Seeking advice on loan structure after a duplex sub division

Discussion in 'Investment Strategy' started by Icarium, 24th Mar, 2018.

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  1. Icarium

    Icarium New Member

    Joined:
    24th Mar, 2018
    Posts:
    3
    Location:
    Melbourne
    Hi guys,

    Just seeking some advice on my loan structure after a sub division of my duplex. I'm a newbie investor and any help would be appreciated.

    After advice from my dad and a bit of savings, I bought a duplex in a suburb of Melbourne 5 years ago for 420,000 in total. They are a 2 bedrooms each on a block of 771sqm - 1 title for both units.

    Loan is currently sitting at 379,000.

    I have started a process to have the units sub-divided - 1 title per unit. Reason for doing this was to try and extract more equity by having them valued independently.

    So once this is completed, I'll have 2 titles attached to the 379,000 loan.

    I'm seeking some advice on what the best loan structure would be after this is complete. My aim is to extract equity to fund my next purchase.

    FYI the suburb is Hallam, median price for a 2 bedroom unit is 380,000.

    Thanks heaps.
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Hi LC
    welcome to PC

    bit of a hard one without specific data

    AS a VERY general idea, assume that the places value at 380 a piece AND you have serviceability AND you use a lender that will do the cash out

    To break the xcoll over the 2 titles we would

    DO a single loan of 80 % on Property A

    304 000

    Then
    on property B secured ONLy to B

    have a loan of

    75 k to repatriate the balance of the 379
    and

    a cash out loan

    of 229 000

    Choose lenders wisely, because the vals and cash out may not be what you expect

    ta
    rolf
     
  3. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    You need some tax advice in conjunction to the loan advice. You should split the loan into 2 portions based on the cost base for each property. It may be 50% each, but probably some other figure as even if the properties are identical they may not be the same value.

    Split the loan into these portions, have each loan secured by only one title.

    Then get 2 more loans on each bringing it up to 80% LVR, again each loan only one title as security.

    See my tax tips
    Tax Tip 93: Subdividing Property and Deductibility of Interest

    Tax Tip 43: Demolishing PPOR and Subdividing land and building 2 houses

    Tax Tip 27: Borrowing to knock down PPOR and build duplex and Rent one

    Some relate to demolition of main residence, but may give you some ideas.
     
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