Hi
I am a new member and would love to get into property in a serious way. I have ordered the book 0-130…
In the meantime I was wondering if anyone could advice the next step.
I own one property (neg g) which is used for holiday rental and one that I am renovating.
First has doubled price in 3 years – now worth around 385000 with mortgage of 135000.
Second we are hoping will be worth about 300000 when renovated. mortgage 185000.
Would like to keep first one as place still growing and sentimental attachment. Not fused about others but my main aim is to own a number of positive geared places and stop work.
Any ideas would be greatly appreciated.great start and not a bad problem to have.
a 200 windfall in 3 yrs is like winning the lottery.
I love seeing great results like this. I hate to brag but I initially made money out of property by fluke!
Partner and I bought small house in 1997 for $170k approx and sold 4 yrs 3 months later for $370k. This was our principal residence so no CGT.
We have since invested in 2 IP’s. 1 was purchased 2 yrs ago for $198k and would now sell for $240k. However, there is a fair contribution as we negatively gear it. Second property was bought 1 year ago for $55k and have just sold for $80k. However, we did have problems with tenants, malicious damage etc…Overall a mixed bag but we have come out on top.
What do you think?Hi Misty,
If your numbers stack up and your income levels can service additional loans you have a potential $228K equity available for ‘deposits’ on other property.
This figure is determined by adding the value of the two properties together (=$685K) multiply by 80% (=$548K) less existing debts (=$320K) = equity available of $228K.
Note I am assuming the banks will recognise 80% of the value of each property – depending on their size and classification this may not, in the main, be entirely correct. The final figure may vary somewhat depending upon loan structures etc.
All things being equal – hang onto them and follow your investment plans.
Derek
Thanks Derek
I assume you are suggesting using equity to buy + cashflow properties. Is that possible with 100% borrowing? As we live in the one we are renovating we had thought maybe we should sell that and buy another to renovate and a + cashflow.
What do you reckon would be the better option?Hi Misty,
Apologies for the delay but I have been away from home for a week.
Yes I am suggesting that you use your equity for deposits as this way you are maximising the leveraging capacity of your existing assets. For that reason I also suggest you do not sell either as long term growth will, in all likelhood, continue in the long term – why sell a growing asset – it’s contribution to your coffers stops the minute you sell it.
In addition any sale will incur selling costs and CGT liabilities and by default will ‘cost’ you some of your gains. Adopt a long term view and you should enjoy further successes.
The other reason for hanging onto these is that banks do a asset value and serviceability check when lending future money – these two properties provide considerable value to your portfolio.
If you have any other questions do not hesitate to ask.
Derek
[email protected]Thanks Derek,
With the equity is it best to buy one + property or more lesser value ones, bearing in mind the more you buy the more costs you have?
Hi Misty,
I can only give a ‘that depends’ answer.
Ultimately only you can decide what is right for you and you do have a number of other intangible assets on your side, you are enthusiastic, you have experience in property and you seem to have get and do attitude.[thumbsupanim]
If I was in your position – I would initially determine my borrowing capacity so I knew what I could feasibly achieve.
Depending upon this outcome then I would spend to the limits of either my finances or my reasonable comfort zone until I reach either of these limits.
Bear in mind I am a growth focussed investor and seek to find properties in large centres my aim is to have as many assets as possible working for me. There is no reason you could not do the same irrespective of whether or not you are growth or income focussed. Sure you costs are higher but your increased assets/income are working harder for you and at an earlier stage of your journey – hence the impact of compounding will kick in earlier.
My thoughts for you to consider.
Derek
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