us old hands don’t bite…

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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