3 properties, what next?

Hey team,

Seeking some advice or even just thoughts while we are mulling over our next move.

This is our current situation, my wife and I.

- 2016 - Built PPOR in Cranbourne East for 450k. Current value 720k. Owe 319k
- 2018 - Investment Ballarat. for 351k. Current value 470k. Owe 360k
- 2021 (March) - Investment Bendigo for 399k. Current value 440k. Owe 410k

Our annual incomes are 80k & 95k

We have a 3 month old son. We had the opportunity to go again right before he was born but just thought it would be a little tight when my wife was about to go on mat leave.

I am hoping we can pull the trigger again within a year and twice within a 2 year period. My wife is currently on mat leave but the plan is for her to return to full time at least until we secure another property and then she may go back to 4 or 3 days. We plan to have a second child at some stage so don't want to be too stagnant before then and want to try build the portfolio out .

My parents are building a house and when it's complete we are discussing the option of us moving into their current house and renting from them at a fairly discounted rate, likely 400-450pw.

Would that help our lending capacity?

Any advice or thoughts on our current situation moving forward would be helpful!

 

Lots of chatter about Debt to income ratio, portfolio restrictions for investor and higher serviceability. It will be difficult in 1-2 years time, kids also reduce borrowing power. Good luck

 

If you want to rent, then rent...but pay your parents fair market value.

 

Not really a fair comment to make when you don’t know the situation at all. Their financial situation is they don’t need either to sell or the rent money it wouldn’t make much difference to them. Their option is to either just sell or keep and rent to us discounted to help us get a head ‍♂️‍♂️

 

Excuse my ignorance but by active debt recycling are you referring to using equity for future purchases ?

We used equity to purchase Ballarat but not since . When purchasing Bendigo Ballarat had not risen too much to do that .

Mae haven’t capped but would likely cap after one more 400k mark purchase .

hence wondering if renting would help the situation a little

 

Congratulations on your success so far. I think it makes sense to purchase now rather than later given the current market conditions. In terms of borrowing, I would encourage you to speak with a broker. I am assuming you may already have one? (given you have a portfolio already). If not, they would be best suited to determine what you can and can't do moving forward.

 

Thamks Branden, we do have a broker. When we finalised the loan amount for Bendigo in about March, we explored the option of going again. The advice was that we could definitely go again but would need to pay some LMI, and we just felt with a baby on the way it was just going to be a little tight for us.

In hindsight I probably wish we just did it. As soon as my wife is back from maternity leave which will be about April, we will explore going again.

Then in terms of going again after that we are looking at the rentvesting option, converting our PPOR to an investment and seeing if this would help our future lending position.

 

Hey special, this is a fair comment. Just because they don't need the money is a moot point. You are already ahead - you and your wife have good incomes, you have 3 properties and you have equity. You appear to be able to stand on your own two feet. You do not need handouts or rent discounts from your parents anymore. You can continue to build your portfolio.

 

What is your end goal? Are you just trying to collect properties? I would suggest you spend some time reading this forum - learn about the benefits of paying LMI and learn about debt recycling. Have you crossed-collateralised your properties?

 

Fair enough, I think paying LMI isn't as much of a problem as many people are led to believe. It's just an added cost of purchasing a property, the gains (particularly in the current market) would likely outweigh the small amount of LMI paid to purchase a property.

With regards to rentvesting, I am a massive fan of this concept. Given the high purchase price of Sydney/Melbourne property, it makes sense for younger people to get ahead by taking this approach (assuming the numbers stack up). Turning the main PPOR and living with parents would likely increase borrowing but I'm sure your broker could clarify this further. Best of luck with it all.

 

Update:

Met with our broker during the week and we are good to go again. Going through the early steps now but it looks like we will be looking to purchase another asset in the 4-450 range. Exciting times a head!

 

Well done!
I really liked Ballarat and Bendigo for a long term CG view but we've only started our journey recently and the lower yields might have stopped us from continuing to grow.
(And we have double as much PPOR debt)

Only recently discovered the "success story" and I'm absolutely loving it, feeling very inspired.

 

why would you need to pay LMI? It seems your LVR is about 66% atm
LMI is a waste of money if it can be avoided.

 

Thankyou @The Y-man, I thought it was quite rude as well, hence why I haven't made any further replies.

 

the other thing to note is a range of professions get LMI exemptions (you go through the same screening process, but don‘t have to pay LMI). Worth checking if your profession is on the list

 

specual probably doesnt need the rent discount but if the parents want to do that for their child then whats the big deal?