All Topics / Help Needed! / How much equity do i need?

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  • Profile photo of danechchdanechch
    Participant
    @danechch
    Join Date: 2016
    Post Count: 1

    Hey guys,

    I am new to property investment and looking at buying my first investment property but have no idea if I have enough equity or how much I need etc. I want to buy a townhouse around the 280k mark, I have my own house that got valued at 450k month or so ago and i owe 405k on it so 10% equity which is 45k. Is this enough to buy a 280k investment property or do I need more? Any help greatly appreciated!

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    Hey guys,
    I am new to property investment and looking at buying my first investment property but have no idea if I have enough equity or how much I need etc. I want to buy a townhouse around the 280k mark, I have my own house that got valued at 450k month or so ago and i owe 405k on it so 10% equity which is 45k. Is this enough to buy a 280k investment property or do I need more? Any help greatly appreciated!

    Hi Dan,

    If your existing equity is only 10%, doubt you could use much of it, if it all. I personally wouldn’t bother unless the new valuation is much higher?

    To buy an IP at the $280k mark, you would need at least 5% + the purchasing costs (which I usually calculate as 5%) = 10% = 28K.

    Hope this helps? :-)

    Cheers,
    Ethan

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,376

    Hi Dane,
    Ethan’s comment “If your existing equity is only 10%, doubt you could use much of it, if at all” is good comment.

    But if you want to know WHY that is so, do check out this post,
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/page/2/#post-5023105

    and click the link within it to learn even more. Once you see some examples, it will become a lot more clear,

    Benny

    Profile photo of sampson_701sampson_701
    Participant
    @sampson_701
    Join Date: 2013
    Post Count: 20

    I believe banks will let you use 80% of equity, some 90%

    So 450-405=
    45k x .8 = 36k

    Just my understanding.

    Best advise I can give is get in touch with a good mortgage broker who can really help you out.

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    The calculation is a bit different. 80% of 450k = 360k. Since the OP mortgage is already higher, that’s not an option. Need something like 95% and take LMI into consideration.

    Definitely agree that best speak with a professional. It’s free and useful 😊

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

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