All Topics / Help Needed! / To equity or not to equity

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  • Profile photo of mattnmattn
    Member
    @mattn
    Join Date: 2004
    Post Count: 15
    November 9, 2004 - 4:44 am

    Hi All,

    I currently have 2 options for freeing up cash to invest in IP or wraps.

    1. Redraw equity in my home & existing IP which would give me 165k to invest.

    2. Leave the equity & use the money I am earning from a side business to fund IP’s (Aprox 40k PA)

    I see that the money used from the side busness could potentially be used to repay the redraw of equity rather than waiting any longer.

    Any advice for a newbee

    Cheers
    Matt

    Profile photo of PurpleKissPurpleKiss
    Participant
    @purplekiss
    Join Date: 2003
    Post Count: 580
    November 9, 2004 - 5:50 am

    Well, redrawing equity would increase your cash going out as the repayments would be higher. If you went this way make sure the income coming in more from the IP’s covers the extra expense that you’ve just made.

    I’d probalby use the 40k incme you have coming in, but that’s me.

    It really depends upon you comfort level, or your ability to go outside your comfort level, the level of inocme expected form deals etc.

    Good Luck and perhaps others can help more.

    PK

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    November 9, 2004 - 6:27 am

    Hi

    $40,000 pa is not going to get you too far. I would use the equity up to 80% LVR and then avoid paying mortgage insurance. On a $100,000 property, you will be looking at using about $25,000.

    Terryw
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    Profile photo of mattnmattn
    Member
    @mattn
    Join Date: 2004
    Post Count: 15
    November 9, 2004 - 6:30 am

    Thanks PK

    I’m not overly worried about the extra repayments, my wife & I earn reasonable salaries. We started the business to access extra income to invest with but it’s a slow road after all the business set up costs. With the equity sitting there looks like an easy start up fund.

    Matt

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