Determining Equity iot buy the next IP

[Smouch]

Hello

I am looking a bit down the track but I'd like to know what the next few steps are.

I am building an IP in an area of what I believe should be good growth. The IP has been valued by bank as 290k (costing me 280k) which I am assuming is ok. Anyway, assuming the property grows at an ok rate and I end up thinking that I might be in a position to purchase a second property, do I approach the bank and ask them to do another valuation to see if I have enough equity to refinance my loan in order purchase a second property. Are banks easy enough to approach and ask this, could anyone provide a ball park figure of what it costs? Do banks use their own valuers all the time or would they agree to an independent licensed valuer?

I am thinking that if the bank has their own valuer, I should still get a second, independent opinion. Is this a bit of overkill or would anyone think it would be a waste of time/money?

I have had a bit of a read of a few things (including Michael Yardney's recent book and some of Jan Somers books) and I think that I have a basic level of understanding of the concepts of buy (in the right stage of property cycle) hold then use capital growth to 'pyramid' my portfolio but I know that I need to allow capital growth to occur before I can do much else.

Ideally I would like to gain a portfolio of about 7 or 8 properties of the next 15 to 20years. For anyone that has a few properties, did the 'use equity to help buy the next property cycle' get easier to follow after you actually bought your second property?

Any thoughts/comments would be appreciated.

Regards

Smouch

 

[Bargain Hunter]

Hi Smouch,

You've obviously done your research in how to create equity.

Wait until the market has moved sufficiently and then have the bank carry out a new valuation, then use the equity as a deposit on your next property.

It gets easier as you go along because you end up with a snow ball effect. By the time your second property has the required increase in equity, you have more equity in the first property. You may then have enough deposit to purchase two more homes, depending on the market this compounding effect could see you reach your goal of 7 in less than ten years.

Regards

Andrew

 

[sailor]

To get a rough idea of how much the property has increased in value, I tend to check with a couple of REA's and also look at what people are asking for similiar properties in the area. This can save you some money, as some banks like to charge to get their valuers look at it first.

You are definitely on the right thinking path! Go for it with DD!

 

[Smouch]

Thanks to you both.

I was hoping I was on an ok track so I appreciate your responses. Can I ask though, did it take a few times of refinancing before it all made sense? I have a broker who explains things quite well and I think it is a good start but to be fair, I am a bit of a 'control freak' and feel a touch uncomfortable when I don't have a thorough understanding. Having said this, if I waited until I fully understood all of the processes, I probably wouldn't get to build a portfolio!

I am focusing finding advisers (accountant/broker/conveyancer etc) whom I trust and who have ip experience as many suggest this is a good thing and it makes sense. Do you think most people are a bit unsure when they start out? I think that I can't help but err on the side of caution but I know that I can't reach my goals without some risk.

Anyway, thanks again

Damien

 

[sailor]

Thanks to you both.
You are most welcome.

I was hoping I was on an ok track so I appreciate your responses. Can I ask though, did it take a few times of refinancing before it all made sense?
Surely did. Learned from books, the net, Dale GG's articles on his web site, and SS forums, and from each refinancing as I went along. Got better at asking better questions from the broker, and learned heaps about how the financial institutions viewed me and my situation. I was such a "babe" when I started out...so naive. LOL

I have a broker who explains things quite well and I think it is a good start but to be fair, I am a bit of a 'control freak' and feel a touch uncomfortable when I don't have a thorough understanding. Having said this, if I waited until I fully understood all of the processes, I probably wouldn't get to build a portfolio!
Yes, I felt that way too, and I'm still learning.

I am focusing finding advisers (accountant/broker/conveyancer etc) whom I trust and who have ip experience as many suggest this is a good thing and it makes sense. Do you think most people are a bit unsure when they start out?
Took me ages to find the right accountant who was IP-savvy, my MB was recommended by a family member, and I trusted their judgement, I'd used the lawyer over many years and that helped too.

But I needed to learn about "structures" and that was complicated and needed to be designed to my specific circumstances (ie lifestyle, occupation, income, age, and financial goals).

I think that I can't help but err on the side of caution but I know that I can't reach my goals without some risk.

Anyway, thanks again

Damien

Damien, there's a lot to consider and plan for, before jumping into the IP thing. I made lots of mistakes along the way through my own ignorance, and some bad accountancy advice over the years. I've made up a lot of ground over the last 2 years, and quite honestly, its been hard work...reading...discussing...learning...and lots of unplanned physical work with renos, for which my body has paid in pain and increased fitness. (Can't have the bad without the good, eh!) I've learned how to use a few tools, and regularly drill the people at Bunnings when I take on a new reno task.

Despite all the hard work and mistakes, I wouldn't change a thing. I have learned so much, and grown as a person...can't get that anywhere else. Tis all worth it. And then there's the financial gains....I reckon I'm doing ok now. Hope you will too.