Looking for a few idea’s in how to structure the finance for my next few properties.
Situation is as follows:
PPOR value $275,000
Owe $45,000 Principal/interest
Equity $$235,000
Cash $20,000 (would rather not use any of this. Currently sitting in offset account on PPOR, PPOR loan is therefore effectively $25k)IP1
value $300k
LOC Loan limit $170k
Available $92k
Rent income $280 p/Wk
Therefore equity on IP is about $222kIncome approximate $65k
Any suggestion on methods of structuring for at least another 2 properties at approximate $300k each would be greatly appreciated !
Thanks in advance.Hi Tommy
Firstly welcome to the forum and I hope you enjoy your time with us.
Whilst I have to hand fairly limited information in relation to your incme and expenditure I will ignore this for the purpose of the exercise and focus mainly on the structure question.
I will assume that your investment LOC was used solely for investment and that there is no element of personal expenditure going through it. Even then i would question why a LOC is being used as the main loan on an IP.
Again not sure of the interest rate being charged on the IP but will assume that it is fairly competitive and the loans are not cross collateralised.
Simpliest and cleanest way is to look at an equity loan secured against the IP / PPOR (depending on the purchase price of the 2 new IP's) to ideally cover 20% of the new purchase priice and then look at a standalone investment loan secured solely against the new IP to cover the 80% balance.
I wouldnt touch the funds in your offset account as you would want to maximise your deductible interest especially whilst you still have a loan albeit of $20K secured against your PPOR.
Carefully structuring with a couple of lenders should get you where you to need to be without much ado.
Shoot us an email if you need any further information or advice.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for your comments Richard. Some more info……
Expenditure is just normal, no other loans, no exotic cars or holidays. LOC on IP was set up as I had repair and maintaince/renovations, strata levy’s etc that totalled $30k and I didn’t won’t to use my money, so I refinanced from P/I loan to utilize some equity to cover the IP bills. (hope that was the right thing to do. Yes, LOC is for IP use only, and my bank manager advised to use the remaining balance as deposit for next IP) Interest rate is at 7.7 %, i think LVR was calculated at 60% and I don’t believe they are cross collaterised.
At present, all IP bills are slowly soaking up the balance of the LOC, and the rent is going into my offset account on PPOR, and I just deposit a little more into the LOC to cover the interest.
So a new problem is starting where I seem to be biting into the IP equity. Any suggestions on how to fix this and a way forward to obtain 2 more properties ASAP would be greatly appreciated. ($300k each)Hi Tommy
Firstly you could probably save 0.7% plus by considering refinancing the IP and this will make a big difference to your cash flow.
Couple of lenders i can think of and you would be looking at circa 6.9% for an equity loan (even less if the lvr is less than 65%).
I assume you have lodged a PAYG Tax variation so should be seeing the benefits of Tax credit in each pay packet. Will also assume that you have done a Quantity Surveyors report for the property .
Might want to consider accessing the equity from your PPOR (again interest rate could be improved) rather than the IP loan.
All in all sounds like you might need an overall finance check to put everything in order to enable you go forward.
Happy to help if you decide this is the way to go.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi all, been away for a while doing other things, time to get back on track. Situation is basically the same as my previous post. Is there a spreedsheet or something that I could throw some numbers at to see if I can afford another property. Something that I could populate with numbers and look at “what if” situations with imputs such as income, expected rent, loan amounts, depreciation values, etc etc. Would really like to purchase another IP but as it has been a while since researching financial/investment info that I seems to have forgotten the basic’s !
Would like to know how much I could borrow and how much I would need to personally cover to invest in more property.
Thanks in advance
Tommy1Tommy1 wrote:Hi all, been away for a while doing other things, time to get back on track. Situation is basically the same as my previous post. Is there a spreedsheet or something that I could throw some numbers at to see if I can afford another property. Something that I could populate with numbers and look at "what if" situations with imputs such as income, expected rent, loan amounts, depreciation values, etc etc. Would really like to purchase another IP but as it has been a while since researching financial/investment info that I seems to have forgotten the basic's ! Would like to know how much I could borrow and how much I would need to personally cover to invest in more property. Thanks in advance Tommy1Hi Tommy
Do yourself a favor and just contact Richard who has already provided excellent advice.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Tommy1 wrote:Looking for a few idea’s in how to structure the finance for my next few properties.
Situation is as follows:
PPOR value $275,000
Owe $45,000 Principal/interest
Equity $$235,000
Cash $20,000 (would rather not use any of this. Currently sitting in offset account on PPOR, PPOR loan is therefore effectively $25k)IP1
value $300k
LOC Loan limit $170k
Available $92k
Rent income $280 p/Wk
Therefore equity on IP is about $222kIncome approximate $65k
Any suggestion on methods of structuring for at least another 2 properties at approximate $300k each would be greatly appreciated !
Thanks in advance.Yes thanks for sharing the case study here Tomy, is it possible to share the result of the loan restructurization here please ?
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