Hello
Im new to this website and to property investing. I have 2 investment properties one is unencumbered and worth about $600K. It rents at $460pwk. My question is I feel that I should sell this one and use the proceeds as deposits for a number of properties. OR should I keep this one and use the equity for the deposits? How can I best use this to my advantge. I have been told that if I do some small renovating and fully furnish I can get $750 per week. My other property rents at $1000pwk, worth $980K and a mortgage of $461K. Im just not sure how to best approach this.Any advise would be greatly appreciated.
When you sell a property to get access to the equity you have built in it, you forego future capital growth on that property, as well as incurring selling costs and capital gains tax on the sale.
You can still access most of the equity in the property for the deposits on other properties, or even the renos on the existing property and you still have exposure to any future capital growth as well as saving on capital gains tax and sale costs.
You don’t need to sell this property to do what you want to do.Cheers,
Marc.
[email protected]Hi I would have to agree with the last statement it is very easy to access the equity in the property you have, therefore there is no real reason you would need to sell. However you may have your own reasons and that would be fine too.
I would be happy to discuss with you how you can use the equity my contact details are below and I am in qld
Wayne Skewes
Mortgage Broker
Email [email protected]
http://www.eaussie.com.au/Mortgages/Aussie_Mortgage_Adviser.asp?ContentID=852280
Comments may not be relevant to your circumstances, check with an accountant or financial adviserHi jaineyb
You can access the equity in your existing properties, but you should also look at the yield and cashflow being achieved.
If you sold the existing properties, took the selling costs hit, would you be able to make a higher yield and/or cashflow with some other properties? This really requires getting out the calculator and comparing the different scenarios.
It probably makes more sense to keep the one without the mortgage. Just get a new mortgage on it and buy some more.
Andrew
http://www.rentmaster.co.nz – Property Management Software
http://www.RentalAnalyst.com – Property Analysis SoftwareThanks to all that answered my cry for help! Much appreciated! [thumbsupanim]
I wish I was in your situation Jainey
Fair points from all before, one thing that you may need to look @ is serviceability. Obviously if you sell you will have to pay selling costs, cap gains, etc etc but you will also be able to pay off a mortgage, and then take your left over cash and buy further property. If you use the equity you will have multiple mortgages, this is obviously the goal of many people to use equity to secure further property and “leapfrog”, however at the end of the day you still have to be able to service the loans, and they are quite substantial loans from the looks of things, so nothing to take for granted.
Also, generally a RE Agents valuation and a bank valuation are 2 different things, check where you get your valuations. The bank valuation will tell you what equity you can access, a RE Agents valuation will generally be somewhat inflated (usually to try and get your business). Same with rental returns, try to get independent rental valuations, not a property manager/real estate agent trying to get your business.
I agree however, if you can afford it, use the equity and borrow the money for more property. Wash, rinse, repeat.
Good luck.
Hi Jaineyb,
As an investor what you would hope to do it make the most efficient use of your capital.
You could perhaps achieve higher cashflow by leverageing into a large number higher yield properties.
However, if you could increase the yields on the properties that you are currently holding AND the properties are in growth areas then perhaps you could be content with that.
There are obviously more aggressive strategies available but don’t make a change for the sake of it. Small changes may help also such as adding another dwelling to these properties to increase yields (hard to comment further without more details)
In my personal opinion we are in a market where there is no need to rush about purchasing decisions as long as you have a plan of action then take your time and consider all your options.
Depending on what your goals are you could easily double your equity position over the next 5 years. Spend at least 3 months developing a plan and checking your assumption. Get orgainised and do it but don’t rush.
Believe it or not the opportunities that are right for you will be obvious when the turn up – if you are new to investing get some trusted advice before you sign on the dotted line but don’t forget the importance of feeling “right” about what you are doing.
Thanks again for the replies. I realise that I am in a lucky position.[blush2]
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