Hi everyone,
As i am still starting out in the property investing world, I would appreciate some advise. I have land which has tripled in value over 12 months, I used the equity from this land to purchase another block of land close to the beach in a new estate and am planning to build on it then rent it out. My problem is my bank advised me to refinance the first block to pay for the second block, is this the usual way of doing it. By building on the second block I would increase my equity again by $100,000 which I was hoping to use to obtain more property, but if I need to refinance again then doesn’t this increase my loan? How do I obtain separate loans for each property but using the equity to buy the others? I have read many books and researched articles, spoke to the loan managers, but I don’t seem to get the answers I am looking for, all they say is I must used the property as security for the next and refinance?
I am really confused and I am not sure if I am on the right track after all, can some one please set me straight.
Thanks Martine[blink]Hi Martine,
congratulations on getting a great deal trippling in value in just 3 months. Well Done!
I would try to keep all loans under one and organising it to have them at the same interest rate. You can do this by having all your loans added to the first. Yes – when you borrow more, you increase your loan – it’s simple ‘physics’.
I also wouldn’t overburden myself by keeping on borrowing more and more equity to buy more property as you said you’re just
‘starting out’. Also be very very very careful as to what the banks advise you – usually is means extra $$$ in their pockets. I would take what they say in writing and go and seek professional advice – show it to your accountant and see how they can help you – but don’t again I say, don’t overburden yourself – it could backfire on you.
The loan manager has to tell you to re-finance and use the property as security because most of them work on sallary plus commissions based upon the amount of loans they make each week. I know one who’s target is giving out loans every week totalling of at least $1.2 million. If they don’t – they get a warning – then there out of a job. Be careful and always get third-party advice.
Kind Regards,
George.“If You never never ask, you’ll never never know”
Hey Martine – have you also assesed your risks.
What happens if you don’t get tenants in the property you wish to build. And how long will it take to build this property. Could you make the repaymenst on your property until it it finsihed being built and then until you get tenants in there.
A rule of thumb is to ‘assess the risks and assess the returns and if the returns outweigh the risks – then go for it’
Kind Regards,
George.“If You never never ask, you’ll never never know”
Thanks Guy for your comments, I will continue to obtain as much information as I can and try hard not to over burden myself, at the moment I can easily repay the loan even without any tenants over the whole of the loan period even if interests go up but I am really looking to be self funded retirees and only have 15 years to do this.
As you can see I am a novice (newby) and need all the advice I can get.
Once again thanks
MartineHi Martine,
Do you have a construction loan in place with this lender? I Need more information to help you further,
You need to talk to a good Mortgage Broker and have your loans structured correctly,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Steve
Yes I do have a construction loan and so far this will be my only loan.
Thanks
MartineHi Martine,
From the information you have given, it seems the bank has structured your loan to gain security of all your land over 1 construction loan, Have you signed the loan documents yet?
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Hi Steve,
I have signed the contracts, but the deal with the credit union was to construct 2 homes one on the first block that we bought and the other home on the block we have just purchased.
The plan was to start building on the most recent purchased block as the rental demand is much higher in this area whereas the other area may only rent in holiday season so we will be building on this block later.
To my understanding the credit union is providing us with money to buy the current block of land by using the security from the first block of land that I purchased, then using the security from both lands to build the house on the new land and then start another construction loan to build on the older land.
Is this the wrong way of going about it? Can we refinance to restructure the loans better or do we go with the flow for now?
Thanks MartineHi Martine,
A refinance at this stage may not be of any great benefit to you; my main concern is the structure of your loans for future lending,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
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