G'day,
Our very first IP has been completed as prev mentioned. Talked to our broker and he reckons that we should wait a while now till we a bit of equity build up on this IP. But where to from here? What if you don't want to wait for say another 2 yrs before another property? What can we do, other than to live on noodles and rice to get enough $$ for our next deposit?
What can we do other that to save that can help us further get more IP's sooner than say 2 yrs?
thanks.
Get another broker who'll help you do what you want to do, not what your broker thinks you should do.
If your income will still allow mortgage servicability, take out a personal loan for your deposit on the next property.
See if you can manufacture some equity in your existing IP by doing some improvement – add a garage if there isn't one, add a deck or outdoor area, renew the kitchen, stuff like that.
If you're very bullish about the area in which you next plan to buy, take out a high LVR loan (you can get up to 106%, but the higher percentage you borrow, the more expensive it is). PROVIDED your forecasts about growth are justified, it can still be very worthwhile using these expensive products rather than being out of the market during the time it would take to get a deposit together.
How much equity did you put into your first IP? You can redraw to 95% if you put in more than 5%.
People talk about finding an equity partner, but I don't know whether it really happens in practise. I'm sure that I don't know anybody who'd let me use their equity rather than using it themselves! But that may be an option for you.
Good luck!
Thanks for your comments mate. I dont understand the part where you said about how much equity I put into the first IP? As in the deposit? I think it was around 6%….
Is that what you meant Trakka?
cheers.
Yes, that's what I meant, Trance. What LVR did you borrow? If you put in 6%, that would mean you borrowed 94% to buy the first property.
Mate, really new to this err what does LVR stand for? Yes I think we borrowed 95% of the loan from memory .
thanks once again.
Trance wrote:G'day,Our very first IP has been completed as prev mentioned. Talked to our broker and he reckons that we should wait a while now till we a bit of equity build up on this IP. But where to from here? What if you don't want to wait for say another 2 yrs before another property? What can we do, other than to live on noodles and rice to get enough $$ for our next deposit?
What can we do other that to save that can help us further get more IP's sooner than say 2 yrs?
thanks.
Noodles and rice would be an ok diet as long as you add plenty of veges and maybe some fruit here and there!
Sounds like your broker is probably correct and you need to build up equity as well as trying to save for your next deposit. Don't make it too stressful. Even though I respect your enthusiasm you gotta walk before you can run.
BTW have you got your principle place of residence as well as an IP?
All the best, Ian
Ian Landy wrote:Trance wrote:G'day,Our very first IP has been completed as prev mentioned. Talked to our broker and he reckons that we should wait a while now till we a bit of equity build up on this IP. But where to from here? What if you don't want to wait for say another 2 yrs before another property? What can we do, other than to live on noodles and rice to get enough $$ for our next deposit?
What can we do other that to save that can help us further get more IP's sooner than say 2 yrs?
thanks.
Noodles and rice would be an ok diet as long as you add plenty of veges and maybe some fruit here and there!
Sounds like your broker is probably correct and you need to build up equity as well as trying to save for your next deposit. Don't make it too stressful. Even though I respect your enthusiasm you gotta walk before you can run.
BTW have you got your principle place of residence as well as an IP?
All the best, Ian
Yeah I hear ya man. Just gotta learn to be patient I suppose :o)
We dont have a principle place of residence, lets just say that i'm in a job that transfers me around the country every few years. I get subsided housing at this stage so riding that wave till something happens.
Do you have any thoughts or pointers for a newbie like us?
cheers.
[/quote]
Do you have any thoughts or pointers for a newbie like us?
cheers.
[/quote]I rekon that market timing and property selection would be pretty crucial for you. I have had good success by buying duplex size blocks and creating instant equity by doing the small development project. This takes time and energy to complete a successful project and might be difficult if you are moving around but something to consider in the future if you are ready to take the next step.
Keep researching and talking to people in the industry and grow a positive yet realistic outlook.
Where are you living now?
Ian
Trance,
Why don't you get one of the overseas trips with work. I hear they pay well. Or buy your next one as a PPOR when the new work loan scheme comes in around mid year. It looks to be good if used properly. And then rent it out when you move on. If you do this you can sell it within 7 years without paying CGT if you haven''t bought another to live in. And since you mention we, why not get the other half to join you at work part time. Great tax benefit in doing that.
JLIan Landy wrote:Where are you living now?
Ian
At present in the process of moving to QLD more precise Toowoomba but have no plans at this stage to invest there as its very much a dead part of country.
Trance wrote:Ian Landy wrote:Where are you living now?
Ian
At present in the process of moving to QLD more precise Toowoomba but have no plans at this stage to invest there as its very much a dead part of country.
I think they've had recent rains which has brought the place back to life after a shocking drought. Just trying to think on the run here. I think that there are companies around that do special mortgages that help people invest with limited funds. Thing is that they share in the capital growth when the property increases in value but may be worth checking out for yourself? You heard of these?
Sorry, Trance – LVR = Loan to Valuation Ratio – the percentage of the purchase price that you borrow.
OK, so given that you borrowed nearly all of it, then unless the market's moving very quickly, you're unable to get out more equity for another deposit. If you'd bought for $200K and it was already worth $220K, you could access a good portion of the additional $20K in equity by refinancing; which is like "resetting" the loan as if you're buying it again today at the increased price – but the extra $20K you can get in cash and use to fund other purchases. Since that's unlikely, you either have to make it more valuable – eg if you can spend $10K on improvements (garage? new kitchen? etc) that increase the value of the property by $20K, then you could borrow another $10K for deposits on other properties.
If that's not really an option either – which it's probably not as I'm guessing you don't have the $10K to spend on improvements anyway! – then if you really feel that the market in which you wish to invest is moving quickly, then you may want to consider taking out a 100% or even up to 106% loan. These have higher interest rates, but if you feel that values are going up very quickly, then you may still be better off paying these high interest rates if it means that you can buy another property now rather than having to wait a year or two.
trakka wrote:Yes, that's what I meant, Trance. What LVR did you borrow? If you put in 6%, that would mean you borrowed 94% to buy the first property.What about Closing costs, I hear the average is 5% of the purchase price, so by these calculations your LVR should be 99, not 94, right???
Also, if you tkae out a 100-106% loan the interest will be higher in percentage form but what happens if you pay off part of the loan and the property goes up and your LVR goes from like 100 down to 80. Can you then go to the bank and say "hey i'm not such a big risk now, how about dropping me back down to the lower interest rate??" Would they do that??
Chris.
Hey Trance,
Where exactly did you buy your 1st property?
Ian Landy wrote:Hey Trance,Where exactly did you buy your 1st property?
QLD
Trance wrote:Ian Landy wrote:Hey Trance,Where exactly did you buy your 1st property?
QLD
Brisbane?
Coomera
DraconisV wrote:What about Closing costs, I hear the average is 5% of the purchase price, so by these calculations your LVR should be 99, not 94, right???In a sense, yes. Wasn't wanting to complicate things ; )
DraconisV wrote:Also, if you tkae out a 100-106% loan the interest will be higher in percentage form but what happens if you pay off part of the loan and the property goes up and your LVR goes from like 100 down to 80. Can you then go to the bank and say "hey i'm not such a big risk now, how about dropping me back down to the lower interest rate??" Would they do that??Yes, some of them will. You really need a mortgage broker to optimally navigate this territory, and preferably one who's familiar with high LVR products. trentc on this forum fits into that category.
Thanks Trakka.
Also Trance you might be able to do a quick reno on your current property. It would help to build equity and also provide you with extra cash if you refinance.
Chris.
Trance wrote:CoomeraWell that's a good start. Coomera ( gold coast ) is definitely a great area to invest from what I've heard. I am just south of the qld border and property is growing strongly here. Did you buy a new dwelling or an older place?
Ian
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