Hi all, I have been lurking the forums for awhile, and Thank many of you for posting really valuable and informative information. I have purchased an IP in Dec 2020, on a P&I variable investment loan. The purchase price of my property is 565k. And my current loan owing is around 410k. Current valuation/estimation from RP data of the property is around 580k. Total equity 170k. By using an online equity calculator it has given me about 54k useable equity. My next steps is to use the 54k + save up bit more to say 65k to use as deposit to buy a ~300k property in regional. Do you think 54k accessible equity is too little? or should i save up for longer before i jump in to buy my second IP? Thanks, Serenity.
Hi Trainee, Sorry i should have mentioned i signed the COS in Dec but it will settle in early Feb. My available funds are around 150k, i am intending to put in as a deposit to purely just reduce my loan amount. However this hasn't been settled yet. I got a loan amount of 452k. I had ideas of taking out the full 452k loan amount and using my left over funds for deposit for my 2nd IP.
What is the cost of going to 90% lvr, for example, and what is your further borrowing capacity like? If you want more exposure thats one option. eg would going 90% lvr allow you to buy 2x 565k properties? Would that give you better growth? though it seems very fast to aim for the next one when you havent even settled the first. Is the market moving that fast? Worth mapping out a funding strategy with your mortgage broker?
I am planning to get another IP within the next 12 months, just trying to get my head around accessing equity and if i would be able to do it. Or wait another year or so before getting 2nd IP. Would you recommend not putting the full 150k as deposit, and instead putting less? to have a 80% lvr. And then using the extra funds for my next deposit or would it be the same, if i were to put 150k deposit i would have greater accesible equity. And i would like to take advantage of the 25% stamp duty reduction in vic which ends in June this year too, if i can service it. Just exploring my options at the moment. Thanks
Put in 30% deposit then refinance to get 10% back is two steps. put in 20% deposit and leave 10% in a bank account is one step. Whats better, accessible equity or just cash? Answer: cash. If you want to buy more and your deposit is limited, have you considered say 90% lvr? Lmi is an extra cost, but you have to consider the benefit as well. consider interest deductibility and how you manage that when you want ppor in the future. otoh, buying for the sake of buying, or just for a 25% stamp duty reduction (1% of purchase price?) isnt the right reason to do it.
Thanks Trainee. Definelty can see the benefit of having cash over more equity. Im with a bank that requires 20% deposit, and the interest rate for it is very competitive. So have not considered giving less deposit, unless I refinance to another bank. Yeh the stamp reduction is just a bonus, because im thinking if I do plan to get another IP, I should get it while that reduction is still in place till mid this year. But not a big deal if I am not ready to buy before then. Seems like cash is the key, more saving to do in the next year is the plan.
This is putting the cart before the horse. you tell your mortgage broker what you want, and they choose the lender for you. even if you found the best rate out there, is it worth you not being able to buy more property? if you say you dont want to pay lmi or just dont want the risk of going over 80% lvr, okay, though you should think more on it. If you say you did not consider it because your lender doesnt offer >80, the suggestion would be to get a new broker. Are you using an independent mortgage broker? Or just called up the bank you have accounts with?
I didnt use a mortgage broker for my first IP. I am waiting for settlement date and then will engage in one to map out my plan. I just researched for the best rates and went with that bank.
Yes figured that. this is a mistake. The finance plan needs to be discussed with a good broker before you even look at property.
You would be smart to chat to a broker. Each property in a portfolio is like a domino . You need the loan structures , borrowing capacity and purchase prices to fit a plan so the dominos are set up properly for the next one to fall properly . As those above have suggested , you should map out this purchase and the next one with a broker . All of this relatively easy , but often overlooked . Remember - Equity is not purchasing power . It’s lovely , and the focus of most investors who are starting out , but it’s not any use to you if you can’t access it . Map out a borrowing capacity budget so that you know what’s possible .
Please choose one from this forum - they all 'get it' when it comes to investment. Most random brokers from the high street don't understand how to plan a portfolio and are more transaction focussed.
