Structure Plan for IP Purchase

Hi All,

I would like some feedback regarding the strategy we are planning for our next IP purchase.

Property A - Currently tenanted and paying off the cost of the P&I Investment Loan
Property B - Currently tenanted $540/week, property valued ay 1,050,000. Loan is $250,000 ($260,000 +$10,000 in redraw)

We have $90,000 cash saved up for deposit and looking to refinance Property B to get $100k split used for Property C IP deposit. ($750,000 purchase)

However, we are thinking of paying down Property B by $90,000 (brings it down to $160,000) and refinance $190,000 out instead to be used as a deposit. ($750,000 purchase)

So it would look like this

Property B - $160,000 original loan for property B and $190,000 split loan for property C
Property C - $590,000 IP loan (incl stamp/fees/etc estimated at $30k)

Does it make a difference if we use the $90,000 cash as a deposit and just refinance $100,000 from property B or is it better to pay down property B and refinance the whole deposit $190,000?

Many thanks for your help

 

what's your thinking behind that?

 

Given the equity in B, and assuming your serviceability works, why would you use the 90k cash at all?
Also what is the plan to buy PPOR? If you buy the 3rd IP, do you have enough serviceability to buy PPOR in the future?

You need to talk to a good mortgage broker to work out a strategy.

 

My wife's first property and she has told me in the past that she would love to move in to that property in the future - therefore by paying property B loan down, we will have lower non-deductible debt if we make it PPOR. At the moment, we are living rent free at one of our parent's property.

 

In that case it would make sense. This is debt recycling really, I call it debt recycling in advance. Just make sure you split the loans appropriately.

 

I have thought about that too and advised our broker to let us borrow $190,000 from property B with offset, and we can leave our $90k cash in the offset.

They said we cannot service the loan. Some background info, I work in sales with $55k base and rest is commission - year on year average about $115k. She is around the same base.

 

In that case you might want to actually pay down the loan with cash and reborrow it - then it would be debt recycling in advance.

Best to get some tax advice.

 

Makes sense and 100% that's what you'd do if the intent is to move I to it.

 

Can't really determine your servicability based on this, need alot more Info.

If you cant service a loan for $190k cash out, how are you able to service the loan for a new investment ?

 

I am not sure.

I have a $470k IP Loan.
She has $250k IP Loan
We have $17k car loan
We have $50k Nab Equity builder Loan

Combined Gross Income is under around $170-190k

 

That's probably why. Yes have a $7k Hecs debt.

I'm slowly starting to regret our MB. I feel like we are just getting churned - quick job in and out without helpful planning.

I will learn next time!

 

If just $7k paying it out might be the best option

 

How is hecs assessed? Is it worth paying down i.e if we pay 7k off we have capacity for 15k more borrow?

 

Thank you for the tip!