All Topics / Help Needed! / Just bought 1st apartment

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  • Profile photo of avalonesaavalonesa
    Participant
    @avalonesa
    Join Date: 2013
    Post Count: 11

    Hey, we just bought 1st 2bed apartment as PPOR for 290k in melbourne.

    How do we go about getting an investment property now and when is the best time to buy the next place? I understand you can get an investment loan out based on the equity in your property, (currently we have about $40k equity) how do we do that?

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    How are you calculating equity? What is your current loan amount and the purchase price of the PPOR and when did you purchase it?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Avalonesa

    Congrats on the first purchase.

    Some banks will allow you to access equity up to 90% of the properties value (some will actually go up to 95% but they're not easy deals to get across the line).

    So on that basis, if your property was valued at $290k – the bank may let you take your current borrowings up to $261k which is 90% of the properties value.

    Let's say, for arguments sake, that you had a loan of $200k against the property – then the equity you'd be able to access would be $61k. We come to that figure by subtracting the $200k loan from the $261k = $61k

    You would then set up another separate loan to cover the remaining balance of the IP. So all up you have three loans.

    PPOR

    Loan 1: Existing loan ($200k)

    Loan 2: Equity release for IP deposit/costs ($61k)

    IP

    Loan 3: Remaining balance for IP (can be the same bank as the two loans above or a different bank)

    As your current property is a PPOR – you really want to set up a second loan split for the equity release so you can identify which is non deductible (your PPOR loan) and which is deductible (your equity release for the IP deposit).

    Hope that helps.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of avalonesaavalonesa
    Participant
    @avalonesa
    Join Date: 2013
    Post Count: 11

    Current loan amount is about $250k and apartment is valued at $290k (also purchase price)

    Purchased it last month.

    Just want a guide as to how to go about getting the next investment property started. Our income is going up to $200k/year at the end of this year.

    Profile photo of avalonesaavalonesa
    Participant
    @avalonesa
    Join Date: 2013
    Post Count: 11

    Thanks for the help Jamie.

    So loans 1 and 2 are from the same bank right? Or can loan 2 be from a different bank? Must they send a property value assessor to the residence first to obtain the current value?

    "Second loan split for the equity release" ? I don't know what that means?

    When you say, "deductible", you mean tax-deductible right?

    So what exactly is the deductible part of the "equity release for IP deposit" loan? The interest on that loan?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi

    No worries at all.

    Yes, loan 1 and 2 are from the same bank.

    They'll usually send out a valuer if the loan amount is going to be higher than 80% of the properties value. Otherwise they might go off  a desktop valuation.

    Second split for the equity release means second loan. So if you looked at your online banking you'd have two loan accounts set up – the first being your original loan amount, the second being your equity release loan which can either be a line of credit or an interest only loan.

    Yes, the interest repayments on the equity release loan will be deductible because it's being used to fund an IP purchase.

    At present, you don't have enough accessible equity to purchase an IP. If your bank let you take your total borrowings up to 90%, you'd only be able to access $11k at present.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    It is very unlikely that the valuation on this property will be higher than $290k unless you have done some extensive renovations on it and even then there is no guarantee of a higher valuation.

    Therefore lets assume that the valuation is $290k. If this is the case then your current LVR is 86.20%. This means that you can draw upon the equity at either a 90% or 95% LVR. If we assume that you can do it at a 95% LVR then the equity available would be $25k minus the LMI payable. The LMI payable at a 95% lend will be around $6k so the equity would be $25k – $6k = $19k.

    Who is you current lender?

    Regards

    Shahin 

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of avalonesaavalonesa
    Participant
    @avalonesa
    Join Date: 2013
    Post Count: 11

    current lender is bankwest.

    property cost $290k and we put down a $40k deposit

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Ok so your equity at a 95% lend (which is hard to achieve but let's park that for the time being) is approx $19k.

    What is the purchase amount of the new IP?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    TheFinanceShop wrote:
    Ok so your equity at a 95% lend (which is hard to achieve but let's park that for the time being) is approx $19k.

    Ain't happening with Bankwest.

    At 90% LVR it's an $11k cashout and that's not going to buy a whole lot right now.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of avalonesaavalonesa
    Participant
    @avalonesa
    Join Date: 2013
    Post Count: 11

    Ok, I guess we'll just focus on paying down the loan a bit more for the time being and maybe prices will come down and we can jump in again :)

    My second question would be, which areas of Aus can I find a + cashflow IP ?

    I've heard the UK market is starting to recover, should we be looking overseas instead?

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Depends – you need to look at regional or create dual income if you are looking at metro. 

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

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