I'm in the process of buying/planning for IP1. But I want to consider how I'm going to get IP2 because it may affect my strategy for IP1.
I would like to know how long it would take before I could realistically buy IP2. e.g. would it be possible after 12 months.
If I buy IP1 for $500,000 (Rent $430 per week) which would be a property in original condition and renovate it, lets say after a $20k renovation it is worth $550,000 (Rent $475 per week). The original loan amount is $400,000.
When buying IP1 I'm being as aggressive as possible, so $500,000 is the max I could buy with my cash deposit + bank loan (as much as the bank will lend me). I know that 80% LVR is not that aggressive, but say the bank would lend me up to $400,000 based on my current income, and I use $100,000+stamp duty+costs from my cash savings for the other 20%. In other words the bank won't lend me $450k on a 90% LVR.
After 12 months, say the property increases by 5% in capital growth. i.e. the value increased from $550,000 to $577,500. I also get a small pay rise of $2000 p.a. from work and adding the $2340 p.a. extra rent after the renovation gives me an extra income of $4340 p.a. after 12 months.
So after 12 months I could probably get a LOC of I'm guessing around $30k. I'm going to get this LOC and keep the funds there as a second buffer (in addition to my cash buffer) so that I can still afford to fund the negative cash flow shortfall if something goes wrong.
I know there is rent which helps serviceabilty when there is IP2, but it seems that after 12 months I can only access a $30k LOC and it is still a fair way off before I can buy IP2 for say $250,000.
So I estimate that I won't be able to get IP2 until around 4 years after IP1 after rents go up which will reduce the negative cash flow shortfall. Am I on the right track in this line of thought? Or how long do you think it will take? If it would take 4 years before I can buy IP2, then my strategy would be to be aggressive with IP1 and buy the highest value property that I could reasonably get a loan for.
I don't understand how people are able to buy one property per year with a captial gain focus which would generally be cash flow negative in the first several years, especially if you maxed out your loans on each one.
I would like to know how long it would take before I could realistically buy IP2. e.g. would it be possible after 12 months.
If I buy IP1 for $500,000 (Rent $430 per week) which would be a property in original condition and renovate it, lets say after a $20k renovation it is worth $550,000 (Rent $475 per week). The original loan amount is $400,000.
When buying IP1 I'm being as aggressive as possible, so $500,000 is the max I could buy with my cash deposit + bank loan (as much as the bank will lend me). I know that 80% LVR is not that aggressive, but say the bank would lend me up to $400,000 based on my current income, and I use $100,000+stamp duty+costs from my cash savings for the other 20%. In other words the bank won't lend me $450k on a 90% LVR.
After 12 months, say the property increases by 5% in capital growth. i.e. the value increased from $550,000 to $577,500. I also get a small pay rise of $2000 p.a. from work and adding the $2340 p.a. extra rent after the renovation gives me an extra income of $4340 p.a. after 12 months.
So after 12 months I could probably get a LOC of I'm guessing around $30k. I'm going to get this LOC and keep the funds there as a second buffer (in addition to my cash buffer) so that I can still afford to fund the negative cash flow shortfall if something goes wrong.
I know there is rent which helps serviceabilty when there is IP2, but it seems that after 12 months I can only access a $30k LOC and it is still a fair way off before I can buy IP2 for say $250,000.
So I estimate that I won't be able to get IP2 until around 4 years after IP1 after rents go up which will reduce the negative cash flow shortfall. Am I on the right track in this line of thought? Or how long do you think it will take? If it would take 4 years before I can buy IP2, then my strategy would be to be aggressive with IP1 and buy the highest value property that I could reasonably get a loan for.
I don't understand how people are able to buy one property per year with a captial gain focus which would generally be cash flow negative in the first several years, especially if you maxed out your loans on each one.