My situation : Bought a 3bdr , 2 bath unit in preston,victoria last year on IO for 5 year ( with anz ) which I am currently living in right now, I have now matched the loan balance(250K) with the offset balance so I don`t have any monthly payments .
I now would like to buy another property preferably a house with land with an IO loan for about 500K with a 20 % deposit, my parents will be giving me $200k which I will straight away put in the offset so leaving me with a loan balance of 200k . Initially I would like to put it on rent and then in 2-3 years time to help me pay down the mortgage a bit ,as by that time I`ll match the offset balance with the loan balance and then I would like to construct 3 townhouses on it by taking out a construction loan , then selling one townhouses which are going for about 450k in the area and clear off the loan and own the 2 townhouses outright plus the unit I`m living in right now
I have spoken to a few people about it but they all have given me different views and I am getting confused . My goal is to live off the rental in 5 years time as I would be spending majority of my year overseas in south east asia , and the income from my properties should be enough to cover for my living expenses . During that time I will still have a ppor here in Melbourne and as per 6 year cgt rule i will be living in it for some time and rest of the time it will be rented out
My Questions for you knowledgeable people :
1. Do you think what I'm aiming for is achievable or I`m just dreaming ?
2. Also I've been trying to get an idea for a cost of a 3bdr 2 bath townhouse but cant rally get a ballpark figure on it , so if someone can just let me know roughly how much it costs.
3. I only earn 50k per year so do you think I can get a loan , I will be going to see a mortgage broker in the coming week but just wanted to know roughly
Thank you everyone for your support and help, I have learned a lot from you guys, Appreciate it !!!
thanks
Ash
Yes, it should be achieveable.
If you are not paying any interest then the cashflow from property 1 would be the rent of the property less about 25% in costs. You don't indicate what this would be but if your loan is $250k then the value may be around $300,000. At 5% yield the rent would be around $25,000 per year. Less 25% for costs = $18750.
That alone is more than enough to live comfortably in SE Asia.
For the next property if you have a large sum in the offset then this should be cashflow positive as well.
To answer your questions:
1. Not dreaming, it could be possible sooner than you expect – within weeks rather than years.
2. $300k upwards
3. Probably could you get a loan.
You need to carefully plan, you would probably want to maintain your tax residence status here. You also want to make sure you qualify for the 6 year rule (s118-145 ITAA97). It might be harder to qualify for a construction loan down the track for 3 units, but you could still qualify with careful planning.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Thank you so much for your reply !!! I bought my current PPOR for $ 350k with a 20% deposit the remaining loan balance is now matched with the offset balance. The current value of the property is about 400k. The rental for similar next door unit is 1600 pcm. I have since last year managed to save about 80k which I would like to use as a deposit towards my first IP.
I did speak with my mortgage broker today and hes saying that I might need to get a split loan with 2 different banks and I would need to use some of my money from the offset a/c against my PPOR which I don't understand why ,as I already have 80k saved in a different account other than the offset, I will be getting $200k the day after my loan starts for the IP to place it in the offset a/c, the rent where I`m looking to buy is about 350 pwk and the property I`m looking to buy would be somewhere between 450-500k.
I am hoping that Richard or someone else can help me understand what my mortgage broker really means .
My only goal at the moment is to own 3 quality properties outright move overseas for some time without affecting my tax status and live off the rent
Thanks for keeping my spirits up and making me believe in something I've always dreamt of achieving , just got a few questions though :
- Is there something that you would recommend is absolutely necessary for me to do when you talk about careful planning or does it just mean loan structure and things
- Few people Ive spoken to are saying that it would only take max 160-180k to build a 3dbr townhouse of 200 sqm
- Why do you think It might be hard for me to get a construction loan in the future ?
thank you kindly
Regards
Ash
1. Plan so that you can remain a tax resident – otherwise you could lose this status – seek legal advice on this from your accountant or lawyer.
2. This is a statement not a question! That sounds cheap to me
3. If you are not working it may be hard to demonstrate serviceability.
You have $80k but it would still be a good idea to use none of your own cash to pay for the next one. Could you get hold of the $200k before you buy? This way you could just borrow 80% of the purchase price and put the rest in the offset account. You could then immediately buy another property- instant retirement.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Ash88,
Please confirm What I am understanding is as below is correct.
Todays condition
Owner occupied property valued at $400k , Value at start of loan was $320k remaining loan 250K offset account balance 250K.
Cash other then Offset account 87K
i.e. Net Asset $487K
Planned
At the time of purchase of IP gift of 200K
Net assets $487K+$200K=$687K
After buying the IP valued at $500k
Assets valued as $400k Home + $500K IP = $900K
Deposit paid 20% =180K
Cost of buying 20K
Money in offset account = $687K-$200K=$487K
Loan remaining = 900K-180K-487K=233K
Loan payment about 13K
Rental income frm IP about 25K
net rental gain = 12 K
Living expenses 12K
Net saving none
After 3 years
Property appreciated value …/.
Cost of construction
After 4 Years
sold the property or keep on rent….
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