Hi Kesiera,

We would need a bit more information but here is a response with a series of assumptions.

If the property you are purchasing is in NSW and the value of the property is $350k then you would need to come up with at least $365k in funds (if your LVR is 80% or under) or aprox $370k (if your LVR is 90%). 

If you have $100 in equity against another property (say $100k) then you can use this against another IP purchase. However, you need to structure the loans correctly and not contaminate the borrowings.

Now back to your question – if you have $100k in equity which you can draw from then that would leave $265k in funds that you will need to come up with.  This is good because you will also avoid LMI. This would also mean that you would need to borrow approx $265k with the lender.

The other important question is if you are wanting to use this PPOR as an IP in the future. If so then you again need to strucutre the loan correctly. Jump onto an IO loan and set up an offset facility linked to your loan.

 Regards

Shahin

I have personally bought 2 properties in ‘lower social demographic areas’ and waited about 5-7 years and waited for it to improve dramatically (both from a capital growth perspective and a general demographic area). You do need to ensure that the tenancy agreement is water tight. On both occasions I asked that the rent be paid on a weekly basis and I inspected the property once every 2 months. Also make sure you have landlords insurance.

Fantastic. The house with the DA approval for a duplex sounds good. I have a lot of investors who have made a lot of money in the Pendle Hill/ Wentworthville areas building duplex. The rental demand is extremely and ridiculously strong. The capital growth has also been fantastic. So a lot of these investors are building a duplex, selling one to reduce their loan and keeping the other brand new property and claiming good depreciation and negative gearing against the property. With the DA as you have stated – you do not need to build now. You can build later but DA’s have a time period before they lapse. Having said that it is relatively easy to get a lapsed DA approved again.

Hi Free_Dom

Welcome to the Forum,

You actually have $132k in equity/deposit to utilise. You have $74k to use against your PPOR and you have $58k to use against you IP.

You need to really look at 2 things – the rental yield (not just cash-flow but also taking into consideration the holding costs such as strata) and also Capital Growth and this will help accelerate future IP purchases.

My preference is to purchase a house – it has far greater potential for increase in rental yield as well as capital growth. You can extend, renovate more extensively (I’m not talking about over capitalising but rather more flexibility) and develop (or perhaps sell with a DA without carrying out the development work).

Also it is best to present the numbers of both scenarios including incoming income, outgoings, deposit amount, etc and have someone model the scenario to show you which option is better. Which areas are you looking at?

Shahin Afarin – Elite Property Finance
http://elitepropertyfinance.wordpress.com/

No worries – please let me know how you go as I have a couple who have purchased a land to do something very similar (they are wanting to build villas).

It is slightly concerning that you will be giving financial advise to their financial adviser? (sorry couldn’t help myself!) They definitely need to speak to a mortgage broker about their strategy. Also just because they are borrowing 110% doesn’t mean you need to use the mum’s security. There are other options which a broker can explain to you.

It really depends on the area, zoning, etc. A lot of developers in certain pockets of Sydney are purchasing older boutique apartment blocks, renovating all of them and then marketing them the same way as a new units. It is quite attractive for investors particularly those interested in OTP purchases. Higher risk but if done well there is good potential for higher return.

Shahin Afarin – Property Finance Consultant
http://elitepropertyfinance.wordpress.com

Hi Glen,

I obviously work full time but have purchase 3 properties that needed a full reno – nothing structural more walls, floors, bathroom, kitchen lighting, gyprocking, etc.

I took 2 months off work and renovated to hell out of 2 properties. I am talking 7 days a week and 18 hour days. I personally found that if you are a weekend renovated, the job will never get finished. I try and do most of the work myself (with the help of my wife of course) but I did find that it pays to have professionals do certain jobs (such as the electrical wiring). Before I started on the renos I contact a real estate agent and simply asked what is going to sell? He gave me a lot of pointers which helped.

Shahin Afarin – Property Finance Consultant
http://elitepropertyfinance.wordpress.com/

Hi Jenny111,

Don’t be disillusioned by the rental yield. Rental yields will not make you money. Capital Growth is what you should be focusing on. It is the best way to help fund future and ongoing IP purchases. That said, it is important to purchase properties which can be rented strongly. By strongly I don’t mean high rental yields but more the demand. Areas outside the CBD are the way to go but you need to do plenty of research. Talk to buyers agents and talk to real estate agents. When looking for properties try and think of how you can add value to help with capital growth. How? Properties that you can renovate, extend (up, down, left, right) and develop (or at least get DA). Finally get a few scenarios in place to help you distingiush which strategy will work for you. Always think long term and never think short term.

Shahin Afarin – Property Finance Consultant
http://elitepropertyfinance.wordpress.com

Hi Joel

Begin by looking locally in your area due to familiarity. Then you can start working outwards from there. Start engaging people from the industry such as local buyers agents, real estate agents, etc as they are a good and often free source of very valuable information. Then start looking at your long term strategy. Capital growth? Strong rental yields? Units vs Houses? You need to map out a few scenarios to give you an idea of repayments, negative gearing vs positive gearing, etc. Go to as many open houses and auctions as you can. You will get a great idea of the number of people inspection a particular type of property, demand, etc.

Which state/city are you in?

Shahin Afarin – Elite Property Finance
http://elitepropertyfinance.wordpress.com