Hi all,
So, new user here, young and trying to learn FAST…!!!
I need advice on structuring my loan/s for 2x investment properties. About to embark on the 2nd investment in the short term so fixing up the finances currently.
Investment property 1 – Current value around $380k, still owe $250k. $15k in redraw. 100% off-set account. Our first mistake was not changing from paying P&I to IO when we converted this from our PPOR to IP. So we have lost out on tax savings here. Negatively geared and looking that way for the next 5 or so years.
Investment property 2 – Looking at borrowing $210k including loan purchasing costs and roughly $15k for reno's (husband a builder). Thinking of structuring this the same way i.e. 100% off-set, IO. Hope to be positively geared within 2 years.
Question – what would you recommend to be the best structure? There's so many products on the market it is all very overwhelming really. i realise I'm probably missing some info for ppl to answer this question thoroughly so feel free to tell me what you need
Meeting with our accountant in a week but wanted to go in with some idea!!!Thanks in advance
Hi Amy
Firstly welcome to the forum and I hope you enjoy your time with us.
Hate to say unless your Accountant holds a Credit License or is an Authorised Representative of a License Holder under NCCP he wont be able to offer you any Credit advice.
You are right there are a myriad of loans and offers out there however you need to focus on actually what you need and not what the lender wants to sell or offer you.
Cleanest and my preferable way of financing the deal would be as follows:
1) Separate sub loan secured against IP 1 to cover a deposit , acqusition costs and reno funds for IP.
The level and amount of the loan will depend on a couple of points however might be able to go 85% with NO LMI.2) A separate standalone loan secured against IP 2 with different lender keeping the loans frees standing and no cross collateralised. As IP 2 increases in value revalue draw down additional funds repay the sub loan and shift the debt to IP 2.
I would question why you need 2 offset accounts. With odd exception most lenders charge something for an offset account whether it be a monthly or annual package fee. Only think of a couple of lenders off the top of my head which offer a true fee free 100% offset account and there is a limit to how much you can offset each month especially if you are ever thinking of purchasing a PPOR in the future.
A good independant broker should be able to sovle the problem for you with some lending options.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard thanks for all your advice. We are with a Govt CU and to date have not experienced fees with our off-set a/c which is why I thought to open another one for IP2. But I'll discuss your suggestions with our planner. Meeting with him as well as the accountant. Thanks again
Also, i forgot to mention that IP 2 is on a block over 1200sqm and the potential to subdivide in the future and build a home (husband to build) to either sell or hold is a consideration. Does that change any of your suggestions? Thanks again
Hi Amy
You might consider having Richard help you instead of your accountant and planner. Richard does this sort of thing every day and is a property investor himself.
Jac
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Meeting with our accountant in a week but wanted to go in with some idea!!!
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