Investment/ finance strategy

[KyanFable]

Hi guys

Looking for some opinions for my brother in law. He and I discuss property all the time but we are both amateurs. He's asked me how he can buy more investment properties so I thought I'd put it to the forum.

He's 50 and earns 70k per year. PPOR no debt and value is 750k.
He has 1 IP currently geared at 93 %. value is 330k loan is 310k.

I'm not sure how he did it but the Ip loan is x coll against PPOR. He has a LOC with CBA limit is 50k and has drawn down 8k so balance is 42k.

He and I were talking and I said "man if I had my PPOR fully paid I would use a lot of my equity to buy 2 or 3 properties" . He like the idea but not sure how to achieve it using his PPOR equity.

How would you do it?

 

[Jamie M]

Hiya

The simple approach is to set up an equity release (IO loan or LOC) against his PPOR and use it fund the deposit/costs on future IP purchases.

He can then set up a separate IO loan to cover the remaining balance for each IP.

Not sure why he would have an IP at 93% LVR if has an unencumbered PPOR - but I don't know the full details.

If that cross coll can be tidied up - it wouldn't be a bad idea to fix that.

Cheers

Jamie

 

[Aaron_C]

Sounds like he is in a good position. What he needs to do is clean up the cross collateralisation since his LVR is more like 50%, not 93%. Get equity released from the PPOR and use that to buy more if he so chooses.

 

[KyanFable]

How do u un cross the two properies?

 

[Jamie M]

How do u un cross the two properies?

Usually two applications submitted at once - he can arrange the equity release at the same time.

Cheers

Jamie

 

[norwoodman]

How do u un cross the two properies?

You could refinance the IP with a different lender (assuming both properties are financed by the same lender?).

 

[KyanFable]

Ok soot sounds like he needs to refinance The IP with another lender to un cross his 2 properties.

Then he needs to organize an equity release on his PPOR to use as 20 % deposit on Ip2.

Then secure 80% loan from another lender for purchase.

Considering his equity holding approx how much will he be able to access?
Ball park figure?

 

[Terry_w]

He could stay at same lender.

Just set up a LOC on the PPOR and rejigg the IP loan to 80% LVR on current valuation. Use part of the LOC to pay its LVR down from 93%. Still 100% of the IP loan deductible. And will have loads of LOC balance left for deposits on further properties.

 

[Peter_Tersteeg]

He really needs to do a few things in parallel. The IP needs to be refinanced and at the same time he needs to access some equity in his PPOR to enable him to reduce the LVR against the IP to 80% of its value.

The total equity he'd be able to access from his PPOR is probably about 80% of its value. This is inclusive of a LOC which is probably secured against the property - if a LOC is in place, this should be considered a loan.

 

[Rolf Latham]

Hi

Might b a good plan for "him" to get his own log on and have some skin in the game

ta

rolf