Just got NAB to release $740,000 of equity in the house. What to do!

Viewing 8 posts - 1 through 8 (of 8 total)

Jon
Participant
@johnny99
Join Date: 2005
Post Count: 36
July 4, 2014 - 9:11 am
Hi there,
I am a fairly low wage earner, I’m a school teacher on $66,000 a year. I have played the property ladder and this PPR I own in Richmond, Victoria has shot up in value so I have been using the equity to buy three investment properties so far. I have one property rented at $260 a week, one at $255 and one at $240 a week.
I just got the NAB to revalue the house and it came back at 950K and at 80% LTV ratio they can lend me an offset amount until its spent of $740,000. I nearly fell off my chair when I got the email from NAB! So I wondering what everyone would recommend I do with the equity. I reckon I could buy 15 more rural properties with it or a two or three townhouses around Melbourne or Brisbane. The small salary though is still a factor as it seems banks are more concerned with your annual job income than having a large pot of cash at my stage of investing. Subdivision is another option – I was a town planner back in 2004 (horrible job!), and there are some good opportunities in the outer suburbs.
Any thoughts appreciated! Thanks
Kinnon Bell
Participant
@kinnon
Join Date: 2014
Post Count: 151
July 4, 2014 - 9:20 am
To help combat the servicability issue you need to structure your loans correctly from the start which means if you’re looking at buying quite a few properties go to the less generous lenders first (not nab) and then once things start getting tight you then start to go to the lenders with more generous servicability ratios.
What’s your strategy and end goal? What are you working towards? How rural are the rural properties? I assume you’re focusing on rule for the cash flow and not the capital growth?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Tony Fleming
Participant
@the-dark-knight
Join Date: 2008
Post Count: 396
July 4, 2014 - 9:24 am
Wait so is your PPOR a line of credit now? I agree with Kinetic although having 12 or so rural properties might not be the best idea. I invest in regional areas and even they have gone up due to low interest rates some areas I wont touch because I know once those rates go up the prices will be heading south.
Tony Fleming | Triumphant Property Group
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NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
July 4, 2014 - 9:41 am
A low income earner with a massive line of credit against their home seems a little irresponsible to me. Are you sure the NAB banker didn’t fudge figures to allow you to borrow that much?
Whatever you do with the money, don’t rush into anything – take your time.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Mortgage Broker assisting clients Australia wide Email: [email protected]
Jon
Participant
@johnny99
Join Date: 2005
Post Count: 36
July 4, 2014 - 12:27 pm
Hi there, thanks for the replies. My existing properties are in Mildura and Horsham. With the rental income my total income would be approx $100,000. My wife earns similar money to me but as yet her name is not on the house. They are putting the money in a separate offset account, so no interest payable until its spent. My strategy is to replace my teaching income with rental income and then move full time into subdivisions and developing. My rule is three cashflow properties to one capital growth property, which is my current ratio with the capital growth one being my PPR. Lots to think about! Thanks for help so far.
Kinnon Bell
Participant
@kinnon
Join Date: 2014
Post Count: 151
July 4, 2014 - 12:37 pm
Woah hang on…. cash in an offset account? Avoid that like the plague. Set up the $740k as a Line of Credit an draw upon as needed. Gets messy with tax otherwise – seek tax advice on this one.
Sounds like you have a good plan in place – nice work.
*edit* Just re-read your post and by the looks of it, it seems to be a LOC that they have set up for you just not the right terminology being used. I’d confirm just in case.
- This reply was modified 10 years, 5 months ago by Kinnon Bell.
Kinnon Bell | Kinetic Funding
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
July 4, 2014 - 10:08 pm
Yes, borrowing to park in an offset could mean none of the interest is or will be deductible.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
July 5, 2014 - 11:29 pm
Simply ask the NAB Bank Manager if he will put in writing that if you draw the funds into an offset account for you the interest will still be deductible.
Me thinks he talks the talks but won’t walk the walk.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender