Hi all,
I’m just hoping to get some advice.
I currently have 1 investment property that started as PPOR. It’s currently tenanted for last 2 years, about +$10 p/week.
When I changed from PPOR to investment property I didn’t change the loan, currently paying principal + interest. This is under my own name, not company.
I purchased for $205k in 2012, currently owing $185k. Similar properties have sold for around $225k in the last 3 months.
I have some savings (10k), but was hoping to use the equity in the house to get the next investment property. Looking for another around the $200k mark. I have been self employed for 5 years, with salaried employment on and off throughout that time.
My questions are:
– Firstly, is it feasible to use equity to purchase second property?
– Any recommendations for type of loan for second property? e.g. line of credit / low doc, etc
– Is it a good idea to put into company name so each property has its own company? Is there a typical structure that’s usually recommended for investors?Thanks all for your time, appreciate it!
Hi Daniel
where is your property? if you don’t mind sharingThanks
Marisa
MTR:)Hi Daniel,
Assuming a valuation now of $225,000 as per your guesstimate, you would have *accessible* equity of circa $17.5k which could be released if your lender will allow it (if the lender allows 90% cashouts/topups).
This is insufficient for another purchase @ 200k, so you would need to mix your savings in to get a deposit over the line.
Being a near on 95% LVR loan when you purchased, you would have paid significant LMI. Which lender was this with? To avoid paying this all over again (and eating away what equity you do have), you would need to stick with your current lender for the existing property. For the second property it would be dependent on your exact details – the only way you’re going to get useful advice with this is by engaging an investment focused finance strategist. They should be able to assess whether you have the capacity, what structure is appropriate and how to get to the position of buying your next property.
In terms of ownership structure it all depends on the individual – there isn’t a one set path as every persons situation is unique. I would say for all the investor clients I work with, the vast majority purchase in their personal names, with a small amount buying in a trust and almost none purchasing in a company structure.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Your best bet is to speak to an investment savvy broker. With lending getting as tight as it is, really need to strategise which lenders you use if you want to get multiple properties. You’ll find with both the banks and with novice brokers that they only really care about getting the current transaction through and not really much beyond that.
Corey who posted above is an excellent example of that and has financed the majority of my portfolio.
D.T. | DT Property Management
http://www.dtproperty.com.au
Email Me | Phone MeAdelaide Property Management - whole Adelaide metro
– Firstly, is it feasible to use equity to purchase second property?– Any recommendations for type of loan for second property? e.g. line of credit / low doc, etc– Is it a good idea to put into company name so each property has its own company? Is there a typical structure that’s usually recommended for investors?
1. You can use equity to purchase a second property providing there’s enough equity to access and your borrowing capacity enables it.
2. In terms of which loan to recommend – it’s impossible without knowing the finer details of your situation which can only be done via a fact finding session
3. A typical structure for investors involves setting up a second loan/equity release against an existing property and then another (separate loan) against the IP.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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