Not sure what your asking or wanting to know??

Let me take a punt
1. You may have equity in your property; but you need to be able to AFFORD any increase in your loan as well
2. Drawing out equity from your property = increasing your loan by the amount you draw out

Say you have $50k equity available in your property; your income needs to be high enough to afford a 50k increase. so really if the bank advise you can only afford another 10k( which is peanuts)…it sounds like you won’t be able to afford the amount your after.

10k is not a lot; do you agree with what the bank as told you? they could have gotten it wrong, i know i have in the past… mistype by one decimal place
Before considering how much equity you have, you need to know for sure how much the bank will lend you ie your serviceability.

Regards
Michael

The bank will ALWAYS win….when they fix your rate, they will also secure the funding with their funding line at a set rate for a set period of time- They will always maintain their profit margin. The only risk they take is YOU defaulting on the loan….interest going up or down is not a major risk factor for the bank to consider; as they migrate this change into their business and variable residential loans

Bank loses when they have poor management , risk control or bad funding source/business model.
If your a share holder of one of the big 4, you could access their annual report which provides a break down on their profit – it wont tell you how much their funding cost are etc…BUT Generally speaking the banks makes a larger profit from variable then from fixed,..even if the rate does up or down..

Regards
Michael

Chen- i haven’t looked over your numbers, but just a quick tip as im subdividing one of my IP in the North west district as well ( Cheltenham — > Hornsby council).

1. There are diff type of subdivision, if you want it to be torrent title then it will need to be a min 500+ squ ( depending on council) from what i understand + a 1.5m set back.
2. However if you subdivide as a strata title or company title the min squ meters requirement is reduced + less set back less and 700 squ meters ” may” be possible.
3. Different street have different set back requirements, especially corner blocks
4. Everything can be done as an exception as long as you have a good reason + design plan- ie you may need to build a smaller duplex etc..

Talk to the town planner + read the council’s DCP.

Regards
Michael

I presume your talking about North Wentworthville in NSW??

If so; Parramattta council has a list of houses/street that are flood prone with their associated % – don’t have a direct link for you, but i do have the report and if you do a search on the council’s website for ” Water management / flood studies” you should find your answer there…

If not it will be in the sale contract of the place your thinking of buying, under section 149- Flood prone.

Regards
Michael

Rockian, have provided an excellent summary.

Just note – section 94 contributions cost diff council to council..it ranges from $2k- 40k+

Up to 60% LVR with a commercial lender in the SMSF field is not an issue– however most banks with commercial SMSF will need you to see a financial planner before they will approve your loan, no matter how low your LVR is.

Regards
Michael

PPOR- Is a non -tax deducible debt..while the IP is.

Regards
Michael

This is a classic case of how getting the right structure is so important, beats any “cheap rate” on offer. Also an example of how bank staff will just get you the deal that’s easiest for them and “who cares what happens 1-2 years later” …

Anyway solution.

Your broker is right in saying that you shouldn’t “redraw” the loan from the IP to pay for the PPOR as the total loan will no longer be treated as a tax deduction.

Your accountant is also right in saying you can re-structure ( more like you WILL have too) your loan in order to reverse the transaction.
I have one bad and 2 good news for you…lets start with the bad.
Bad news- your gonna have to most likely switch bank.

Good news- Switching banks, sounds like your bank manger you been dealing with either isn’t trained with basic tax and property investing strategies + forced you to cross, even though you didn’t need to.

Good news- it can be fixed, but what ever you do …DONT redraw at this point in time. – you will need to re-structure.

Regards
Michael

Just answering some quick concerns you may have Steve.

1. Your income is quite high, so your probably paying quite a heft tax every year ( which is a good problem to have ^^)
2. It’s good that your thinking of changing your loan to I/O
3. I would suggest an offset account as well, to offset your PPOR debt in a tax friendly way
4. You have roughly $28,000 equity that you can draw out without the need of LMI – HOW you draw this out is VERY important as it will have some impact on how you can claim the tax.
5. The next IP i would suggest you leverage as much as possible, and keep any spare cash against your PPOR offset
6. Don’t cross, in fact in your situation you won’t need to. no matter what the banks tell you.
7. Loan Structure is key

– How much you can borrow/ afford to buy/invest, will depend on many factor’s that i won’t bother listing here…

Regards
Michael

My comments are directed more towards St marys, Willmot, Dharruk and those surrounding areas ( Blacktown is ok)

Experts been saying the area is going to grow for the last 5 years, but most place will grow in 5 years time ( how much depends on your expectation) …nothing new.

Recently there has been more hype in the media because it’s one of the few places that actually HAVEN’T gone up, compared to it’s counter part surrounding suburbs …so hence rental yield is a lot more attractive, doesn’t mean it will have CG though.

Reason why some BA sells this area so heavily is because it makes the client ” happy” as they can see instant return…recommending an area with higher chance of good CG is not something a lot of clients will be happy with as they can see the return especially if it’s costing them quite a bit to hold .

—-

Do i know the blacktown area? i wont say im a expert…but as an active investor of both CG and Rental yield property in Sydney + i live 20-30 min away from Western Sydney i can say; im ok buying in black town.
But i personally would stay area from Willmot, Dharruk and those surrounding areas unless you have the patience to wait it out + aren’t scared of a few “nasty” tenants.
Don’t get me wrong; great place for cash flow, but poor CG.

Your statement about “When population grows people rent then ultimately buy in the same area.” – can apply to MOST suburb…if im going to invest into a CG area; i want to see CG within 3-5 years.

If it’s for Rental yield, then i would want a way to continue to ramp up the rent- ie dual occupancy + purchase below the market value…i expect “some” CG , like 2-3% per year + give or take 1-2 years with no growth i would be happy with. Any more i’ll take it as a bonus.

Regards
Michael