Finance

[WebBoard]

From: Mike .


Cash to spend on IP
From: KJ
Date: 12 Feb 2001
Time: 16:26:56

I'd like to purchase cheap in Bris & renovate, and increase the value. My hope is that the valuation will be 25% more than I paid for it & the renovations. The bank would then lend me 80% of the value, which will mean that only that house can be used as security.

I'm selling a house in the UK (it was tenanted for free by a family member) and will end up with $250K cash. Should I use this cash to purchase & renovate, and then get the bank to lend me the full amount after renovations are complete ? As an alternative, I have lots of equity in my existing house that could cover the whole cost of purchase & renovation. Thanks for any ideas.

 

[WebBoard]

Rolf

Reply: 1
From: Mike .


Re: Cash to spend on IP
From: Rolf
Date: 12 Feb 2001
Time: 21:15:35

Hi Kj

With 250 K cash and some earning capacity either from a job or income you would be able to purchase 5 to 10 "renovators" in middle ring Brisbane, thereby technically 5xing your returns.

Much depends on your current icnome.

Regards, Rolf

[email protected]

 

[WebBoard]

KJ

Reply: 1.1
From: Mike .


Re: Cash to spend on IP
From: KJ
Date: 13 Feb 2001
Time: 08:12:56

My employer & I agreed to go our separate ways last Friday. So one avenue I could pursue is renovating. I have accounts to verify my high income, so the bank will lend to me (I have lots of equity in my house).

The question is - do I use my cash to purchase & renovate and then get the bank to value the IP, and get all my cash back to do the same again with the next IP or do I use the equity in my house as security on the IP and keep the IP unencumbered, and use the cash to live off.

Option one requires only one bank valuation and has less hassle with finance. Option 2 won't allow me to claim interest on the cash I lend myself.

Are there any other advantages/disadvantages ?

This will be my first IP, so I'm trying to get the structure right first time. I intend to go for a lot more as you suggested. However, since my income has disappeared I'd like them to be c/f +ve from day one.

 

[WebBoard]

Rolf

Reply: 1.1.1
From: Mike .


Re: Cash to spend on IP
From: Rolf
Date: 13 Feb 2001
Time: 14:09:41

Hi Kj

Intending to reestablish your PAYE income ?

Ta - Rolf

 

[WebBoard]

KJ

Reply: 1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: KJ
Date: 13 Feb 2001
Time: 18:54:28

Hi Rolf,

I plan to spend a couple of weeks renovating, & research some more IPs and do the same again. So I don't expect to go back to PAYE for 3-4 months. Although, I'll get a small retainer which will just about pay my home mortgage.

KJ

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: Rolf
Date: 13 Feb 2001
Time: 20:25:54

Hi KJ

Your current income is an important consideration if you are not self employed for the lenders borrowing criteria. If on a retainer are you s/e or normal PAYE?

Ta - Rolf

 

[WebBoard]

KJ

Reply: 1.1.1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: KJ
Date: 14 Feb 2001
Time: 07:54:09

Hi Rolf,

I (& my partner) have been employed by my company (we are the only directors & employees), my company's contract has just ended - so we will now have no income. However, we will have 250K cash when the UK sale goes through & heaps of equity in our home. I'd like to buy & reno IPs for the next 3-4 months. Income in the short term is not a problem as I will receive a retainer & use up a bit of the cash.

Should I use the cash to buy & reno, and then get a IO loan using only the IP as security based on it's higher valuation ? Thanks KJ

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: Rolf
Date: 15 Feb 2001
Time: 18:38:42

Hi

Being self-employed and buying IP you can easily get "no docs" finance, where you sign a stat dec that you can afford the loan. LVRs are a little light but still better than laying out all your own cash on one IP when you can spread over more. I figure that if you have a tax problem using your cash is not going to help your tax situation for this financial year. What is your expectation for future income ?

Ta - Rolf

 

[WebBoard]

Anna

Reply: 1.1.1.1.1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: Anna
Date: 16 Feb 2001
Time: 12:19:10

If you have a company wouldn't you have tax returns from previous years detailing income? The bank will not be asking you for this (2000/2001) financial years tax returns. We are self employed but have never needed to resort to no papers finance.

 

[WebBoard]

KJ

Reply: 1.1.1.1.1.1.1.1.1
From: Mike .


Re: Cash to spend on IP
From: KJ
Date: 16 Feb 2001
Time: 14:06:20

Hi Anna, I have no problem getting finance. My company (ie me) earns over 100Kpa. The question is - Use my spare cash (150K) for an outright purchase, and then after reno get the bank to value it and loan me 80% of it's value (which I hope will cover all I have spent on purchae & costs & reno). The alternative is to use my home equity as security for the lot.

Before anyone says I can leverage into 20 properties with those figures - I intend to, but I'd like to get the finance structure right to begin with. If I go with the former option, each property will (I hope) be full security for it's loan. And I can do this forever.....

Thanks, KJ