Hi guys, just joined after trawling through some of the incredible resources available on this website.
Quick snapshot of my situation:
24 from Melbourne
Currently own my PPOR in a partnership with my mate, we are both carpenters, I have around $130,000 in equity in this home (my share), and around $200,000 in cash atm to invest.
Self employed, but high earning, I'll be receiving my unlimited builders license in July, and as such looking to increase my investment portfolio as much as I can in the next few years to take advantage of the low interest rates/depressed prices currently available in the market.
My strategy revolves around investing in areas whose mean unit price is relatively close to the median house price. Identifying properties on large enough blocks, set close enough to the front boundary with reasonable access to the back, Subdivide, develop 1, 2 or 3 units on the back property, as well as rennovate the existing dwelling.
I'm also interested in renovating for positive cashflow.
Basically, what I'm asking is what structure would enable that I don't max out my borrowing capacity?, especially dealing with construction loans on developments, as Ideally I'd like to keep these units for their returns if possible.
Also, could anyone point my in the direction of a seminar/mentor from someone with experience in the strategies im looking at undertaking?
Also, I'd be interested if someone could refer me a broker in Melbourne that they have had positive dealings with.
Chris.
Hi and welcome aboard.
I can't comment on your borrowing capacity without knowing the finer details of your S/E financials – which I wouldn't expect you to air on a public forum
You've got a good equity base to get you started – to access that equity, you'll need your mate to agree to the equity release as well.
Going forward, I would avoid using your own cash for deposits on IPs – instead, you can look to inject the cash into your PPOR loan and reborrow for IP purposes.
When financing properties that you're looking to subdivide/develop – you'll need to use lenders that are conducive to this, preferably lenders that allow multiple dwellings at higher LVRs.
Pete Tersteeg from Sage Lending is in Vic (Nunawading)
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]
a couple of things to consider is possibly going for a lender that has a common debt reducer as you have joint debt with an external party. Most banks would take the full joint debt against your PPR where a couple will accept only your portion of the debt.
I’d be calling Jaime, rumor has it he’s a gun. Any baby yet Jaime or we still have to keep on waiting?
How long have you been self employed?
There is a big difference if you are planning to construct 2 vs 3 vs 4 dwellings on a single title. This will be a crucial thing to consider when choosing the lender. Most lenders will do 2, some will do 3 and very few do 4.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
jmsrachel wrote:I'd be calling Jaime, rumor has it he's a gun. Any baby yet Jaime or we still have to keep on waiting?Only 2 weeks and 6 days a way
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]
Something I hadn't considered, purely because I thought it would reduce my pool to fund deposits by 20%?
If I theoretically paid off the rest of my loan of about $181k with cash on my PPOR, refinanced to tap into the equity, wouldn't 20% of that be trapped as "lazy money" so to speak? Where if I kept it as cash, I would have an extra $30k or so to fund deposits?
Was more touching on the trust aspect of structuring, I know Steve mentioned it as a way of continually increasing your borrowing power forming companies as trustees etc But I've seen that opinion refuted on here by a few of you guys.
Thoughts on that Jamie?
– I've been self employed for around 2.5 years.
– In regards to the title question, I'll be looking at subdividing these blocks, the sizes I'm looking at, it probably won't be more than 2 on a site.
Anyone know a seminar worth while on this sort of strategy?
I don't see why you would max out your borrowing capacity. If you ideally want to keep some of the units you develop. Then make sure what you are developing puts you in a better cashflow position after you have built it.
Ie your current income could service a construction loan to build say 3 2br units. 450k build cost.
If you were to build and keep them all. And rents put you in a negative cashflow position . Lets say selling 2 of those units and putting the proceeds into reducing the debt on the 3rd unit so that it was highly positive . Perhaps with a small debt remaining. Most banks consider 80% of rental income as income. So if this rents for 300 and your expenses (for small loan remaining are 100 a week plus extras) you would have actual positive cashflow of 200 a week . Whilst the banks would consider 80% of 300 – $260 a week, therefore in the eyes of the bank you have actually increased your borrowing capacity by $60 a week which at current interest rates 5.5% lets you borrow more money about 55k more (correct if wrong)
So make decisions that increase your borrowing capacity and not decrease it.
You might have to sell a couple units of your unit development, or even the existing house and 1 unit to keep one unit positive cashflow.
Great thread, helps alot
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