Hi all,
Long time reader and now first post. There seem to be alot of generous people here who share their intelligence and time with all who ask. So here I go!
We have 600k equity in our holiday villa business which is not our PPOR. They are 7 units on two titles.
We live off site and own a unit which we have 70k equity.
My wife and I are 32 and 28. I am considering starting to use the equity in our holiday villas to start borrowing for investment properties.I feel it is a reasonable time to buy at the moment. We both draw very low wages ( 30K each ) from our business so tax offsets are limited somewhat.
If this was your position, how would you go about investing? I have my own ideas but am hoping someome shares a thought or two which gives me something to ponder!
Thanks in advance,
Andolate
Hi there, how much surplus income is left in the business after it pays the bills on these villas, your wages and so on? Basically what is the net position of the business at tax year end? This will help us understand your ability to service further mortgages, whether it be through the business or outside of it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JacM,
The net position according to the tax office is a loss due to large capital expenditure on renos we did 4 years ago.
We are hoping our large amount of equity we have with the correct stetups( maybe LOC as backup ) will get us going.
Cheers,
Andolate
OK so what do you expect the net position to be on your company's next tax return? Pop down the true net figure and then a separate figure minus any depreciation deductions.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Do you mean a true net figure ie, adjusted profit and loss whereour accountant does addbacks?
I'm basically wanting to establish if your business has surplus money that could be used to service another property loan.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Ok.
This upcoming year we will be in a postion where we have $1500 per month / 18k year extra income due to paying off a loan.
We are also restructuring ourselves which will help by a few thousand a year too.
Sorry for the lack of details but we have a complicared situation which I cant go into here.
Cheers,
Andolate
On the surface, sounds like you could get into another loan. Get in touch with one of the gun mortgage brokers on these forums to discuss specifics. Terry is a solicitor and tax advisor as well which would be particularly handy if you have legal or tax dilemmas to sort through while you are at it.
Richard Taylor https://www.propertyinvesting.com/user/qlds007
Jamie Moore https://www.propertyinvesting.com/user/jamie-0
Terry Waugh https://www.propertyinvesting.com/user/terryw
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Who is the owner of the holiday units? ie what entity?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The villas are owned in two names, my wife and I. We have nexus and rent them to our company for the interest amounts on our loans
I see. Is that a commercial rent?
Shouldn’t be too many issues in borrowing then except for the fact that multiple units on 1 title. Are the two titles able to be separated ie two separate parcels so you could take half to one bank and half to another?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The exisiting mortgages are over both titles so no we couldnt go to another bank. We are very happy with our bank and not really looking to change. My original question is somewhat aimed at finding out what you do would do. ie buy one property to start out, like a unit with good ROI, or buy a block with a home on it, rent for some time then subdivide or renovate later, or lending permitting buy a couple of properties because its a good time to buy.
Due to our low income we pay ourselves we need to find something with a great ROI that is close to neutral or positive gearing if possible.
Would most on here suggest Interest only? Is it the only way to go close to neutral gearing, especially it we are borrowing 100%?
I am thinking we have a LOC seperate from the home loans themselves to fund periods of non rental or repairs required. Can one LOC be used on different properties and claimed accordingly?
Thanks again,
Andolate
Hi Andolate
Best advice I can give you is as follows:
No need to be fond of your bank… be fond of whoever is offering you the best deal at any given moment. This will change from year to year. Be fickle.
Don't restrict yourself by your own ideas. Plenty of clever folks on here that have generated gobsmacking wealth for themselves and their clients as a result of their knowledge. Absorb their ideas, they might just get you to an even better position than you could have with your own ideas alone.
Terry's comment about the two titles and possibly splitting the loans was a very interesting one. Run with it and see where he takes the conversation. There's usually method to the madness of someone's thinking.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
If the mortgage is across both titles could it be split up? Just thinking if your bank doesn't come to the party then you could move part of it.
Also if you are living in one property can this loan be separated and split off? Possibly not by the sounds of things, but if it could then this would be a way of paying off the non deductible debt first.
Anyway, generally, I would set up a new LOC on the property and then when borrowing to buy future property you would take the deposits from this LOC and get 80/90% loans for the new property from a different lender. If you want to use the LOC to pay expenses or interest then you need to be very careful and seek tax advice first.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Ok thanks all,
Am sorting through a few asset protection options, compnay options and personal options at the moment.
Once a bit more refined I wll check back in !
Cheers,
Andolate
Excellent – we'll look forward to hearing about how you get on
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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