Hi David,

You are looking at it the wrong way – most of Sydney is good to buy. The question is the opportunity – i.e. what can you do to the property to create a higher yielding property or create CG.

I know your budget is tight so your options are limited particularly in the Sydney market but what is your exact budget and whats your IP strategy?

Regards

Shahin

I read it as if he is taking 80% of the value of the property and then subtracting the existing loan amount for this to get his equity. 

Paul – what is the current value and loan amount?

Regards

Shahin

It doesn't quite work that way. Just a few things – in the above scenario you will may not be able to use rental income as part of the servicing (depending on how the application is structured).

If you have an aggressive IP strategy have you considered borrowing as much as possible on the first purchase and leaving a higher deposit amount for the second purchase? Having adequate deposit for an IP purchase is an extremely common issue. 

Just because you have a $600k will not mean that you have $600k to spend on 2 properties especially later on. 

Strategy is a good one though – just need to ensure that the finance is set up correctly not just for what you want to do today but also for your next IP purchase.

Regards

Shahin

Start with the upfront val to determine the equity and tee up a time to see your banker and broker about the numbers. 

Also re finance submit the loan as the worst case (high loan amount) you think you will need in case you decide to use the funds for renovations, subdivision, etc.

Regards

Shahin

Units or houses? What's the strategy? I know those areas quite well.

Regards

Shahin

In short if you are purchasing a property for $190k in NSW with a $40k deposit then your LVR is almost 82% and the LMI would be around $800. You can capitalise this on top of the loan. 

Therefore the costs are not as much as you think. The other costs would be the conveyancing costs which is around $1,500 and the Building and Pest Inspection Report which is $500. 

What is the loan against your PPOR? Also if possible get an upfront valuation on the PPOR to ensure that you have the equity that you need for the IP purchase.

Regards

Shahin

Re postcodes it depends – some banks will not lend to some postcodes and other will have restrictions on either the LVR or the loan amount or both. Double check but you should be fine. 

Re structuring the loan – this is the set up:

Property 1:

PPOR Value: $400K (example)

PPOR Loan (a/c 123): $280k (example)

Loan 2 – Deposit for other purchase (a/c 456): $40k

Total LVR: 80%

Property 2:

IP Value: $190k

IP Loan: $150k 

Total LVR: 80%

Therefore you will have 2 new loans one for $40k against your PPOR and one against the IP itself. 

You can do this with different lenders but with those loan amounts you are better off with one lender. Shop around and see if there are better deals in the market. Using equity doesn't affect the PPOR if you do it as per the above. Depends on if you are going to convert the PPOR to an IP. If no then best to park all available funds against the PPOR since its not tax deductible.

Regards

Shahin

Ok you need to make sure that the sum insured is equal or more than the valuation amount for the building. At $320k you should be fine.

Spend a couple of bucks more and go for the higher amount.

Regards

Shahin

I would highly doubt you can speak to the bank rep directly. It would have to go via the agent.

Who did speak to in the bank?

Regards

Shahin

Who is your building insurer when you settled the property and what was the amount insured? Or has settlement not taken place yet?

Regards

Shahin