How much equity? 2 Units for Sale in my building

[Alex P Keaton]

There are 2 properties for sale in my complex, one is 44 sqm the other 48 sqm. Wander if I can afford to put an offer in haha. I dont know. Perhaps its an investor selling off both. The exact same wording is in the description.

Because its under 50sqm do you still need to have 20% deposit.

Am I living in dreamworld. Is it possible for me. I'm not seriously thinking of buying it, im just curious if i would be able to.

Do you think I have enough equity to buy this property if I bought it for example at $230 K. Thats the highest I would go probably. Its unrenovated priced at $199K - $259 K


My details

My Property is worth $250 K
Equity $80 K

Savings $20 K

I am able to save $300 a fortnight each pay.

What formulas do I need to use to work this out please.

 

[Alex P Keaton]

i have to go back to work now, catch everyone later

 

[tess85]

kim5 - that's awesome that you're looking to buy again the bug has really bitten you, hasn't it?

personally I think you should diversify. having 2 properties in the same building is a bit like putting all (2) of your eggs in 1 basket?

hopefully someone else can answer your main question which is the equity one.

 

[LynnH]

kim5

As far as your equity goes, the following provides some basic calculations - everything has been worked out on the basis of being able to borrow 80%.

Your Home
Value: $250K
80% is $200K
Current Loan: $170K
Maximum additional borrowings $30K

Other Property
Value $230K
80% is $184K

Maximum Borrowings
From your PPOR - $30K
One new property - $184K
Add available cash - $20K
TOTAL AVAILABLE: $234k

So, on paper, you have sufficient funds to buy the second property. However, whether you will be able to borrow depends on your DSR (and there is not enough information here to calculate that), and the policies of lending institutions.

Hope this is of some help.

Cheers
LynnH

 

[Alex P Keaton]

Cool thanks for the formulas

Yeah I'd just have the funds to cover it but with no buffer.

I think I will wait until my ppor is worth at least $300 K, before I buy an ip. By then I will also have saved up at least another $15 K. I would like to use just the equity in my property to purchase the ip with. I dont want to have to use my savings if I can help it.

So here is what it looks like if my ppor is valued at $300 K


PPOR
Value: $300K
80% is $240K
Current Loan: $177K
Maximum additional borrowings $63K


IP
Value $250K
80% is $200K

Maximum Borrowings
From PPOR - $63K
One new property - $200K
TOTAL AVAILABLE: $263k


Hopefully will be able to do this in 2-3 years.

 

[RumpledElf]

If a 1br unit in Perth is 300k, what are you going to get for less? 1br unit further out?

 

[Alex P Keaton]

I'm not sure what you mean. Anyway, I was just talking about the future when my ppor will be worth $300 K.


Actually the next time I see my mb my salary will have increased a lot. It will be $48 K in two years time. When I got my anz loan of $177 K was calculated on my permanent level 1 salary of just $35 K. That will help

 

[RumpledElf]

I mean, you have a 1br unit ... you can't extend it, or subdivide it, or do more than tart up the interior. 1br units will never appeal to families or friends who want to share to keep their costs down. If there's any class of dwelling that is going to go up less, not go up, or go down in the current climate it is very small units. The usual thing people do is live in a largeish PPoR in a desirable area that they add value to, and buy cheaper crappier houses in less desirable areas that have better yield - you don't really have this option to buy a second cheaper house, other than to get a small unit in a worse area, or switch your current PPoR to an IP and shuffle your loans around and get a nicer PPoR down the track.

No offense intended, mind you. I have exactly the same problem - huge house, huge block, extraordinarily undesirable area, very high chance of its value going down in the forseeable future. Pointless to subdivide it, its overcapitalising to extend it. So I have an IP that cost more than my PPoR, is worth considerably more than my PPoR, will always be worth more, will rent for more, is on a smaller block but with more subdivision potential etc etc but the low value PPoR had juuuuuuuuuuuuust enough equity in it to make the deposit, and the way things are going this is my one shot to use that equity as a deposit - there just isn't any more where that came from. The equity fairy giveth once and once only in this house.

 

[Alex P Keaton]

I mean, you have a 1br unit ... you can't extend it, or subdivide it, or do more than tart up the interior. 1br units will never appeal to families or friends who want to share to keep their costs down. If there's any class of dwelling that is going to go up less, not go up, or go down in the current climate it is very small units.

The usual thing people do is live in a largeish PPoR in a desirable area that they add value to, and buy cheaper crappier houses in less desirable areas that have better yield - you don't really have this option to buy a second cheaper house, other than to get a small unit in a worse area, or switch your current PPoR to an IP and shuffle your loans around and get a nicer PPoR down the track.

I have a 1 bed unit, cos that is all I could afford. I am single. If I wanted to buy a 2 bed villa or house for the same price I would have had to move to somewhere further out like Rockingham which I didnt want to do.

This one bedder isnt meant to appeal to families, it appeals to a different market. Its located in Highgate a trendy Perth suburb very close to the Mount Lawley Cafe strip and only 2 km's to the cbd. Excellent transport and amenities. Its ideal. I disagree with you about the capital growth. A well located inner city unit will always do well. Location is important.

 

[Alex P Keaton]

No offense intended, mind you. I have exactly the same problem - huge house, huge block, extraordinarily undesirable area, very high chance of its value going down in the forseeable future. Pointless to subdivide it, its overcapitalising to extend it.

No offense but I would choose a small well located unit in a highly desirable area any day over a huge house on a huge block in an undesirable area

 

[RumpledElf]

And I wouldn't. Purely a reason of cost - it was a business decision, as we are self-employed. $60 a week (including rates etc) for a huge house with everything we need vs $350 a week to rent the same thing (or $800 a week to buy) in a good area and then get slugged with school expenses etc on top of that, which I don't pay here. What I lose on big time is value-for-money internet access.

Was frightening how much the budget changed when I moved here (from a trendy inner city 1br apartment). I quit work and went on the pension but my disposable income skyrocketed (savings were mostly petrol and childcare) Very high churn in the block of units I was in - mostly students and singles, every time someone got hitched or pregnant they'd move out (thus clogging up the common driveway with a removal van), and I had to constantly battle with people parking in my spot when I was at work. The PM was a moron, and there was always one or two units for sale per block in this block and the others on the street, so there'd always be people tramping around in packs looking at the ones for sale or rent. If I ever buy or move into a unit again I'd be getting a townhouse or unit in a small group that has a gated or rollerdoored parking space and a private yard front and back, and definitely not so close to the city.

Although I do admit the proximity to all the restaurants was nice, and you could sit on the balcony watching the scantily clad clubbers wander past on Friday and Saturday nights That unit was easily in one of the best locations in Adelaide. It sold within a week when I moved out for a surprisingly small sum, probably due to being in a block of 10 in an area with an oversupply of 1br units - anything over 1br had a premium on it. Did a quick search on realestate.com.au and it seems to be the same in that suburb, heaps in the 1M-3M range, quite a few in the 600-900 range, and whaddayaknow, the 1br units - as opposed to cottages or townhouses - are down at the 200-400 range, so they haven't moved much in price since I left the area 3 years ago.

I swear I'm the only person I know who moved from one of the top 5 postcodes in a capital city to one of the bottom 10 regional ones.