I am new to this and am trying to understand how I can continue to build a property portfolio when i have exhausted the equity in my home.
For example I have a home in the burbs of Melbourne which has doubled in Value in the past three years. I am currently undergoing an extension and a reno this again will increase my equity. My question is How do i continue to purchase investment properties when i have used up all the money that the bank will lend me against my home?
Hi creach
You mention that the property has doubled in value over the past few years and you are doing renovation work which I assume will again increase the valuation. Presumably you have increased your borrowing to carry out the extension work.
Wouldn’t your equity (being the difference between your borrowing and the valuation) have increased significantly with the doubling of the property value.
On the basis that your income can support further increased borrowing why don’t you arrange for your Bank to add a line of credit facility to your overall home loan taking it upto 80% of the after works valuation.
This means that when you have used all the funds up on your renovation you will still have access to further monies which you can use to increase your property portfolio. Draw 20% of the purchase price together with the acquisition costs down from your line of credit and have the 80% balance on a stand a loan debt secured against the new IP.
Keep doing this until you have either used up you LoC or you you feel that your income cannot service borrowing.
As the IP’s increase in value revalue and start again.
Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
Thanks for your valued input Richard that makes things a little clearer. I look forward to purchaseing my first IP in the near future.
Craig
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