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.
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.