I am a starter in IP. My background is i am owing a house around 400K house, no finance on it and my salary is around 56K pa. . I am interested to purchase my first IP in Brisbane. I would like to use the buy and hold startegy. Any good suggestion on how to get a good start on it.
Hi, Miclkc
Looking at a financial point of view, you have to options for funding a deposit for your IP; cash or equity. Cash is really king at this time, so I suggest going to your lender to see how much equity you can access on a separate loan. Also find out how much large a loan you can finance on your income. Most lenders are limiting LVRs to around 90 – 95%.
As for the type of IP and investing structure (personal name or via a trust), that is entirely up to you. The wife and I recently purchased our first IP via a Family trust and am undertaking a comestic reno. It is quite a learning curve for us.
Regards
DanielHi Mic
Welcome to the world of property investing.
The main hurdle is to make sure you start with the correct foundations so that you can build from there.
My prefered approach as Daniel has touched upon is a Line of Credit secured against the Principal place of residence which can then be used to draw down to cover your 20% deposit and acqusition costs on the new investment properties themselves.
Then separately you take out a interest only loan with 100% offset account linked to to a level of 80% of the purchase price of each of the investment properties.
The entity that you will use to purchase will vary depending on your circumstances.
Initially a Corporate Trustee maybe overkill for the first property and has certain disadvantages.
it all boils down to your own personal circumstance and the type of property you are looking at acquiring.
First thing is to set up the finance and then work from there.
Richard Taylor | Australia's leading private lender
i have been to the pre financial approval and should be ok to borrow 400k (interest only loan). At first i would like to purchase the apartment in Brisbane city, but i am worrying about the depreciation of it, which will affect the equity in future. If the apratment has been valued down in future, how can i use this as my equity to purchase the other IP.
Mic
There is the problem immediately and thatis the structure of the loan.
Sure some lender has given you pre-approval (for thats worth) on $400K but they will be wanting to take your PPOR as security and that is the very reason why you dont cross collateralise your loans.
Needless to say it is in your lenders interestfor you to do so but you are correct if the apartment where to fall in price and the loan is crossed with your PPOR then your future borrowing is effected.
Structure it correctly with a standalone loan and this does not become an issue.
Your Broker shoudl be able to explain this to you.
Richard Taylor | Australia's leading private lender
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