First post on the forum! I've been studying the art of property investing for about a month or two, so certainly still a newbie here! Hope the experts on this forum can point me towards the right direction!
I'm quite young (24) and only started my first full time job in March. My goal is to build up a solid portfolio while still working (i like my job!).
I plan to get into the property investing market by the end of this year but I will be looking to buy my PPOR in about 2-3 years time (and marriage!)
I'm looking into find an IP that has positive cashflow or at least neutral with depreciation (probably want to start off at ~$250,000)
I'm currently saving up for my deposit (20%) + cost with some help from my parents but I was wondering if it would be better to use equity from my parents' commercial IP for the deposit? Is there any difference in using your family's IP equity and your own home equity? and how/when would the bank release my parents' IP as security?
Also, in this instance… Is it best to go for IO loan on IP + IO loan/offset against my future PPOR or LOC?
Thank you in advance!
1. Go for a variable instead of a LOC
2. Go IO with a linked offset
3. Even though you are saving the 20% deposit to avoid LMI – I would be looking at going up to 95% LVR (if the purchase price is around the $250k mark) and keep the rest in a savings account. The LMI premium will be tax deductible for the first five years or the life of the loan (which occurs sooner).
4. You can use your parents equity in their property so long as they have the equity there of course. It doesn't make a difference where you are accessing the equity.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi and welcome aboard.
Personally, I think it's best to leave family out of the picture when investing.
If you do decide to use your own funds to cover the deposit/costs – perhaps look at using a smaller deposit and leveraging LMI.
This way, you won't throw all of your savings into your first deal – and will retain some for future opportunities/contingencies.
You could also look at spreading those funds across a couple of IPs.
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]
thanks for your replies. So if I go for a smaller deposit do I save the rest in a savers account or offset?
Sounds like a stupid question but would the LMI be there for the lifetime of the loan?
most lenders have a genuine savings policy which means that you need to save at least 5% of the purchase price over a period of 3 months and some have a no genuine savings up to 95% but entry into these lenders is tough and pricing is not as competitive.
LMI is a once off payment that can be added on top of the loan. If its an investment property – the LMI premium will be tax deductible for the first 5 years or for the life of the loan which ever happens quicker.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
coolestwolf wrote:thanks for your replies. So if I go for a smaller deposit do I save the rest in a savers account or offset?Offset account linked to the loan.
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]
I would also suggest a IO loan with offset. Best to avoid a LOC – these should only be used to access equity.
It may also be best to avoid paying a 20% deposit as this will mean less cash for your non deductible PPOR loan down the track.
You could borrow 20% off family, then wait for capital growth and pay them back by borrowing against the equity in the property. This way you will have 100 or 105% finance based on the original purchase price and still be able to avoid LMI and maximise deductions down the track.
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
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