Hi all, My partner and I are looking to increase our income through property investment. We are at the initial stages of researching and planning a strategy.We are looking to buy and renovate for profit – however we are open all to ideas as to what options are available.
Welcome to the forum
What you are suggesting is the way most people build wealth through property – using the equity in an existing property to leverage from to buy the next.That’s why I like ( and buy) capital growth properties. You’ll find some people recommend Cash Flow properties, but while they are cheaper to hold on to in the short term, they won’t deliver the growth that will allow you to leverage off for the next property.
Read some good books during your research phase. Check this forum. You’ll see many recommend Michael Yardney’s “How to grow a Multi Million Dollar Property Portfolio – which talks about the exact strategy you mention – buy and add value.
It’s also worth getting his newsletter – http://www.propertyupdate.com.au/Good luck with your investing
Regretfully your partner wont be able to buy and claim the FHOG as you have already claimed it.
From what you are saying this project could the first of many so i think you need to be make sure it is structured correctly.
I wouldn't use your PPOR as security for the next deal but look to take out a LOC and maybe lend the funds to the Trust or whichever entity you intend to use for the new property.
There are a 101 considerations as CGT / Trading Profit will reduce your cash reserves very quickly.
Your mortgage broker should be able to give you some options.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Wow, all this is interesting – its been a while since I have been on here. – So wouldlike some advice also.,
I currently have approx 350K equity in my PPR and am building an investment worth 370K (Altho this wasnt my real choice of investment but got stuck with a block I bought before the crash). My sister is moving in with us and we either want to invest in another property or sell this house, down size and then buy a couple of investment properties. She has approx 200K in bank – no house.
Do you normally look at a 80% lend for investments to avoid Mortgage insurance?Do I sell this house and buy one for say 200K less to secure more cashflow
Keep this and buy another 1 once my building investment is complete (The bank says I cant borrow any more til this is done)I am also considering using a property finder – is there anyone here that is looking in WA? Preferably +CF as I believe this will allow me to borrow more money in the long run? How much do you charge to find a decent property?
thanks all
? What crash ??
Thanks all for the input. Just a question Qlds007 – I never claimed the first home buyers grant as I brought my first property pre-buyers grant – this one i live in is my second purchase. Is my partner still able to access the first home buyers grant? our PPoR is in my name only.
Hi Aloha
No unfortunately he/ she is unable to claim the Grant as you have already owned a property.
Sandtracker – You situation sounds like a bit of a mortgage mess no doubt created by your Bank.
It is difficult to comment without knowing any of the real details but more often than not there is always a way.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard
what do you mean by a mortgaeg mess?
Here is what I have:
Mortgage on PPR of approx 350K – house worth 700K
Investment loan – IO for house & land – this is due for completion approx April next year.My sister has been living in UK and sold her house in the boom, hence she has 200K sat in the bank.
We are happy to live together if we can come up with a plan for investing. I live very close to the beach in WA, and there are heaps of cheap properties here still. I can either downsize our house which will release some cashflow and the bank will lend me more for investing, together with the 200K. Or, I can stay here and just use the 200K and wait for the house/land to be completed?
Any pointers?Hi Aloha,
The FHOG only applies if the parties (including a partner) havent entered into the property market before.
But there is other government goodies that I am currently taking full advantage of but runing them negative geared at the moment, that is building new homes off the plan in new developements. I just find a simple reasonable priced block (hard to find, but they are there) then building just the most basic 3-4bed, double garage, with the creature comforts of a basic ensuite and built-ins. I've built two and there almost neutral geared (IO loans), my first cost me $349k and rents for $430/w from the moment it was complete, the property value is now $410k, according to the realestate.
I only paid stamp duty on the blocks and with the goverments cutting the stamp duty in half for new homes it made the costs in settlement fee's alot easier. I also claim full tax depreciation on the properties and no worries of to many hidden costs after the home is complete ie, hotwater system failing and it has a seven year stuctural warranty.
I am currently looking around the outer towns of Melbourne or Brisbane for my next investment which I would like to start in the begining of the next financial year (when we are cashed up) and have noticed alot of developers in these areas advertising deals.
Thats just a little food for thought and it's not for everybody as it can lead to larger dept, but it's suiting me at the moment. Just do your homework before jumping in to deep.Regards
JSorry J but that is not quiet correct
The FHOG only applies if the parties (including a partner) havent entered into the property market before.
You can certainly enter the property market and acquire an Investment property and still claim the FHOG.
The reason Aloha's partner would not qualify is that Aloha has purchased an owner occupied property previously and therefore his / her partner would not qualify. Had the property been an Ip then he / she would qualify.
Cheers
Yours in Finanec.
Richard Taylor | Australia's leading private lender
Sandtracker,
Are the loans cross collateralised i.e did you use the security of your PPOR to purchase the IP. If so then the fact that the IP has fallen in value will erode your equity and may mean that you financier will not allow further borrowing.It is a lot cleaner and easier (you situation is a typical casient scenario) to keep them separate.
I am assuming that you will form a Discretionary Family Trust with you sister to buy your IP's and whilst she might bring cash to the table you would need to gear against your equity to lend to the Trust.
The mortgage mess refers to the assumed CC of the loans.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard,
I believe it is CC with my PPOR, and I believe we didnt havent much choice at the time? So I may either need to wait until it is complete, or refinance without the PPOR – I suppose pay mortgage insurance or pay a chunk off it to avoid mortgage insurance . THe house/land hasnt actually fallen in value, I would probably break even if I sold it.
I dont know whether it is worth selling my PPOR because of the high mortgage and taking a smaller house/smaller mortgage and hence have more available from the bank to invest – or just keep it, and then invest with what we have left, including my sisters 200K. In the mean time consider renting the IP out when it is built, and having that as our 1st.
I am not too clear on a discretionary family trust – but will need to look into it if investing is going to be a long term thing that we do.. Is there anywhere I can find info about this or do I just use my Accountant?
thanks for your help so far.jlb2431 wrote:Hi Aloha,The FHOG only applies if the parties (including a partner) havent entered into the property market before.
But there is other government goodies that I am currently taking full advantage of but runing them negative geared at the moment, that is building new homes off the plan in new developements. I just find a simple reasonable priced block (hard to find, but they are there) then building just the most basic 3-4bed, double garage, with the creature comforts of a basic ensuite and built-ins. I've built two and there almost neutral geared (IO loans), my first cost me $349k and rents for $430/w from the moment it was complete, the property value is now $410k, according to the realestate.
I only paid stamp duty on the blocks and with the goverments cutting the stamp duty in half for new homes it made the costs in settlement fee's alot easier. I also claim full tax depreciation on the properties and no worries of to many hidden costs after the home is complete ie, hotwater system failing and it has a seven year stuctural warranty.
I am currently looking around the outer towns of Melbourne or Brisbane for my next investment which I would like to start in the begining of the next financial year (when we are cashed up) and have noticed alot of developers in these areas advertising deals.
Thats just a little food for thought and it's not for everybody as it can lead to larger dept, but it's suiting me at the moment. Just do your homework before jumping in to deep.Regards
JHi J
When you mention building and finding deals from developers – I find they generally would sell you the block at the same time – or are you referring to builders? I have bought a few blocks and built on them, but for some reason or another have had to always sell them when complete. I have however alwas found the block myself and then a builder as oppose to a developer?
Can you give me more info on your projects, as this is a path I would like to continue to take – I have a house on the go at the moment.
thanksHi Aloha
I hope you don't refinance your house to buy a car again! Cars depreciate!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Sandtrackers wrote:Wow, all this is interesting – its been a while since I have been on here. – So wouldlike some advice also.,
I currently have approx 350K equity in my PPR and am building an investment worth 370K (Altho this wasnt my real choice of investment but got stuck with a block I bought before the crash). My sister is moving in with us and we either want to invest in another property or sell this house, down size and then buy a couple of investment properties. She has approx 200K in bank – no house.
Do you normally look at a 80% lend for investments to avoid Mortgage insurance?Do I sell this house and buy one for say 200K less to secure more cashflow
Keep this and buy another 1 once my building investment is complete (The bank says I cant borrow any more til this is done)I am also considering using a property finder – is there anyone here that is looking in WA? Preferably +CF as I believe this will allow me to borrow more money in the long run? How much do you charge to find a decent property?
thanks all
Borrowing 80% secured against purchase property will avoid lenders mortgage insurance (LMI) . The remaining 20% plus costs secured against your PPoR (you could use an LOC for this, but note dates and monthly interest amounts for tax purposes ).
If you have an offset account your sister could park her $200k and it would save you interest. She could invest in two or three affordable off-plan projects where developer pays interest where the deposit funds are released. I know of one in NSW where the interest paid is 10% pa – which could be taken as cash, or for greater tax effectiveness, offset against the balance owing (effectively reducing purchase price). Check this out with your Financial Adviser.
The Industry standard charge for Buyers' Agents is between 2 & 3%. As I am a sole operator with few overheads I only charge 1% or 20% of discount to list price that I am able to negotiate (incentive for outperformance!). I can also provide a couple of WA BA contacts
Graeme Freer | Freer Property and Finance
http://www.freerpropertyandfinance.com
Email Me | Phone MeBuyers Agent
Hi There
Could you explain more about where you say the developer pays interest where the deposit funds are relaeased? If we purchase an off the plan house/land package, where does this come in that the developer pays you interest?
thanks
This is where the Developer is paying interest on an upfront deposit (released for seed capital). Win /Win as long as risks are explained by an independent financial adviser. Developer has access to cheaper funds than if borrowing private finance and investor gets a return higher than if money in a term deposit. Loan document needs to give comfort as to strength of the guarantee .
Naturally the track record of the developer needs to be scrutinised. I like to see 10 years experience and conduct extensive due diligence on the location.Graeme Freer | Freer Property and Finance
http://www.freerpropertyandfinance.com
Email Me | Phone MeBuyers Agent
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