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How do I buy another IP?

Discussion in 'General Property Chat' started by dmb1978, 7th Nov, 2015.

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  1. dmb1978

    dmb1978 Well-Known Member

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    Hi all,

    I am pretty new at this and although I know I will need to seek some financial advice soon, I just want to know how I keep moving forward.

    I understand the basics of using equity etc to borrow but how do you keep buying when you are at capacity. Is it as simple as waiting and hoping for more capital growth or saving more cash or is there a secret I am not getting that allows people to keep buying properties so frequently.

    I have a PPOR which we have used to buy two IP's over the last 4 years. All the equity is spent now as we are at 84% LVR. We borrowed everything including stamp duty to buy these properties. The house IP is doing well, the unit has stayed neutral and the PPOR although our loved home is a money pit in all honesty.

    So where do i go from here? I could be waiting forever for growth to have enough equity and I don't have enough cash pay down the PPOR and release more that way.

    Is there a strategy to speed this process up or is there something I need to change to help my situation other than finding more money?
     
  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Is there any add value opportunity on any of your properties to manufacture growth?
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Try a couple of diff valuations for the ppor and see if there is a bit of fuel there

    The ips sound like they lmi on them so u can really only ideally revalue with the existing lender

    Ta

    Rolf
     
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  4. dmb1978

    dmb1978 Well-Known Member

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    Thanks Gockie. The PPOR is having a few updates as its already renovated but we would be over capitalizing as its just not in the right location. The unit, most likely not as its not that old and the house maybe as its not too old but has cheaper fittings. The things that would improve would be newer kitchen/bathrooms and i cant see us getting the return for such an expensive outlay at this stage. Also it looks fine just not the latest style.
     
  5. House

    House Well-Known Member Premium Member

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    Manufacture your own growth through cosmetic renovation. Fresh coat of paint is the easiest and cheapest way but you can do some landscaping, new fittings, updating to the latest style, adding whatever is 'in' around your suburb to make it more appealing to the tenant. Can also help increase rent.

    Compare old and renovated property prices in the area to give you an idea of the difference and then go about setting your budget.

    Plenty of free info out there such as Improving Property Value - The Secrets of Cosmetic Renovation | Renovator Mate
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You might benefit from some debt recycling on your PPOR to help speed up your next deposit - it's not an instant fix by any means, but small changes in the way you do things can mean a lot down the track by increasing deductible debt and reducing non-deductible.

    How are your loans structured? All separately secured?
     
  7. dmb1978

    dmb1978 Well-Known Member

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    Thanks Rolf, yes we did pay LMI on them. We are with CBA and all the loans that are fixed are due to finish the fixed period this December so will need to come up with a plan and restructure. Will the bank do a valuation for free?
     
  8. dmb1978

    dmb1978 Well-Known Member

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    Thanks AlexH, the house is only 12 years old and still looks new and relatively modern. It has never been vacant and the garden is small and neat. Granted this is the IP that is doing well. The PPOR is getting some new double glazed windows and maybe we can squeeze some more value out that.

    Thanks Jess, excuse my ignorance but how do we recycle debt on PPOR? The loans are structured so they are not cross collaterised.
     
  9. TMNT

    TMNT Well-Known Member

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    Im a bit risk adverse for those that say. Give it a fresh coat of paint and revalue

    It may increase in price and then you leverage off the equity. But in a few years. If the market hasnt moved. The property has devalued back to a place that needs a new coat of paint.

    And thus your risk is higher.

    Id much prefer something that doesnt become older in value like a gf
     
  10. dmb1978

    dmb1978 Well-Known Member

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    Thanks TMNT, I Iooked into that a while back as our PPOR is 1100m2 so plenty of room but was told I couldn't do it as it didn't have driveway access.
     
  11. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I dont think that double glazed windows will help your valuation unfortunately. Get it if it makes it more liveable for sure but I wouldn't rely on it as a factor to add value for a valuer.

    Getting an extra bedroom into the house (in a smart, logical way) will though...
     
  12. skyfall

    skyfall Well-Known Member

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    If you have lots of serviceability but no equity maybe we can do a deal. I've got loads of equity but can't service a loan.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  14. dmb1978

    dmb1978 Well-Known Member

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    Yeah, its only on the front as the windows are wooden and rotten so needs to be done but I think we are done with the PPOR, even a new bedroom and rumpus wouldn't move this market!
     
  15. dmb1978

    dmb1978 Well-Known Member

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  16. dmb1978

    dmb1978 Well-Known Member

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    I don't have lots, how come you can't service a loan - where are these magical positively geared properties we hear of?
     
  17. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Sometimes a CBA desk top val can be like a pot of gold :) It can be like a free deposit, no reno required.

    If you set up a small Line of credit to use for all your IP costs - rates, maintenance, everything (except interest in most cases, you need specific advice for this) - you can then divert the cash you would have used into your PPOR. This effectively grows your deductible debt and reduces your non-deductible and can make a huge difference over time.
     
  18. dmb1978

    dmb1978 Well-Known Member

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    Thanks, I will look into it.