Hey guys first of all I love this website and the knowledge I have gained, im defently addicted.
Better start with my situation im 24 and very eager to continue building on my property portfolio, I feel a bit out of the loop as ive been on deployment for the last 7 months. Ok so I purchased my first IP property in 2011 a modest 4bedroom brickhome on the central coast, I currently am renting with my girlfriend as I get rental assistance through work.
Ok so my current property has 250k leff on the mortgage, im currently renting for 350 a week so property is slighyly negative geared but im very happy with my first purchase :) I also have 80k in my offset account which im planning on using to buy a house to live in down the track, the property itself has gone up in value and i have around 100k equity.
Is it smart to use the 100k to secure a second investment property, looking for something postively geared or close to it if possiblly with also the chance for capital growth, ive begun looking around the outskirts of brisbane and Adelaide as there much more affordable.
So my question is what would you guys do in my situation and any advice on some suburbs to begin researching, I must say thankyou in advance to everyone and I appreciate all advice :) thanks guys !!!
How come the property is negatively geared if the owings are $250k with $80k in the offset and a rent return of $350 per week? What’s the interest rate? Is it a principal & interest loan or interest only?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hey man its principal &interest currently 5.22% variable looking to fix it in at a much lower rate, not sure if that will make it harder to use the equity or not.
Why not convert it to Interest Only. It would reduce your holding costs.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hey JacM thanks for replys, im in that frame of mind where as long as I can afford to have it interest & principal I will I like seeing the mortgage go down, once I have a POR il change it thou, do you think its smart to use the equity to purchase second IP? Where do I sort of begin, I know its a very broad question but looking for any sort of guidance obviously im researching non stop :)
Hi Chris,
Well done already !! I’m with JacM in suggesting you look at Interest Only. WHY? Well, “assuming” this is to remain an IP into the future, there is no need to hurry to pay it off, particularly if it is positive geared. It sounds like it would be positive if converted to an Interest Only loan.Smart move using an Offset too – as this effectively reduces the Interest Owing each month, making your Offset grow even quicker, thus Offsetting even more of the current mortgage. If you REALLY wanted to pay it down, then the funds in your Offset COULD be utilised to do that – but that should be a well-thought-out decision after consdering your whole situation in detail.
If wanting to “move on” with investing, keeping surplus funds in the Offset is KEY (rather than paying them off an IP loan). Do take a look at the post refering to “Offsets” in this link :-
https://www.propertyinvesting.com/forums/general-property/4349450Do read any of the other posts too – these are a cross-section of questions and answers that affect newer investors. Ruminate over each, and think how the suggestions posted might affect YOUR situation too.
Re going Fixed, it is probably a pretty good time to do this. Keep in mind though that any “paying down” of the Fixed Loan might be limited by the lender. AND it will also mean that you re “locking in” any sale of that property for x years. Break costs come into play if you suddenly want/need to sell while under a Fixed Loan.
If it were me, I would certainly be looking to use the Equity to purchase again, or at least put it to good use in another investing method. It is available to you, so do consider how best it can work for you. Maybe make contact with JacM or one of the other Mortgage Brokers that add sound guidance on here.
Benny
Hi Chris
There is no need to be on principal & interest unless you cannot control your spending. Go interest only and put what you otherwise would have paid towards the principal part into an offset account. It achieves the same thing (interest reduction). When the amount of money in the offset is equal to the original debt, you’ll be charged zero interest so in a way it will be paid off. The difference is you can withdraw the money from the offset whenever you want without asking the bank. When the offset balance is of a suitable size, you could whip the money out of there and use it to fund the deposit on another property rather than mucking about refinancing to get at your equity.
It is difficult to comment on whether it would be wise for you to buy again at the moment and if so whether you should use equity to do so. More information regarding your current circumstances would be required. I don’t like it when people mortgage themselves to the hilt to the point that their world will crumble if Woolworths increases the price of bread and milk.
Feel free to drop me a line if you fancy chatting about it in greater detail.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thank you both for the reply, il defently be dropping you a line with more detail and a few more questions. If thats ok thank you again for the help.
Sure thing.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
