I would like to have ur savvy investor idea on what you would do with the equity, of two houses paid off in full, one worth 800k and one worth 600k? One is a rental one I live in.
Just trying to get an idea of some options and how to utilize the moneys that are in these houses I have.
Thanks.
i would be out buying already, seriously alot of buyers will hold off buying now because no one likes making big expenditures leading up to xmas…
i would take a LOC on the Investment property and buy as much growth property in Capital cities as i can using 5% deposits + LMI
thats my strategy ive been using for 3 yrs my fiance and I are sitting on 8 IPs, some would call it a high risk strategy but its working fine for us
Depends upon how much risk (debt) you are comfortable with. Leave your PPOR unencumbered (so no risk on the roof over your head).
Use the rental as an LOC (as above) for the deposit on a few properties (but leave enough in the kitty to cover any shortfalls due to vacancies, expenses etc). Use the other properties as the security for the loans.
Other things to consider – structure, land tax, diversification (other states)
A Savvy investor like you would come to me and partner up. With your equity monies, and my expert investment professional strategy we could team up and make a motza!!!!!!!!!!!!!!
Just kidding, I wish i were in your shoes tho. I am all fired up from the Steve McNight book launch, but dont have much to play around with, He did say there were three areas that he would look at, Muti faimly dwellings, eg, duplexs and blocks of units, Positive cash flow properties and commercial. If this gives you something to look at. Let us know how you go.
ten_burner wrote:i would be out buying already, seriously alot of buyers will hold off buying now because no one likes making big expenditures leading up to xmas…
i would take a LOC on the Investment property and buy as much growth property in Capital cities as i can using 5% deposits + LMI
thats my strategy ive been using for 3 yrs my fiance and I are sitting on 8 IPs, some would call it a high risk strategy but its working fine for us
Dont know if you can get 95% anymore, with all this GFC and all, not from the majors at least.
with the equity he has he would have little problem getting that through the CBA
I have less equity than that and got 105% finance (property+LMI+stamp duty) through CBA I just had to come up with legal fees
A 95% strategy is completely unnecessary given your fantastic position. At 95% LVR, you wont easily find cash flow positive properties either, so you will have to top up the monthly mortgage payments, possibly by several hundred dollars per month. This will also limit your borrowing capacity. No need to rob Peter to pay Paul. If you have a significant income and can afford it, and want some neg gearing benefits, that might work, but why take the risk when you have so much equity? You could simply put a larger deposit towards each purchase and let them pay for themselves. You're in an incredibly strong equity position, but you didn't mention your income level so if you are going to be relying on rental income to contribute to servicing the loans on the investment properties you buy, stay below 80% LVR and you can still buy several properties and let them take their time to grow without any real risks. It would be beneficial to your borrowing power too.
So…
On property 1 you would get an I/O loan for 480K. ( 80% of 600K)
On property 2 you would get an I/O loan for 640K ( 80% of 800K)I'd start with one property only- lets say you get a 480K loan approved- you could easily go and buy 4 x 500K properties.
You put up 20% on each (100K) plus stamp duty. In NSW for example, that would be around 20K. So there's $2million worth of properties bought using 480K of your equity!!!! Then borrow 400K for each of the investment properties, and let the tenant pay the loans off. All loans would be at 80% LVR, so no LMI to pay. Also, be sure to use at least 2 different lenders for the investment purchases. Dont give one bank, all five loans. That puts too much control in one banks hands, and may impact on your ability to gear any further at a later date, if you wish to.You'll have 4 x rental incomes to service the loans. If you buy well, each should rent for 25-26K per year. That's100K across all 4.
You'd have an I/O loan of 400K for each one. At current rates (lets use 5.5% I/O ) your repayments would be 22K. 88K per year.
That leaves you with a little bit of a buffer for vacancies, repairs, insurances, property management fees etc and you dont need to put any of your own money in. Even if rates climbed 1.5% to around 7%, you'd only have a shortfall of a few thousand per year on each property, and because your PPOR is unencumbered and you have no mortgage, I will make an assumption that you could easily cover a small shortfall like that. This sort of a strategy may not provide the "maximum" number of properties or the "maximum" amount of growth, but this way you take no risks and can still own multiple properties. Nothing wrong with sensible geared investment, especially when you have such an enviable equity position to start from.You could then look at repeating the process using your other unencumbered property- but I'd look at putting a chunk of that money into a self managed super fund and buying a couple of the investment properties through it. You'll need to put up about 30% deposit on anything you buy in a SMSF, but the tax benefits are fantastic
Anyway, just an opinion, and to be honest these are just random numbers Ive selected. You could easily buy properties that are more expensive or less expensive than what Ive suggested- but I had to use an example for the purpose of the exercise.
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