LVR for the investment property

Discussion in 'Investment Strategy' started by Neeraj_I, 8th Jan, 2020.

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  1. Neeraj_I

    Neeraj_I New Member

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    Hi ,

    I am in process of buying my first investment property in QLD.The property value is expected to be at 400k. At this stage I have 150k equity that can be used for the deposit.

    My goal is to create a property portfolio and would like to optimise the equity for the next investment property.

    I would like to understand if keeping LVR at 80% is better to avoid LMI or do the loan at 90% LVR with LMI instead that will keep enough equity in hand for the next investment property.

    Please let me know.

    Thanks
    Neeraj
     
  2. David R Sutantyo

    David R Sutantyo Well-Known Member

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    if cashing out from the other properties still live them at 80% LVR or below, then 80% LVR is always ideal
     
  3. Beano

    Beano Well-Known Member

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    Commercial or residential ?
     
  4. Neeraj_I

    Neeraj_I New Member

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    Residential
     
  5. Trainee

    Trainee Well-Known Member

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    Dont know what 150k equity means. Is that market value less mortgage? If so you cant access all of it anyway.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Always the optimist, not too many out there who'll jump into their first IP being a CIP. :rolleyes:
     
    Last edited: 8th Jan, 2020
  7. Beano

    Beano Well-Known Member

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    Did you get your first CIP while you were still in nappies SNM and mentoring others at college ? :)
     
    Last edited: 8th Jan, 2020
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  8. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The answer to your question needs to be taken in consideration to your future goals and circumstances.

    You can settle this property with an 80% loan. If that were the only consideration, then it's fairly clear that this is the most cost effective option.

    However what are your future goals? If you what to purchase more property, perhaps a 90% loan is more effective because you can keep some cash in reserve for that purpose.

    This then raises another context question. Will you qualify for another loan in the near future or are you reaching your servicing limits for additional lending? No point in setting aside money for another deposit and paying LMI if you're not going to be able to use that money.

    Realistically a more in depth understanding of the bigger picture is needed to give the best possible answer.
     
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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    Pretty close - I was playing on my first stack of still-hot bricks back in the days of green bans. :p
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Will your equity run out before serviceability vice versa?
     
  11. Neeraj_I

    Neeraj_I New Member

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    I have not assessed in detail serviceability for 2nd investment property yet. However will have extra income from my partner to help purchase the 2nd investment property. Hopefully in 18 months time.
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That is the most important thing to answer because there is no point in paying LMI if you will not be able to borrow further after that.

    see
    Strategy: Avoid LMI where your Servicing is Limited (and you have the cash) https://www.propertychat.com.au/community/threads/strategy-avoid-lmi-where-your-servicing-is-limited.18960/
     
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  13. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Hi Neeraj,

    If you want to build a portfolio, and you use your whole deposit how long will it take you to save the next one? Will you have anything left for a risk buffer?

    I recently made a video about using LMI strategically but can't link to it as I'm on my phone right now. If you go to the Seed Financial Facebook page you should be able to find it easily. :)
     
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  14. Neeraj_I

    Neeraj_I New Member

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    Thanks Jess.. the video really helped
     
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  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    some considerations

    the LMI premium at 88 + cap LMI for a 400 k buy is around 5 k depreciable over 60 mths.

    Small price to pay to allow future flexibiliity if you have the risk profile and resources to make it work.

    Not enough info, but I feel you might need to go back even further than your purchase to basic first principles and ensure your PPOR and equity draw set up is optimised.

    It may make the LMI question a MOOT point.

    Your real goals and future resources need to be considered beyond what is obvious now

    Here a post from earlier today that may apply for you with regards the DR piece.

    Stop looking for the LOWEST interest rates


    ta
    rolf