Overseas property - finance & advice

[roceans11]

In 2011, being young, naive, less educated and on 'advice' from family, I put down a deposit on an overseas (India) investment OTP of total $80k. It is due for completion later this year.

Till date, I have paid ~$55k in cash on this property as it gets completed in various stages of its build. So there is still approximately ~$25k left owing on it until possession.

The property has grown in value by approximately 20% since 2011 and I expect to see growth the longer I hold on to it.

I have avoided taking an overseas bank loan since the interest rate there is approximately 11%, complications involving monthly overseas loan repayments and lengthy paperwork.

I am sick of paying for this property in cash as in the last 3 years I have learnt how important it is to have cash in hand for future investments and in general. Saying that, I do have a good savings base inspite of the overseas OTP and local purchase.

In hindsight I should have had a look at a better way to finance this purchase and my lack of knowledge back then is coming back to bite me.

Since then, I have also bought a property here in Australia for $450k on a 95% loan current value approximately $520k.

I am a bit confused on how to best finance the rest of this property.

Can I use the equity from my australian property to cover for the $25k remaining on the overseas purchase? Is it wise to use the equity on an overseas asset? What would be the tax implications on an overseas asset funded by an australian bank.

If anyone has gone through this kind of a situation, any advice would be appreciated At times I regret the purchase just because I had no vision for it when I bought it, but hope the learnings from this purcahse will help me in future buys.

 

[tobe]

theoretically you can reborrow from the aussie property to pay the $25k, but in practice, there wont be enough equity to do that yet.

Id suggest selling the property in india, failing that find the last payment and then investigate taking out a loan to 'repay' yourself.

the interest rate is diferent, as is the yeild etc. I wouldnt be concerned about the gross interest rate. I would be concerned with the ROI, and the relative diference between interest and rent.

What is the opportunity cost of this money? What will you use the $80,000 for if it werent invested in this property?

 

[roceans11]

theoretically you can reborrow from the aussie property to pay the $25k, but in practice, there wont be enough equity to do that yet.

Id suggest selling the property in india, failing that find the last payment and then investigate taking out a loan to 'repay' yourself.

the interest rate is diferent, as is the yeild etc. I wouldnt be concerned about the gross interest rate. I would be concerned with the ROI, and the relative diference between interest and rent.

What is the opportunity cost of this money? What will you use the $80,000 for if it werent invested in this property?

Thanks for your reply. My bank says I have accessible equity of $32k at the moment but I am not quite sure if they will allow it for overseas investments due to my high LVR on the australian property.

I plan to sell it in 2-3 years depending on the growth but my main concern is the remaining $25k for now. I do have spare cash to fund it, but is it wise for me to fund it that way? I would estimate the rent to be approximately $150/month which is like 2.25% (yields in India are very low in general).

Well, if you had given me the $80,000 now, I would definitely have invested it in the australian property market following a basic buy and hold strategy. I was naive 3 years ago, but have equipped myself with knowledge by basic research and reading through the lovely forums for knowledge.

 

[Terry_w]

Since you only have $25k to pay it might be easier and cheaper just to use cash. Increasing a 95% loan will mean LMI is payable and then you have the hassles of exlaining where the money will be going - which may worry the LMI people