Hi guys
Im so glad I have come across this group! Its been a wealth of information.
OK Im in need of some help and ideas to get me on to the next stage.
To break it down I have:
– 1/3 share in an IP fully paid valued at $600k with low rent income of $300week
– 1/2 share in an IP valued at $500k with total of $340k owing paying I&P – low rent income of $300week
– $200k cash
My goal is to purchase further IP's on my own as the other parties dont wish to carry on.
I wish to purchase IP's with the intend to subdivide and develop.
What would be the best move??
Use my share of the equity from the two IP's to purchase another?
Pay the $200k cash into an offset account for IP number 2?
Dramatically raise the rent on both IP's after some basic renovations?
It would be great to hear of other proven options.
Thanks again!
Jon
Hi Jon
Ok buying with friends or other parties can have issues especially when it comes to finance going forward.
Many lenders will only allocate 1/3 or 1/2 of the rental income that is received on the existing investment properties to the income side of your ledger whilst taking 100% of the current liability. This of course significantly reduces the amount you can borrow.
To avoid this use a Mortgage Broker that is experienced in investment lending and structures to ensure you can keep on borrowing.
Now should you wish to utilise the equity in the current properties remember all parties to the Title will need to sign the new loan agreement and this will increase their liability.
In similar cases for existing clients we have suggested the set up of 2 sub loans on the property for the same amount with each split being the same amount. I.e $40,000 each.
Whilst both parties are jointly and severally liable for the total loan each party can agree to do with what they like with their own split.
If this is not an option and you have no other equity to draw upon in your own name I would:
1) Use minimal cash to purchase the property and borrow the balance.
2) Use a Term Deposit as additional security and borrow 100% of the purchase price.
Again i can't stress how important getting the finance structure going forward is.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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