Hi All,
I am sure it is a bit of a silly question but here goes.
Have a IP worth about $260k
Owe $80k
Repayments $500 per month
Income $830
So it is positive $330 per monthI am wanting to buy IP number 2 When i finance the 2nd one using the equity from the first as a “deposit”.
If i buy a IP worth $250k, do i borrow the lot or do you “take” money from 1st IP to fund deposit.
If i borrow the lot and use my 1st IP as “secuity” does that mean that my TOTAL investment becomes negitive geared???
Signed
A confused Gordon Gekko
“Greed is good”
Gordon Gekko (Wall Street)Hey Gordon,
What are the estimated numbers on property two. That will help crunch the numbers.By the way….greed is not always good unless you are greedy for time and control of your life. Even then greed is probably not the right word.
Enjoy
AD [:0)]
(Andrew)“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
AD,
Thanks for replying.
I don’t have a IP in mind yet but i want to send around $250k mark. And i don’t have any cash for deposit. Just the the $180k equity.
So do i “lum” the two loans together ($80 and $250k= $330k) Total income will be around $1680 a month, which would leave a me a short fall to pay (neg gear) which is fine.
Is that how the Bank and my accountant / tax man will see it.People out there with two or more IP’s, how do u do it, all one loan?
thanks[
]“Greed is good”
Gordon Gekko (Wall Street)Hi Gordon
We have recently had our PPOR valued and then set up a LOC attached to our PPOR which we use as deposits for new purchases. So when we find a property we want we go to the bank with the deal and borrow 80% and finance the 20% deposit and purchase costs from the LOC which is also the banks money. But they don’t seem to have a problem with that!!![?]
Cheers
Leigh K[]Read, learn, grow but most of all just do it.
Hi GG,
Ditto on Leigh K’s method. It can get even more involved than that, with multiple accounts stemming from the same initial account [
]. Leigh’s method is what we have set up.
Depending on what interest rate (IR) you can get for new IP loan, sometimes the existing interest rate on the LOC (attatched to your PPOR/or split loan) is lower than your IR on new IP!Must be late [
]
Cheers
Sooshie []“small steps make the journey” (SAS)
Same method here,
Can get confusing though, I think I’ve got more IP loan accounts than IPs.
Rod.
Hi Sooshie, Leigh and Rod,
I’m just in the process of applying for LOC (or possibly Off-Set account?). I’m with the CBA so I’ll probably apply through them.
Would you revealing who your LOC is with and whether you would recommend them.
Should I be asking them any questions in particular and what fees are negotiable?
Thanks
ArchiZEN
Mine’s with Bank of Melbourne (Westpac) all organised via a Mortgage Broker. No problems so far, this is on the professional package ($300 per year) which gives an interest rate discount and no other application fees.
Rod.
Hi Archizen.
Ours too is with the Bank of Melb. We’re going in this morning to sign the docos.
We previously had a mort with 100% offset with the BML, so they waived the establishment fees. There’s a $300 a year fee.
Our broker split the LOC for what is currently still owed on our existing home, and the balance.
Interestingly, the bank didn’t send anyone to look at our place and just accepted the value we’d put on it. I guess because it wasn’t over the top.
If you do something like this, just remember that if you want to pay off your home, it’s up to you to continue making principle payments.
A minor benefit was the slighty lower interest rate, but the fee of $300 a year, pushes the effective interest rate back up.
Gordon
Invest in People for a Prosperous Future!
G’day Gordon,
So far, my wife and I have exactly the same setup you mention : 1 loan secured by 2 IPs. It is a Line of Credit account, and as such we can withdraw up to certain limit, thus having the next deposit in theory available through a “hole in the wall” ATM.
Pros – easy availability of funding the next deposit / repair / renovation / etc. All incomings / outgoings in the one account.
Cons – bank has us by the short and curlies. If everything goes horribly wrong, it would be easy for the bank to say “yoink” and take the lot. It makes it hard to calculate whether each property is +ve or -ve cash flow.
With only a few properties, this is a good setup. However, with many properties, I can see it would be a pain.
So far, this has worked extremely well for us.
Thanks,
BDM
CBA has zero applications fees on it’s line of credit at the moment.
Davo70
]
]. Leigh’s method is what we have set up.
]
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