My current situation
-PPOR bought for 645k last year, don’t know if it has go up in value or not. owned outright
-350k in cash just sitting in bank
-no debt
-IP overseas 300k owned outright. income $7200 p/a net
-wife income 60k per year before taxI have been reading different scenarios with structuring finances and strategies.
Im very lucky but feel like I’m way behind compared to everyone here in this forum. I would love to buy and hold 7-15 years with my IP’s.
So I’m currently been looking for deals here in Melbourne. In my head I would love to be able to buy a property around 350k-400k including SD and expenses with 20% down. One a year for the next 5 years. Am I too ambitious is this realistic? So I don’t know if I should be taking LOC on my PPOR for deposit and save my cash? or just put cash down as a deposit in which i will run out of money with the 3 properties with some cash to buffer for emergencies. 80k down each property x 3 = 240k with some cash left over for reno’s or emergencies. All the IP’s in IO terms.I havent talked to a mortgage broker yet. Still doing research. Also was thinking of doing my first property with and buyers agent. Good idea or bad? Waste of money? any recommendations? Its it good to have a buyers agent that has clients that have houses to sell?? Doesn’t that make them a bit bias to sell house that clients have? or?? Also with property management do you do interviews before buying a house? or after? am I jumping the gun a little bit??
Cheer for any advice
Too ambitious or realistic? It will come down to your borrowing capacity but the equity is certainly there – so if leveraged property you could purchase multiple IPs.
Don’t use cash – leverage against your PPOR. Take out a variable IO loan rather than a LOC. Use this to cover the deposit/costs on each IP purchase and set up a separate loan for the remaining balance against each IP.
By “borrowing” to fund the deposit/costs you’re keeping 100% of the IP debt plus costs tax deductible.
Talk to a PM after you have an offer accepted on a property.
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]
Hey Jamie
Thanks for the info.When you say leverage your PPOR does that mean basically borrow against your house to put down a deposit for an IP? And can I do that every year without a problem? Is that the definition of Cross collateral? or completely different?
Also, I forgot to mention, that I don’t work so if the IP is negative geared then I should put it in my wife’s name for tax purposes, correct? If its positive I should be put it in my name I believe. And if and IP starts to go positive can I switch it to my name easily??
So just keep the cash liquid? wouldn’t it just be sitting there losing money every year?
Cheers
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This reply was modified 10 years, 5 months ago by
yuley7575.
yuley7575,
Start with a clear strategy, that’s key to moving forward with your wealth creation. Know what you want to achieve as your investment outcome, know how much income you need to create and by when (retirement?).
IMPORTANT: Always look at where your advice is coming from and who is paying that advisor, if it’s not you paying them then they are not working for you. Ask lots of questions. Are your advisors property investors and how successful are they?
Property investing is buying in an area that is going to have strong capital growth over medium term and holding that property using the rental income to maintain the debt. The key is to buy right and avoid buying duds.Modernity Investing
Email MeIMPORTANT: Always look at where your advice is coming from and who is paying that advisor, if it’s not you paying them then they are not working for you.
Not sure if I agree with that and I’m not being argumentative :-)
For instance, I get paid by the bank when arranging a clients loan but I don’t give a stuff about the bank – only the client. The clients are the ones that I’m serving – and their ultimately the one that’s going to spread the word about my business.
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]
<div class=”d4p-bbt-quote-title”>Mark Coburn wrote:</div>
IMPORTANT: Always look at where your advice is coming from and who is paying that advisor, if it’s not you paying them then they are not working for you.Not sure if I agree with that and I’m not being argumentative :-)
For instance, I get paid by the bank when arranging a clients loan but I don’t give a stuff about the bank – only the client. The clients are the ones that I’m serving – and their ultimately the one that’s going to spread the word about my business.
Cheers
Jamie
Great to hear that Jamie.
Dealt with a clueless broker on a SMSF deal recently. He had no idea on SMSF deals (quite a few brokers are in that boat), and took the banks side rather than the clients best interest in the review of the mortgage docs (personal guarantees) and bare trust, which the NAB proposed changes to benefit the bank and would have resulted in a non -compliant fund.
I was so disappointed with that, he was more concerned about the r’ship with NAB…..Glad I will always protect clients best interests even if I lose a referrer.
Cheers, Ivan
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
Hi yuley,
As mentioned above, I would have a goal that I’m aiming for and then try and figure out how I’m going to get there. You have $1mil+ in equity and plenty of people retire with less, so the question is how do you best use that equity to meet your financial goals. Property may or may not play a role, so I would be looking at finding someone to help you meet your goals. These will vary depending on your age, expectations etc.
Just as an FYI, I want $3mil in equity plus a free hold home. On an extremely basic equation, that will give me $100k a year income (3%) that will go up with CPI (3%) while still maintaining the $3mil in equity forever (needs a 6% return).
Before jumping into property, I would have a chat to a good Financial Advisor / Accountant to talk about your options.
Good luck.
Hey New Guy
thanks for the info. Im always scared to talk to financial advisor. but for example he says ok maybe you have enough equity in property you should diversify into shares. I don’t have enough cash really for a full time broker that is really going to take care of my needs. I will get a rookie that has just come out of uni and take educated guesses on which companies he should buy with my money. So to him, i more of a genie pig until he gets a couple of home runs and his employer lets him take on investors with deeper pockets. I have a bitter after taste as I have gotten burnt for 120k in the past with the stock market. bad timing and bad investment banker.working on my trust issues
Cheers
update:
I talked to a bank about my situation. So basically he says I can borrow the max amount of 300k base on my wife’s salary. So I might be bit ahead of myself thinking I would be able to borrow a lot more. He also stated that it is fraud to have a LOC used that as a deposit on a house and get borrow the new funding from a different bank. As you are suppose to disclose everything. Is he correct in saying this??
Cheers
So I might be bit ahead of myself thinking I would be able to borrow a lot more. He also stated that it is fraud to have a LOC used that as a deposit on a house and get borrow the new funding from a different bank.
That’s rubbish.
You’ve disclosed what the funds are being used for.
The banker just wants ALL your business.
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]
Jamie
So are you saying that I can take out a LOC on my PPOR say 300k buy 3 IP with 100k deposit on each with 3 different banks with the same LOC?? and it would be all fine? Is there a lend limit the banks would loan as the cash is coming from a LOC from another bank?
Cheers
Hi Yuley
I can’t tell you whether it will be fine or not because I don’t know what you situation looks like.
I do know that you can tell the lender that you’re taking out a line of credit to invest in property and that you can use other banks to finance the difference. How many you buy depends on your borrowing capacity and what you can afford.
Sounds like the banker you’re dealing with doesn’t want to leave any money on the table and is trying to get you to take out a LOC and the IP purchase with them.
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]
Hi Yuley,
I’ve got no financial quals, but that sounds like a load of c#$p.
The LOC is held against your PPOR, say $100k. While the IP loan (80% or whatever it is) will be held against the IP. As long as you can service all the loans, you’ll be fine. I have done this in the past, but I’m in a bit of the opposite situation, my serviceability is good, but my equity is not so good.
I agree with Jaime, it sounds like he’s just trying to get more loans, or he’s planning on cross collateralizing your loans.
I agree about financial planners, I get really nervous too. One guy quoted me nearly $10k a year to ‘look after me’, but would barely do more than provide me with a budget! It’s definitely hard, but at least you’re investigating your options, which is awesome.
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This reply was modified 10 years, 5 months ago by
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