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Best way to use Equity

Discussion in 'Property Finance' started by bdydrp, 28th Apr, 2016.

  1. bdydrp

    bdydrp Active Member

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    Hi All,

    Keeping in mind @Terry_w 'ideal loan structure', i was wondering what the best way was for me to accessing my Equity.

    I have about $76K in equity, which i plan to use some to completely finish of all our landscaping and backyard to our PPOR. I'm hoping that by doing this, it will raise our valuation by another $50K. (currently sitting at $730K). Our PPOR also has a 100% offset account attached.

    When accessing the equity, considering it will only be used on our PPOR, can this just be put into our offset account and use it to pay subbies etc,??

    Is there any reason to separate it? IO loan?

    Thanks
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Do you really need to spend $76k to raise valuation by $50k? Seems like a pitiful return?
     
  3. bdydrp

    bdydrp Active Member

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    @D.T.
    Sorry, should have added, i dont intend to use the whole lot. I would only be using about $30k.
    As our current valuation is at $730k, im hoping that i can spend about $30k of equity and bring my valuation upto $780k+. Purely based on similar properties in the area, they have been selling and on the market for about $800k.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    cant see any issues as long as the cash is all spent on the property

    if you are going to have mixed use,say for car as well, youd best split that away,

    if you ever rent the property you would avoid a mixed purpose loan.

    With such a chunky non deductible debt perhaps look at doing a debt recycle strategy


    ta

    rolf
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There is. And that is because if the property were every to be rented out the interest on that loan would be deductible.

    But DT does raise a valid point!
     
  6. bdydrp

    bdydrp Active Member

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    Thanks All.
    At this stage (foreseeable future anyway) the house wont be rented out, but never say never).

    Any equity i use, say $30k will only be used on PPOR.
    Once used, and valuation is where i hoping it would be $780-$800k, will then use that equity for an IP following terry's loan structuring.
     
  7. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    Also consider what you will do if the valuation does not change as much as expected.
     
  8. bdydrp

    bdydrp Active Member

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    At least i'll have nice finished landscaped yard..lol, but in all honesty, i haven't really thought about what would happen if the valuation doesnt change as expected.
    Is it sometimes better to take out, say a personal loan to do this osrt of stuff, than using equity? Saving what equity i have for an IP?
     
  9. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    Probably not as the personal loan will be high interest and may be taken into account when buying another property anyway.

    What sort of major landscaping work are you looking at doing? Could you make the exterior look decent by doing it yourself slowly and on a low budget?
     
  10. bdydrp

    bdydrp Active Member

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    Thought that may be the case. - Put it this way - I have NO landscaping. I have done some already by myself, but now would just like it done. The yard still needs to be levelled correctly as ive dug 4t out for a bbq/bar area under the back deck - Plus deck needs to be finished. Tho i can do the deck, i would prefer just to get it finished and front done to have it looking nice... Doing it myself i recon i would be looking at $15-20k
     
  11. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    In that case you will need to have it done eventually. It may even be a good time to do it now so you can start to use your backyard and have it presented better for a valuation while the price you are looking for is still in reach.
     
  12. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Personal use on PPOR - not really necessary to split it because if it's used as an IP later the expenses will be related. The extra component however could be justified if used for investment use, so it may be best to have a split for this component. The fun part is always working out *exactly* how much you need for landscaping - easiest option is to borrow a little more than necessary, any excess you want to cycle through just place into redraw, cancel and release out with the new split on the new value.