Hi all,
I currently own a 2 bedroom free standing unit investment property close to shops, buses, beach, schools etc worth around $230,000 with a mortgage of about $115,000 which rents out for $220 a week. I would love to buy more properties but the problem is in my chosen profession, wages are very small (about $30k) which leaves very little room for further purchases. As the mortgage stands now, repayments take up a lot of my take home wage, so borrowing equity from this loan would be very difficult. How can I proceed from this situation? I hear you say "change jobs" but other than that is there something I can do?
Cheers,
Bob
You can access up to around 90% of the value of the property which is $207,000, minus any outstanding loans ($115k).
So, you could theoretically access $92k; depending on loan serviceability.However, in view of your current financial position, you wouldn't want to buy anything negatively geared just now.
maybe an established and profitable business, or high yield shares etc that are positive cashflowed to offset the negative of the I.P.
Hi Bob a mortgage of $115k should be positively geared, in other words the rent comming in should be covering the mortgage. Do you have the loan at interest only? sounds like you may need the loan restructured this would possible free up more money for the next
Hi, the position as you describe is a bit wobbly. For comparison, most people [me included] have IPs like this.
Purchase price = $223000
Loan = $174000
Rent = $220 pwNote that this is still -ve geared.
We then proceed to save like a mad dog to pay off the home loan on PPOR that was used to fund this IP.
Then the mortgage payments lessen & we have more cash flow while still maintaining a fully tax deductible IP.
I'd employ more patience in your case lest you fall into the zone of 'margin for terror' as described by Steve.
Of course you may have your own way of coping in which case, I wish you all the best,
Kum YinHi Kum Yin Lau,
I am a little confused as you say my position is a little "wobbly". You mention you have an IP that is worth around the same as mine and maintaining the same rent as mine but your loan is a lot higher than mine ($174k of yours to $115k of mine). As my IP stands now it is positively geared and has theoretically $92k that I could access (as LA Aussie suggests). Sorry, but I'm a little confused how this is wobbly???
Cheers,
Bob
Hi Bob. It is not 'wobbly'. Some feel that investment property should be 80% LVR (or higher) regardless of what other debt people have, but in the current economic climate, if someone has non tax deducable debt, (such as a credit card or there own home loan) it is a great idea to try and pay off other debt, and thus effectively decrease the LVR on the loan. With your equity, you are in a good position to 'pounce' when the right deal comes along, but it would need to be CF neutral (or positive if you can make/find one). Bear in mind too, there are lenders that will do a PAYG Lodoc loan at 70% lvr, so if you just have to have a property now if you find a good one, that may be an option.
Tassie eh? Beaut spot……tempted to 'emigrate' there one day…..
CheersHi again, sorry, MISREAD! $115000 loan is probably 45% LVR on improved property valuation. I misread it as $215000 loan.
You have about $85000 excess equity. Congratulations.
FYI, my currently -ve gearing property was undervalued when I bought, I asked for revaluation ten months later, the bank put it at $250000. Currently, the price of similar houses is around $275 to $300 thousand. i have submitted plans for a sub-division with a renovation to the existing house. That was the original reason in buying this property.
I didn't mean to shake or annoy you, it was my mistake in not reading carefully.
Good luck with your next purchase,
Kum Yin
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