Purchase next property

Hi ladies and gentlemen,

I purchased my first investment property around August last year (2012) and now want to look at purchasing my second investment property, I'm just not sure on the best way to do it.

I'm still new to the whole investing scene and don't have a terrible lot of experience with loans (22 years old at the moment and the investment loan was my first).

At the moment I have around $35k sitting in an offset account for my current loan. As this was my first property I have to make a 10% cash deposit in order to purchase the property.

Now that I have a property, it seems that the most effective strategy to fund the purchase of another is to utilise the equity in the property as opposed to using the cash again? (sitting in my offset). Ideally I'd like to leave as much money in the offset account as it's made my first purchase effectively cash flow positive.

My issue is accessing the equity however, the property is only a simple two bedroom unit which I purchased for $165k. How do you know when/if there is equity to access, do I have to wait until the property naturally goes up in value and get the bank to value it (in which case as it's only a recent purchase there would be little increase) or do I have to try and add value myself (which is also a little constraining as it's a unit and the ability to add value seems somewhat limited - could do with new kitchen and flooring however). I have only paid the 10% deposit on the property and am only paying IO repayments at the moment if that affects anything.

Thanks for your thoughts.
 
new kitchen and flooring should add some value to it , however have you checked out comparable sales for this unit ? if you managed to purchase BMV you might be in luck for some equity gain..
all depends on how much you paid for it compared to what the market value for it is...
 
If you think some comparable sales near/in the unit complex are favourable perhaps as your broker/banker to get a valuation done and see what your options are from there? If lucky you can pull some equity out to fund the next IP - otherwise it would have to be from cash and/or going for a higher LVR loan.
 
Both extracting the equity and moving forward with the next IP is going to depend on a couple of points but there are a few ways to make your money / equity go further.
 
Worthwhile doing an upfront val to determine what sort of equity you are playing with.

Be careful not to overcapitalise particuarly if the unit was purchased for $165k.

Regards

Shahin
 
Thank you all for your replies.

I've checked recent sales on RP Data and it seems that there were a few sales of units in the same street around $170k - $175k(ish) and others in streets within 500m radius that were creeping close to, or exceeding 200k (probably better condition).

My purchase as the last in the complex as there are only 4 units. The second most recent sale in my complex was the same as my purchase price of $165k about 5 months before me.

Is it still worth getting a valuation done just to see where it sits? Does it generally cost to have a valuation done?
 
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