Building a portfolio in 2016 with 250k deposit

Hi everyone,

Seeking some general advice on the best way to move forward with my wife's portfolio this year. She is on a 200k salary with about 250k cash at the moment to invest.

She has the following loans atm:

ppor
650k loan with anz

ip 1
240k loan with anz

personal loan
35k balance

joint personal loan with myself, 30k loan (her share would be 15k)

no credit cards

We would like to buy a few properties within the next few months, only in her name, but not sure what the best way is moving forward from a finance point of view.

Are we better off paying down the personal loan she has solely in her name before getting a pre approval? Would she be able to get finance with the PLs in tact?

Should she buy @ 90%lvr (or 88%) to maximise the number of properties that can be purchased with the cash deposit, or just go for 80% lvr?

We will be talking to a few brokers in the next few weeks to see who best fits our needs however, would just like some general advice and guidance from this forum so we will be in a better position to ask the right kind of questions etc.

Thanks
BeefEater

 

Would recommend you seek specific advice about the personal loans, but based on what you've mentioned, they probably won't kill you at this stage. However, they will become increasingly more prohibitive if you want to grow a portfolio though.

Depends on the rates/terms of the personal loans too. If the rates are over 5%, one option might be to refinance the PPOR and IP loans to 80%, split off $75k to pay out the personal loans, and use the remainder towards growing your portfolio, and keep some (or all) of your $250k cash in offset.

How much do you believe each property is worth? e.g. Is there equity in them?

And any reason the loans are with ANZ?

80%, 88%....depends on what you want to achieve. I am a big fan of leverage to both expand your asset base and mitigate risk by retaining more cash at hand but higher LVR lends aren't always necessary or always the best option. Comfort levels, risk profiles, flexibility etc.

$250k at 80% will be about $1mil of IPs. At 88% it'll be closet to $1.5mil.

 

Thanks @Steven Ryan. If we can keep the PLs for a bit longer that would be ideal but my concern is if it will kill her ability to get a loan for ip2.

The ppor was last refinanced to 90% with the funds used to start the business. Since the last val I believe there may be another $50k increase but not much more.

Ip1 was also purchased at 90% but only settled recently. It was an off market purchase and I believe we bought probably 20-25k below market value.

Re ANZ.. had used a few diff brokers in the past (none from this forum) who gave us bad advice and we were stuck for a while with releasing equity. Had a mate from anz help us out so we switched banks.

The goal for this year is to purchase as many properties as we can with the goal of releasing equity from each purchase 12 months from settlement.

 

Well, the solution here is might be to add significant value + cashflow to each property so you're not relying on very strong growth within a year, and for your finance to be to structured so that, within reason, cash out or refinances are not going to be a an issue in 12 months.

$250k is enough to get going with something that can produce a substantial profit whether a renovation, subdivision or something else. You might be able to repeat that once or twice over the year.

Some folks on here are doing super renovations with incredible results. Might be an idea to reach out to some of them or post a topic asking about some of the results they've achieved to see if it might apply to you.

 

Thanks @Rolf Latham and @Steven Ryan

 

Where is the $250k coming from?

Why in her name? What about you?

 

Hi Terry

She has saved up about 80k give or take and the rest will be from me. I'm self employed and don't have any financials yet as it is a start up.

 

She shouldnt be using cash ad that will waste tax deductions. If your money you should consider lending her. Perhaps at 0% to pay off the ppor debt and then she can borrow to invest.

Read.my tax and legal tips for more.info amd strategies.

 

I should also point out that you could buy in your name with the loan in both names. Later when you have enough income to service on your own you could remvoe her from the loan.

Whether you should do this or not will depend on your situation.