Just a question for all you successful PI’s.
I am 22, been married 2 and 3/4 years, bought the parents in-law’s home while on a 2nd year refrig apprentice’s wage, bought house for 110k, got loan for 120k (10k reno’s), house now roughly valued at 170k-ish. still got some reno’s to do on the place. what is the best way to use this equity? banks only loan up to 80% on a home equity loan, which is only about 25k-ish of realisable equity. alos if i buy a +ve cash flow property, it will propably be in the sticks somewhere, where the growth will be minimal, and put almost a stop on my equity momentum. any thoughts? I want high growth, high rental reurns (+ve cash flow) and I want the momentum to keep going after my first property. what do all you seasoned investors think? BTW i hate my job and became a fridgo out of neccesity to provide for my lovely (young) wife. so the faster out of the trade and to financial freedom the better. Besides I have plenty of things I would rather do for fun that earn money. I got laid off work 2 months ago, so my income is a little shakey. I need a IP fast to make up the loose ends. what do you guys think? thanks for your input in advance, it is much appreciated.hhmm……interesting.
Hi N
High cash flow properties are unlikely to have a huge capital growth and will tie up your equity. Property that does appreciate quickly is likely to be negatively geared, which means that you have to fund the shortfall. We personally dont buy anything negatively geared no matter what the promises are. Instead we try to create “active” equity through developments, renovations and lease options (although we havent put one of these together yet).
Active equity is either borrowed against or taken in cash (sold) and the money used to buy high cash flow commercial property.
Overall, you need a balance of cash and equity. That was our personally strategy above, other peoples may be different.
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
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What you’ve said is true about +CF property being low growth. Your strategy makes good sense to me.
Is it true that banks will only lend you 50% max for commercial property? What do you normally look for in a commercial property? Does it cost more in terms of landlord insurance? Are many differences between the insurance for commercial and residential property?
As you can tell i am a N00B in the game of property investing. Hope you dont mine me asking all these Q’s.
It is not true that banks will lend only 50% for commercial property.
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Nath
Banks go past 80% LVR on a LOC and dependant on the security type 70/75 or even 80% is not out of the question for a Commercial property.
Cheers Richard
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Hi nathywally
couple of things
First get a broker two maybe three have already posted, try a couple ( they won’t cost you)
next have a chat with a local accountant the first chat is usually free ( make sure he knows about companies and trusts and how the set them up (talk to 2 or 3)
next you can go either way
Buy a house, develop (work on it)(move in) hold 12 month and sell, no capital gains tax all profit. To do the same again and move up the food chain.( equity will increase as you move)
purchase a commercial
approx 100,000 new
vender finance 20%
80,000
56,000 lend (70%)
you put in 24,000 (26,000 avail equity house)
rental to cover 100,000
153 per week(8%)
current in cbd Sydney you will buy a 60 sq shop and rent for this shop will be around $210.00.
Remember that the equity on commercial is always 60%
hope this helpshere to help
ok, cool that helps.
good idea gross, just a couple of q’s.
that 20% vendor finance needs to some how get back to the vendor. it seems that this property (shop) is $57 per week +ve, thats great, but won’t I need to give that to the vendor? i am not sure about how vendor finance works. I have herd of it, but not sure of the in’s and out’s. so my quiestion is, how is that actually +ve when i still need to come uop with $20G for the vendor.And another q. I have herd you are supposed to balance your commercial property with residential. i actually don’t know why, is there any truth to that? and if so what do most people balance it buy, and what constitutes a good balance? why can’t i just invest in commercial property? Thanks again guys.
hhmm……interesting.
Hi everyone
we are looking at buying our first IP
motgage 57000
value 180?
IP value 175
wanted borrowings 200
so the bank said that they would lend us 80% of the combined properties values
thats our 123 = 175 / 80%
not just the 80% of the property that you currently own
so if i’m right you are probably able to borrow more than you think, depending on income i s’pose
robinHi Nathywally,
So you have a PROP with some equity.
You sound like you are handy? Will your family and friends kick in and help.
Sale of you PROP should be tax free. How about doing a buy renovate sell if you can handle living in a bit of saw dust. Maybe one a year for few years.
cheers
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NZ Investors & Property Spotters
Renovations & Project Management
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