Line of credit - What would I qualify for?

Hi

I'm looking to get a line of credit so I can live off my equity. Currently have 4 properties worth 4 mil with a mortgage balance of 300,000.

Me and my wife are currently earning $120k and $100k before tax per year. I'm 51 and mrs is 48
Would like to know what sort of max limit most lenders would allow me to borrow against a line of credit.

We are aiming to get line of credit of upto 1.5 mil and then slow draw down on it over 10-15 years by which time our super money would be freed up.

Cheers Simon

 

Sorry to say, but living off equity not a strategy that residential lenders will be willing to fund.

 

Aaah, this is something I was looking to do before the doors slammed shut.

Why don't you cashout as much as you can get and plonk 1/2 in the stock market for dividends and 1/2 in your offset to pay for any shortfall?

You can't say you want the money for LOE, but am guessing you can say it's for investment purposes or renovations to your IPs to increase rent.

 

It could be possible to do, and at around $1.5mil roughly. But you would have to carefully structure things.

 

Why a Line of Credit?

 

What’s an alternative strategy you can suggest?

 

That’s what i read about some years ago and is all that i know about. Are u able to suggest something else?

 

Sorry by cash out you mean sell one or more assets or take money out all my redraw? Latter is not an option since i had paid off some loans and closed the accounts

 

Is there a precedent for this? If so, how common is it?

 

What sort of reductions are we talking about? 10%? 50%? 90%? Just how bad does it usually get?

 

LOC will be harder to qualify for too

 

Gotcha thanks.

 

Paying down debt and living of the rental income.

Selling a property periodically to give you funds for lifestyle purposes.

Cashing out your properties over time to realise the capital gains, then reinvesting into assets with better ongoing cash flow.

You can get an equity loan for 'future investment' as suggested. Years ago Living Off Equity was a strategy option, but it never really seemed to work on its own. Everyone I know who simply got a huge LOC and tried to live off it found the funds didn't last very long and they were back in the workforce when they should have been retiring.

The few cases where LOE has been successfully applied are those where it supplemented another strategy, it wasn't the main strategy in itself.

 

If you want to borrow and live off the loan you can simply borrow to buy an asset and last sell that without paying the loan off. The loan could then be recycled

 

Do you have children? Would you like to adopt me?

 

220K gross income. 300K debt. 4 Million resi portfolio.

You didn't mention whether its 3 investment properties + 1 Owner Occ, or 4 investments ?
You didn't mention what rental income the current portfolio generates at the moment and whether it forms part of the 220K gross income earned by you and your wife or whether that income is salary and the rental is additional to that?
You didn't mention whether the 300K mortgage was O/Occ debt or investment debt?

I will assume the rental is additional income to the salaries you both earn...
I will assume the debt is investment debt, as O/Occ debt would ordinarily be the first to be repaid not the last to be repaid.
If so, and assuming you have @ 2 Million borrowing capacity , you could consider

1. drawing down 420K against one or more of the existing properties in your portfolio . This would be broken into 3 x 140K tranches. Each 140K tranche would represent 20% + stamp duty + legals for the purchase of a dual occ to the value of 660K in NSW

2. Borrow 528K ( 80% LVR) construction loan for each of the 3 x dual occ in NSW. That equates to $1,584,000

This would give you new debt of $2,004,000.00, in addition to the 300K you already hold. @ 2.3 Million total debt . @ 6 Million portfolio value.

Each of the Dual Occ's produces over 41K of rental income per year, which results in a surplus of @ 16.5K CF+ if you run them IO. But if you run them P&I they produce @ 3-4K CF+
.
If the 300K you currently owe is non income producing non deductible O/occ debt, set the Dual Occ's to P&I initially and use the almost 50K of surplus CF they produce per annum to pay that 300K debt off as quickly as possible. When that 300K is paid off, switch the Dual Occ's to P&I and use all the rental incomes from the 3 Dual Occ's PLUS all the rental incomes from your existing portfolio PLUS the monthly repayment you were previously contributing towards the 300K debt, and start paying off the Dual Occ's . You should be able to pay all the debt off in @ 15 years, right in time for retirement . If during that 15 year period the rents on the Dual Occ's grow by just 50% you will have over 60K of income being produced by each of them. That's over 180K combined, plus whatever your other properties are also generating by then. Allowing for running costs and tax, you should comfortably be netting well over 100K per annum plus whatever your superannuation is producing for you... and because the land tax thresholds in NSW allow for you to easily hold 3 of my dual occ's and stay well under the thresholds, all the money stays with you ....