Finance for First IP Purchase

[zargor1]

Hi All,

Hope you all had a nice Christmas and New Year celebration.

I am currently arranging finances to have them in place so I can move quickly to purchase my first IP, when the right opportunity presents itself.

I currently have a main residence worth $450k with debt of $150k against it. This facility also has a redraw account against it which currently has $70k in it.

I am organising a line of credit (recognising that the redraw part of my current facility will reduce the amount I can borrow) so that when I find the right IP, I can use part of the LOC to fund the deposit for the new IP.

The balance of the purchase for the new IP (plus associated costs) I would look to have funded by a separate interest-only loan, preferably with a different bank. This way, I should be able to avoid cross-collateralisation.

Any balance of my LOC would be then be used as a deposit for any other IP opportunity that arose with the balance of any further funding to made through yet again a different bank, ideally.

May I please lean on your vast experiences and kindly ask if my strategy above seems appropriate and if there are any other points I should be considering at this time, so my finances are in place PRIOR to finding the right IP for me.

Many thanks

Zargor

 

[Perp]

May I please lean on your vast experiences and kindly ask if my strategy above seems appropriate and if there are any other points I should be considering at this time, so my finances are in place PRIOR to finding the right IP for me.

If you plan to keep the $70K in the redraw available for personal use, this sounds great. Obviously, if you want to use the $70K for investment purposes, then you'd be better off reducing the balance on the mortgage (losing the ability to redraw this $70K), and getting a larger LOC, to maximise tax-deductibility and avoid mixing investment and private funds.

If you think that you would want to use some or all of the $70K for private purposes, then you should leave it as a redraw on your PPOR.

Good work on thinking about all this prior; too many people don't! (Including myself in the past. ) And happy hunting!

 

[Qlds007]

Hi zargor

Happy New Year to you and seems to me like you have your head screwed on.

As Ozperp suggested by all means keep the redraw but try and set up a separate LOC for the investment deposits.

If you find you dont need access to the redrawn funds cancel the advance repayments and then increase the Investment LOC accordingly.

Use a separate lender for your IP's make sense and there are some good options out there at the moment.

As the IP increases in value finance upto 80% of the increased valuation and use the funds realised to pay down the IP.

Repeat process for each new IP.

 

[zargor1]

Many thanks for your thoughts and comments, Ozperp and Richard.

They are appreciated very much.

Zargor