Hi All,
Looking for some basic advice on how to structure loans to be able to buy 1st IP.
My situation:
PPOR is valued at roughly $350K
Fixed mortgage at $177300 (fixed until end Feb 10 at 8.29%) – OUCH – Yep!!
Equity Manager account with a limit of $60K with $57000 owing.
Want to keep both PPOR and IP within 80% LVR.Currently doing a whole stack of research before buying first IP early next year.
I understand I can use the equity in my PPOR as the deposit for the IP but confused as to how that is done.
Also considering doing the RESULTS program starting in July 2010. Not sure whether that would be beneficial considering I'm only really new into property investing.
Would be greatful for any advice.
Matt.
Hi Matt
Welcome to the forum and I hope you enjoy your time with us.
I assume from your post comments your loan is with Anz.
In essence all you would do at this stage is either take out a separate Equity manager account to 80% of the current valuation and use this to fund the 20% deposit and the acqusition costs on your new investment property purchase.
Then in turn you would take out a totally standalone investment loan secured solely against the investment property itself.
If the current equity manager was used for personal purposes I would look to convert this to a standard P & I or interest only loan and link it to an Anz One being the Banks 100% offset product.
Hope this makes sense. Any questions fire away.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks. There's heaps of information on here which is absolutely gold for someone starting out.
I'm with One Direct (ANZ off shoot).
So in effect I'd have 3 different loans? 1. Std P&I (with offset) for PPOR, 2. Other Equity Manager for deposit and costs & 3. IP loan (equity manager)? Have I read that right?
If the above is right, is the interest on the 2nd loan tax deductible? (I realise your information is general and I'd need to check but I just want to get my head around this.
One Direct's minimum loan amount is $100K so it looks like I'd have to refinance elsewhere where they have a lower min loan amount. That's not all that bad as I had the property valued back in June ($330K) and they won't do another valuation until Jan/Feb at the earliest. Seriously contemplating breaking the fixed loan at the moment to maybe start investing earlier.
Has anyone done the RESULTS program of recent times and can give feedback on suitability for brand new investor?
My guess would be that it would be 4 loans:
1. Std P&I (with offset) for PPOR, 2. Other Equity Manager for deposit and costs & 3. Equity Manager which is used for deposit of IP 4. IP loan (Interest only)
The interest on loan 4 is tax deductible.
I done something similar to this except I didn't want to have the Equity loan hanging about after purchase so I consolidated it into my IP loan, in doing this though remembering at tax time that only the original portion is tax deductible
Hi Matt
Ok One Direct at least i was on the right horse.
If your existing Equity manager account was for personal purposes then why not switch it to a Interest only / P & I term loan as unless used for specific debt recyling purposes I am not a great lover of personal lines of credit.
Yes the interest on both the separate investment line of credit and the standalone investment loan itself would be tax deductible.
Richard Taylor | Australia's leading private lender
The results program is well recommended, i cannot personally say i have done it however know investors that have.
The newer you are the better lessons you will learn. It doesn't matter when you start it matters that you actually ACT.(which sounds like you are)I think there is actually a forum about education and many reviews on various programs ect.
Many programs are great however it depends on whether you want to go down the capital growth path, cashflow positive path, or a bit of both.
Read reviews ask questions and dont part with your money unless you are going to be committed to put in the hard yards. Just look at what Steve Mcknights hard yards have achieved!!!
Do it- Good Luck.
mattyk_75 wrote:One Direct's minimum loan amount is $100K so it looks like I'd have to refinance elsewhere where they have a lower min loan amount. That's not all that bad as I had the property valued back in June ($330K) and they won't do another valuation until Jan/Feb at the earliest. Seriously contemplating breaking the fixed loan at the moment to maybe start investing earlier.
Maybe, since you already have loans with them, they will allow a smaller limit on a new LOC. If you were to refinance elsewhere you would be up for a large fee on breaking the fixed loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks all for your responses. More food for thought.
Hi all,
I too have a query about buying a 2nd IP and how to structure the financing.
The question is for my wife and her friend who is a pensioner but currently owns an IP which she recently renovated in the Blue Mountains, nsw worth about $420k – $440k with about $250k owing on the loan. They recently finished built and sold a property early on this year but are looking to purchase a 2nd IP for reno or to build a new IP for renting out.
My wife in addition has about $35k in savings and is a director of a printing company that she has been running for 3 years now has a turnover of about $140k / yr gross. So basically my wife has the 'earning' side and her friend has the 'asset' side (and also whatever she earns from her pension).
The property they are considering purchasing will cost about $270k but ideally my wife would like to save the cash for costs etc and use any available equity in the existing IP owned by her friend.
Any thoughts on this situation or is it better to just keep saving up more $$ and just using that as a deposit. They just dont know.
Will really appreciate your wisdom
Thankyou
Bernard
Hi Bernard,
Whichever way they choose to go, make sure that everything is in writing as far as who has and will contribute what as far as cash and equity go as well as what will happen if one wishes to sell etc. This can get very messy if the two parties have different needs or plans both now and in the future. Good friendships can be ruined by not planning for every eventuality, its a bit like getting a prenup!! people don't want to think that their marriage will fail, but many of them do.
cheers
Sonya
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