Hi property investors
I was just wondering if anyone has duplicated properties through capital growth, i know this is a well used srategy, especially used by John Fitzgerald of custodian wealth builders.
Has anyone achieved this and how did you go about it?
Is this a viable approach?Hope to hear from some people.
Fudge111[
][][^]Hi Fudge
congrats on the century!
I’m guessing that you are asking if people have used growth in value of properties to purchase further ones?
If so, then yes, that’s about the entire way I have purchased mine. The first place I bought (actually two – my grandad’s half of his house with grandma was the second) I was able to use my folks place as security. Every purchase since I have funded deposits by refinancing the previous properties back up to 80% of val, and using that money. Except for some trouble we got in last year where we had to put in $200K cash (expensive lesson I can tell you!), I’ve not put up any of my own money as deposits.
Cheers
MelMelbear, its good to finally make the century!
In you reply you stated
“Every purchase since I have funded deposits by refinancing the previous properties back up to 80% of val, and using that money.”I musn’t understand refinancing properly, do you actually receive cash when you refinance or revalue your property?
Could you please explain it in a bit more detail for a beginner like me?[
]Regards,
Fudge111[
]I’ll give you an example of what I am looking to do at the moment:
I bought a property for $159K about 3 years ago. I borrowed 90% or $143.1K. I got it revalued a short time later at $195K (It was valued at $185K when I bought so it didn’t need to grow much to get to $195K). I then borrowed another $32K.
So at the moment, my loans are $143.1K and $32K.
The value is now $300K, so I am looking to refinance again to be at 80% borrowings. This would allow me to borrow up to $240K. So basically yes, I would get cash to the value of $240K – $32K – $143.1K = $64.9K.
So I now have almost $65K in cash to do whatever i want with.
Cheers
MelYes Melbear, i understand that you have 64.9k to play with in cash, but this is still a loan of cash isn’t it which you will have to pay back with interst on top of it isn’t it, so it is not really much different than just getting a seperate loan from the bank,
Am I right?
Thanks heaps Melbear!
Fudge111[]Hey Fudge
Now I think I understand what you’re asking. Yes, it’s definitely a loan from the bank, and if ‘spent’, you must pay the interest on it.
However, if used as deposit to purchase property, it still counts as a ‘no money down’ deal because you did not take any from your pocket.
That’s part of what I was suggesting to you to accelerate your strategy.
Cheers
MelYeh, so like what your saying that refinancing and subsequently putting down a deposit on another house is similar to getting 100% finance from a bank for a property as you have no money down at the beginning.
True[?]
Fudge111[
]In a word – yep! If you have enough equity it would be 100% finance, plus it could cover costs, so absolutely no out of pocket expenses.
Cheers
MelThanks Melbear,
Now i understand it all alot more clearly, sounds easy enough to understand,
good luck
Fudge111[8D]
Hi Melbear, What are your approx costs of refinancing, and what would you do if the valuation is less than the previous one or still the same? Do you pay for the costs of refinancing or is that included in the new loan you take out?
C2
“Is it true the more you owe the more you grow until the bank steps in?”
C2, great question,
I would also like to know these things as I will no doubt be using refinancing as a major strategy in my property investing plan.
Fudge111[
]Hi F&B, We meet again, so to speak. One of the problems I’m finding with doing this is if the personel at the lending institution changes. For example, I set up a situation with one person and when his replacement took over everything continued as before, then another replacement came and he disagrees with everything the last 2 have said and done and set up. Mean while you’re trying to buy more IP’s and stuck with a person who either doesn’t understand or doesn’t want to understand but plays a major role in your finances. I’m going to post the full details about what I’m talking about later and leaving it for the forumites to give their opinions.
C2
“Is it true the more you owe the more you grow until the bank steps in?”
G’day F&B…
Mel is spot on. In structuring your finances in this fashion, you achieve much better control of your borrowings and increase your capacity to borrow more and if you do it right your Ip’s will be “stand alone deals” You become your own Banker.
I strongly recommend anyone with equity, that you arrange a LOC now rather than later. Even if you don’t use it on property for the next year or two it can be used for any Investment you wish. If not used there is no interest cost to you.
Just don’t blow it on a slow horse or $5-$10k seminars/Bootcamps.
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Yeh, sounds interesting C2.
I’m just wondering whether that would happen very often, do they change that often?
It seems a little weird that they would suddenly disagree with everything the guy before them has done,
like to hear more
Fudge111[
]Hi F&B, If your dealing with lenders in some outer regional areas they do get transferred around. I think my lender has changed personel 4/5 times in the last 3.5 years, that I’m aware of. When I finally have everything sorted out I will post it on the forum. I think some people will find it interesting. It made me realise just how important it is to obtain good independant advice on anything you do in regards to investments. Even if you have confidence in your own abilities. There is always something you may have over looked or missed.
C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi mel,
If you don’t mind me asking, Does this leave you negativly geared?
Thanks Josh
Thanks C2 and Bill
Geez I’m bad with abbrebiations, can’t remember what LOC stands for[
]It’s interesting Bill that if you don’t use it then you don’t pay any interest, so the bank just holds it for you until or if you want to use it, is that right?
Fudge111[
]Is LOC “Loan on capital”[?]
Fudge111
G’day Fudge…
LOC …is a Line of credit.
Best way to understand…it’s just like a big bit a plastic “credit card” ….not a $5k limit but $50k maybe $250k or somewhere between.
Fantastic if used for investment… but in the wrong hands could be, and is,
an absolute nightmare.If you like I’ll send you a sheet with boxes on it, and over the phone show you how to structure your mortgages..
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]THanks for the offer Bill, but at the moment Broz and I are only 20 and still completing our uni degrees, we haven’t got any investments yet, i guess you could say i’m just learning the ropes.
So basically you go to the bank and because you have had capital appreciation they give you an amount, say 60k that you can exercise whenever you wish, and once exercised, you then have to start paying interest, that sounds right doesn’t it?
Fudge111[
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