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Hi brmiau,
Be very careful and ask important questions before proceeding. First question would be the one highlighted by Benny, ask if your MB is planning to cross-securitise your loans.
You could potentially unlock $63,000 of equity from your own house which will be set up as a separate loan split from your home loan.
And then apply for another loan for your investment property. By doing it this way, you will not cross collaterise your house with your IP and then get max tax benefits due to the splits. Your accountant can work on your returns efficiently too with this as they are all separated.Regarding your plan on paying off your IP in 20 years, this is really not a good option for you as you will be reducing your tax deductible debt. Alternatively, you can set up an offset account and direct all income to that offset account which is linked to your home loan as this debt is non tax deductible. Parking it in an offset account will also give you access to this funds quickly for succeeding investment property purchase.
Cheers!
I did think it was weird initially that he said I could borrow $280k without LMI but then borrowing 100% of the loan I could get around the $400k mark. What’s the downfall with cross-securitising the loans?
Is there any Mortgage brokers that have experience in investing in property themselves that could help out in more depth? The mortgage broker I met with hasn’t got any IPs himself. I’m really keen on a property in Coburg and auction is in a couple of weeks. If someone is interested I would use them as a mortgage broker
Thanks
Does anyone recommend a broker that has achieved these sorts of things in Melbourne?
Even anyone on these forums? I'd like to talk to someone about getting started
Look it probably is pie in the sky stuff to be honest, but in saying that I can see how it is achievable. It's not going to happen over night, but in 10 years time it seems very possible. I have purchased books to give me more understanding.
In reference to the 10 properties, I wouldn't retire on $600 pw less tax, maintainence etc.. The figure would be more like $250pw clear. No one can retire on that. But if I could continue to build my portfolio each year, then 10 turns into 20, 30, 50 and so on. I would basically lose half the rent return in tax, but all other expenses I can claim back.
I will read the books, contact a mortgage broker and talk to them about what to do.
Shape, I definitely need to speak to someone/people who can point me in the right direction. Preferably someone who has done it and succeeded.
i wouldn't be foolish enough to jump right into it with my lack of knowledge.
Anyone recommend someone located in Melbourne?
Also Shape, the properties I looked at are in major regional areas.
Why does that concern you? It's only to find out how much we can use to invest through equity etc… Then we'll make the call on what we are going to do.
Bad idea?
We have $240k left on our mortgage and the property is worth $440k. So I could tap into the equity. Most properties I've looked at are between $75-$130k so with 10% plus stamp duty so we could buy 3 or 4 I suppose? We are setting up a meeting with our bank to find out exactly the situation. We currently pay double on our repayments for the mortgage.
Idealy in 2 years I would like to have between 5-10 properties and in 5 years maybe 20 or so, maybe more if it is all going well. Looking at retiring from work to concentrate on property within 3-5 years after that with around 50 properties. Hopefully earning $4-5k a week.
I know it probably seems a bit ambitious or naive or silly, but that's what I want.
Catalyst, my goal is the same as yours. Buy lots of CF+ properties and live off the money coming in. Then continue to buy more and more properties.
I might have my head in the clouds I'm not sure. That's what I'd love for me and my family. I'm 28 so I don't expect it to be retired by 30 but 40 could be achievable.
I have searched a lot of properties in rural areas like Ararat and Broken Hill, and I found 15-20 all CF+ by average $60 pw. That was searching for 30 minutes. I would imagine I'd start off buying one or two, then continue to buy more and more until I've fully covered my working wage (around $100k) then retire, while still buying more properties.
Is that possible or am I in a fantasy land?
Thanks Jamie that's what I thought but someone who is meant to be in the know was telling me otherwise.
I could afford $25k a year but it would be a stretch given my wife is on maternity leave and will ve going back to work 2 days a week next year. Can definitely afford $5 to $15k a year. We currently pay $1k a week toward our mortgage.
I think we will see our bank (westpac) to find out exactly how much we can borrow for an IP and go from there.
Thanks again
Jamie, so does that mean if I purchased an IP for $350k my loan would be the purchase price minus my available equity? Therefor the loan would be $267k for the IP?
Josh, I'd like to be able to buy investment properties and eventually have 5,6,7,10 etc… I know that might not be too realistic but I would like to hold on to them and have lots of capital growth.
How much would I be able to borrow for my first IP? My wage is $95k a year and I have $83k of available equity.
Thanks, Brad
nguli that is very true, a lot of things can be done through the internet and email now. I am very green and new to this game and dont really understand much so to talk to someone, even via phone, would be very beneficial for me. Even if its just to get my head around positive/negative gearing (I think I get the basics), whether or not to go princical and interest or interest only loans, the tax benefits, knowing when to buy more properties, how to setup the loans etc….
Thanks for all the comments.
I've done some more searching and there is quite a few houses/units for sale in the inner western suburbs – Essendon, Aberfeldie, Ascot Vale etc… It might be worth looking into them. Most are around the the $450,000k mark for 2/3 bedrooms, 1 bath and 1 carspace on small land.
We dont have $45k available in cash but we have $120k (ish) equity in our house.
I also read somewhere that if you plan to stay in your current home for a long time, its better to pay it off over the period of the loan and concentrate on putting excess money into IP's. Is that true?
Either way, I think we are going to need to talk to some professionals in person to get the ball rolling and all the info we need. Anyone know/recommend some good ones in Melbourne? Preferably CBD or North/West surburbs.
Cheers
Thanks for the quick responses.
Jamie – No this property will never become an IP. The reason we are thinking about investment properties is once we've paid this house off, or near enough, we think we'll stay here for 25-30 years and have (hopefully) 4+ investment properties. Our other thought was we might pay it off, or near enough, then possibly move to a larger property on a couple of acres worth $800k+ and use the money from selling this house to help fund the move. But we are leaning towards staying in our current house.
Shahin – Wow thats a massive loss. The ones we were looking at are low $200k on Collins st or Flinders st. The one on Collins looks great but when I spoke to the agent, he said all expenses are paid but after 12 years, we are responsible for finding tennants. Which doesn't seem ideal. Our budget would be around the $250-300k mark. I hear off horror stories about renting out residential houses being trashed etc… so thats why we were learning towards apartments but not Serviced ones now.
Ok clearly the term deposit idea isn't a great one.
I cant convince my mrs to buy another property yet. She has her mind set on paying off the house or getting it really low, as in $50k and under before we buy some investments. Which I tend to agree with. Buy that stage we'll be 30 and in a good position to start buying investment properties. Hopefully.
Is it advisable to pay the investment properties off completely and have rent coming in as income? Say from 3 or 4 properties. I have NO idea about all the offset accounts, negative gearing, tax deductions etc…. If anyones in Melbourne, I'd be keen to talk in person more about it in depth in the new year.
Cheers
No we dont plan on living here forever, but we also dont plan on moving out in 2-3 years. At this stage it would be between 10-15 years, but could possibly be longer and maybe until we are around 50. Or then again, we could pay this off really quick, save up for a couple of years and then buy a nice house in a really nice suburb like Williamstown.
Still unsure on what to do exactly. I think paying off the house, or getting it very low, is the priority. I still like the idea of sticking the money in a compounding interest account and watch it grow, then live off the interest and savings. But that doesn't seem to be too popular. Not sure how to tackle the property/real estate investment.
I have a friend who's dad is really sick, still working at age 69, planned to retire in the new year but probably won't live long after that. It really makes me not want to work much after 50. Why spend all your life working, plan to retire and only be around a little bit to enjoy it.
You raise some very good points quickchick which we have already considered. And I agree whole heartedly with them.
One major factor your not aware of is our income. My wife will not need to go back to work for 6 months after giving birth, and once she is at work, it will only be 2 days a week.
In regards to my work, I leave work at 6.30am and arrive home at 4pm. Some days earlier. Also have every second Monday off. And work some weekends that I choose to work, not forced to work.
So thankyou for your concern into our family life, but we know the position we are in financially and its not too bad.
Thank you! When I typed "hopefully" thats what I was referring to. Having kids soon. But I earn quite a good base plus plenty of overtime, and the wife to be earns a decent wage too.
I basically wanna set us up so that when we are 50 or so we are on absolute easy street. IE, 3/4/5 investment properties paid off as well as our house.
Who knows…. maybe I'm thinking to far ahead. Should just concentrate on paying off the mortgage then take it from there. Have an extra $1000-$1400 a week to live it up.
Hrmmm…. it may be a floored plan then i spose.
We are going to try to pay $1400 (hopefully) a week off our loan as of march. Lots of stuff inbetween like our wedding and honeymoon. The US for 4 weeks, cant wait!! Anyway, that means the house will be payed off in just under 5 years. Meaning we'll be 31.
We could wait until its paid off, or only a little bit left on it, then buy one or two investment properties and hopefully rent them out and only pay around $500 a week to make up the difference. Is it wise to buy more than one at a time? Also, I asked earlier but didn't really make heads or tails of the answers. Are apartments/unit or houses a better investment? What about buying a bigger block of land and doing a demo and building multiple units?
Again lots of questions but you guys are helping a lot!!
Thanks again for all the info.
Have done some calculations with a compounding interest calculator online and it seems thats the way where going to go.
Pay off the mortgage by 34, continue to pay $1000 a week into a compounding interest account. By the time we’re 55 we’ll have $2,200,000 in the bank earning approx $110,000 a year off that. Or I could work another 5 years, retire at 60 with $3,000,000 in the bank earning $150,000 off that. Or retire at 50 with $1,100,000 in the bank earning $50,000 a year off that.
Retiring at 50 sounds best, but probably 55 is more likely.
Any one have any thoughts on that?
Thanks for all the responses peeps.
I dont know what a CF+ house is but I think we'll prob just concentrate on paying of the mortgage quickly, then keep paying $1000 a week into the bank and retire at 55 with $1,200,000 in the bank and earning around $80k a year interest off that.
Hopefully.
