questions with 2nd step..

[pirate]

Hi all

Just wanted to throw a couple of tricky ones out there, im desperately needing some help/guidance from the more experienced ones.

Couple of quick facts:
I currently own 1 IP and it could probably do with a slight extension and a new kitchen. To be honest im not entirely sure how much id be up for such an extension however i envisage approximately $30k-$40k mark.
IP#1 cost $380k, has approx $100k owing on it and being rented out for $260p/wk. Great tennants.

iam thinking of buying a 2nd ip around the $350-$400k mark and fully financing the lot

now for the questions
1) Anyone know if iam budgeting reasonably for an extension job on ip#1?
2) would it be wise to fully finance ip#2? or should i workup some sorta deposit?
3) would you extend ip#1 or invest in ip#2?

Cheers and TIA.

 

[wylie]

1) Anyone know if iam budgeting reasonably for an extension job on ip#1?
2) would it be wise to fully finance ip#2? or should i workup some sorta deposit?
3) would you extend ip#1 or invest in ip#2?

1. Cannot help you with that, as it depends so much on what is involved and level of finish.
2. If you can afford fully financed IP2 why not, as your deposit is your equity in IP1.
3. If it was me, I would make sure I get IP2 before spending money on extending IP1. As long as IP1 is rentable, it would be a shame to use money renovating it, and then find you are short of funds or servicability for iP2.

Just my initial thoughts.

Wylie

 

[LynnH]

pirate

I agree with Wylie's comments - personally, I would go for IP2 and get that equity starting to build up. Then you can look at the renos on IP1.

Cheers
LynnH

 

[Jontxu]

Hi Pirate,

It would be hard to tell because we don’t know how large (sqm, etc) your extension will be and also what fittings and kitchen you will be using. A flat pack kitchen can cost $3K and a designer kitchen can cost $20K. Construction costs are around the $1K (at least in some areas in NSW), maybe work out the area in sqm and apply rate and see how you go.

Get a few quotes and work your budget backwards based on what the local carpenter/builder, etc told you. Get 3 quotes at least. Make sure you don’t over-capitalise. It would not hurt calling the tenant and having a chat to him, maybe a reno of this “magnitude” may not be necessary, just some thoughts.

The rent on your IP seems low (compared to purchase price @ $380K), is there any way you can increase this rent, is this the reason why you want to do the extension?

You do have enough equity on your IP, provided that you have your accounts in order and can “afford” the loan, you should be able to borrow for another IP using the equity for deposit and closing costs.

Happy Investing

Jon Salvador
www.headinghome.com.au
For investors … from investors