Hi everyone
I know many of you are experienced property investors and as I am just starting out I am curious to know what you would do in my situation?
My situation
My partner and I are 20 yrs old and very keen to build a large property portfolio (hopefully including our own house in 1-2 years from now). We want to be able to live very comfortably for the rest of our lives and we would like to eventually quit our jobs to become full time property investors/developers. Our income is only a joint $50,000 P/A and are not very stable.
To get us started on the right track we have gone halves on an investment property with my parents (with them as guarantors) We bought an old house on a large block which we have sub divided and we are going to build 2 new houses due for completion in June 08. We have already lined someone up to buy one of the houses and we plan to hold the second house to rent out leaving us with a cash flow neutral property and about $100,000 in equity which will be our half of the profit.
So what would your plan be with starting $100 equity in my situation?
Also as I am keen to continue with property investments sooner, once the contract is unconditional on the new house we are selling would a lender be prepared to lend us money for our next investment? Or would we need to wait until June when the house has sold and we receive full payment?Appreciate any feedback
Thanks
You may need to take into account the Goods and services tax when you sell developed houses and capital gains tax that you may be liable to pay.
With 100K equity, I would use it twice to acquire two more IPs…use equity to buy, and the use the reduced new equity to buy again…somewhere semi-rural, it seems to be the craze right now…I call it the pseudo-tree change…
Make sure youare comfortable with your cf.Thanks Duckster for you reply, however i am quite aware of the gst implications and have already registered to claim as much back as possible.
Thanks handy andy, i cant see how i could afford to purchase 2 further investment properties with only $100,000 equity? ie. i could borrow 70% of this on a low doc loan which would give me $ 70,000 which is a good deposit for 1 investmant property. i really dont want to pay alot of morgage insurance as this will diminish the small funds i have. please explain how you think i could buy 2 and at what sort of price leval?
if anyone else has any further views i would love to hear your oppinions?
thanks
Hello….here is what I figure….
You can borrow up to 80% LVR, being 80K. I am going to assume you can source 95% finance…so lets look at a 300K house…you will need 15K deposit, + lets say another 15K for MI and costs. In reality, your first lot of 15K is "transfered", therefore it still remains equity of sorts that a bank will look at as deposit (assuming you're going with the right bank). Even if they don't, you can then use the remained of your 80% LVR to finance number 2, same process, perhaps even get around paying MI…remember, that there are always acquisition and disposal costs, its a fact of life, and unfortunately, a bit of MI will hurt now, until a few months when its regained in CG, and it is tax deductible….something to think about…hope this explains it…note: this is for information only, not advice…
Thanks for that. I now understand how it may be possible. I will look further into opportunities in rural areas that are cash flow positive.
I’m also trying to work out whether I should continue with development. Basically my current plan is to find ways to add value through renovation or building.
I don’t believe $100,000 equity is enough to enter commercial developments?
So many oppertunities, so little money!
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