please guide first IP numbers and timing

Hi All,

here is our current situation/numbers.

my salary 120k base, partners 88k base, side ABN business by partner 30k a year. this coming July will be first tax lodgement for business. but there is genuine invoices, incoming income to prove 30k income from business.

home purchased 1.39 million in Feb 2016

currently variable loan account at IO - 600k
fixed variable IO - 380k - fixed expiring Feb 2019.

current offset account 560k

current conservative home valuation should also be 1.6 mil or even perhaps 1.65 mil
2 kids to support


1) now want to understand without doing cross collateralization, how much would be able to borrow for our first investment property.
2) our goal is to buy something what our borrowing capacity permits - with more view of long term capital growth. then take next steps from there.
3) else work towards buy land, build a new house - then sell that new house hoping for that project to give us 20k - 30k profit after sale.
in that situation we are looking at buying land worth say 400-420k, build a single storey home turn key for 280k - 300k. sell that home for 800k or more. so main cost to factor in would be holding interest 30-35k, stamp duty on land say 15k. we will not have to pay selling agent fee as brother is an agent and would assist us there. so even after capital gains this should pocket 20k - 30k right.

apologies for long post and questions. option 2 and 3 are main discussion points between the two of us.

thank you.

 

Spending approx 700k to make approx 20-30 seems like too much risk for too little reward. Gives very little margin for error.

 

$20k to $30k profit seems rather low on $720k spend. You do need to factor in dollar figure for your time spent on this project. How long will it take?

What if you do not clear this profit either, especially if it is in Sydney, and the market is changing.

Additionally, even if your brother is the selling agent, again, factor in the dollar investment in it regardless.

If you were to take the amount of time invested, would this make it a viable project?

Everyone has their strategy, but what prior experience do you have in such a space? Would be best to put down pros and cons of buy and hold vs flip in light of your long term goals. Seems you need to explore this further before making the move, given you are comparing the two options. Which one will bring you CLOSER to where you would like to go?

 

Give the value of the house, the loans in place and the offset accounts, you've got the position to release up to about $900k in equity and recycling the cash on hand. This could easily become deposits for another property or several, or it could be used to purchase a property outright. Also easy to avoid cross collateralisation.

There's not enough information to determine your borrowing capacity. It could be somewhere between almost nothing to another $900k. If you want to gauge this accurately, you need to have a discussion with a broker.

 

Building a property with the "hope" of making 20-30k is incredibly risky. Is 400k for a block of land sustainable? I do not think so personally.
Even if you do not cross collatorise your loans you will still owe money to a lender. If one loans goes bad the lender can then require you pay them back using your assets e.g. your home. You do not get out of debt except through bankruptcy and that's a complication any one could do with avoiding.
Your IO loans is due to end soon so I would focus on paying that debt down and on growing your business.

 

thank you, sitting with broker soon. but will have closer look at available options/numbers.

personally buying a property with long term growth or development potential more..