Quick Question *Confused*

[Infest]

Hey guys, quick question.

Buying a house for $317500. Only getting a loan for $260000 though.

So after I live in it for 6 months I am turning that into an IP. Can I then use the $50k I've put into the house to get a second IP?

I don't understand, so if someone could explain, I would appreciate.

Cheers.

 

[Propertunity]

Hey guys, quick question.

Buying a house for $317500. Only getting a loan for $260000 though.

So after I live in it for 6 months I am turning that into an IP. Can I then use the $50k I've put into the house to get a second IP?

I a word "No".

You have to wait until your house is worth more to suck out some cash.

You need to look at gearing or LVR (loan to valuation ratio)
atm your LVR = 260,000/317,500 = 82%
lets say for the sake of this discussion that is as high as any lender will go now and also in 6 months time.

Say your property grows @ 10% pa
In 2 years it will be worth $384,000
Bank lets you do an 82% LVR loan = $315,000
But you already still owe $260,000
Therefore you only can pull out 315,000 - 260,000 = $55,000

That's how you get your $50K back

 

[Infest]

I a word "No".

You have to wait until your house is worth more to suck out some cash.

You need to look at gearing or LVR (loan to valuation ratio)
atm your LVR = 260,000/317,500 = 82%
lets say for the sake of this discussion that is as high as any lender will go now and also in 6 months time.

Say your property grows @ 10% pa
In 2 years it will be worth $384,000
Bank lets you do an 82% LVR loan = $315,000
But you already still owe $260,000
Therefore you only can pull out 315,000 - 260,000 = $55,000

That's how you get your $50K back

And from there, how do I get finance for a second IP?

 

[Propertunity]

And from there, how do I get finance for a second IP?

You go find a $250K property and using your $50K as a 20% deposit and the other $5K for stamp duty and costs you apply for an 80% LVR loan.

Loan from bank $250K x 80% = $200,000
Your deposit = $50,000

 

[Infest]

You go find a $250K property and using your $50K as a 20% deposit and the other $5K for stamp duty and costs you apply for an 80% LVR loan.

Loan from bank $250K x 80% = $200,000
Your deposit = $50,000

So the more equity I have, the bigger loan and deposit I can get?

 

[Propertunity]

So the more equity I have, the bigger loan and deposit I can get?

Yes, the %LVRs are the same but the numbers can get bigger the more equity you have.
Also bear in mind it seems like small potatoes to begin with......but move forward 10 year when you have say $2M in property and you have a year where it grew by only 10%. That's $200K of fresh equity you can get a fair portion of to use as deposits on another maybe 3 x IPs that year.
Cheers,