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Best way to structure to move forward with loans

Discussion in 'Property Finance' started by Paterson00, 25th Jan, 2016.

  1. Paterson00

    Paterson00 Well-Known Member

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    Hi all,

    It looks like our previous plans to buy a kennel block may be scuppered by shifting times so I am now looking at the back up plan of buying two cheap investment properties. One local to me so that I could add value through sweat equity and another in the Gold Coast to try and ride that wave of development.

    I would like to know if there is a best way to go for the loans. I have read a lot of stories of people who have been successful and a lot of those people said it would have been easier if they had taken advice on the best way to take out the finance in the first place.

    Expected property purchase prices are low $200's. I currently own one IP in the UK and PPOR in WA. Purchase prices are at that price point so that should I need to go to 90% LTV on both I will be able to. I have budgeted around $30 - $35k entry costs for each property.

    Any tips will be great to hear but I would rather not get in to too much of a discussion about the likelihood of purchasing at that price as that is a seperate discussion altogether.

    Many thanks
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Ideally, use equity from your PPOR to fund the IP's so you have 100% borrowing. if no equity from growth, look at paying down PPOR, splitting and re-borrowing to debt recycle and achieve a 100% lend.

    No x-coll.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    The best way to structure the loans for each property is to first do an equity release (presumably on your PPOR) to have access to funds for the deposit and purchase costs for each purchase. You'd then take a loan for each property for the remaining funds to complete each purchase.

    Each loan needs to be structured separately so you're not cross collateralising the various properties. This can also ensure that investment debt is kept separate from owner occupied debt to ensure you the the best tax position from the loans.

    The specific loan amounts would depend on your equity position in the PPOR.
     
  4. Paterson00

    Paterson00 Well-Known Member

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    Ok so there are no big strategies that I should know, that's good to know. I have basically achieved what you guys have advised although deposits have come from a combination of IP equity release and loan so still achieving the 100% borrowing. Not sure I won't be shot down on here for using a loan. It was initially taken for use as stamp duty for plan A but since I have it I may as well use it for IP instead if I am able.

    Thank you guys.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Considered some of my strategies from my legal and tax tips? Related party loans, debt recycling, loan structuring, spousal sales, borrowing to pay expenses etc.
     
  6. Paterson00

    Paterson00 Well-Known Member

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    Where do I find that Terry?
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Taku Ekanayake likes this.
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    What sort of tips are you actually looking for.

    Most common mistakes people make is that they cross collateralise their loans or they use a lender that initially looks okay but doesn't meet their longer term objectives. The other big one is paying down a loan that might be an investment loan in the future.
     
  9. Paterson00

    Paterson00 Well-Known Member

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    Just anything to avoid really. I couldn't remember the lessons learned from experienced investors but I definitely remember reading that they wish they had taken advice at the start. Maybe they had X collateralised their loans and paid off IP rather than PPOR etc..
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Perhaps best to get specific advice to your needs .

    Some generalist data doesnt always hold

    Do you have a broker you trust ?

    ta
    rolf
     
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  11. Paterson00

    Paterson00 Well-Known Member

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    Not implicitly.