Renovations and Future Investment

[albanga]

Hey All,
I just wanted to get some advice on something I am considering.
In around May I will be purchasing my brother out of his 50/50 share in our home (I am aware of all tax considerations).
I am estimating my loan to be around 400k with house value 520k.

I am planning to renovate the house and anticipate that will be around 60k. So if I draw that from the equity it would mean an LVR of 88% so I would need to pay LMI but not too much.

Also when the renovations are completed I want to have the property revalued and again draw the new equity for the purchase of an IP.

What would be the best way to go structuring this?

A side note is that I can also borrow the money on a commerical loan from my mother for the renovations.

 

[Jess Peletier]

At a guess how much equity do you think wil be achieved?
Enough to bring to loan back to sub 80% lvr?

Depending on your plans, mums inerest rate and time frame it might be cheaper to borrow from Mum, avoid lmi, do renos, access equity to 80% then to repay mum. But check the tax implications.

 

[albanga]

At a guess how much equity do you think wil be achieved?
Enough to bring to loan back to sub 80% lvr?

Depending on your plans it might be cheaper to borrow from Mum, avoid lmi, do renos, access equity to 80% then to repay mum. But check the tax implications.

At a very rough guess I would say I might be able to achieve a 400k bank loan with a 600k value at finish so 66.6%LVR (all depends on how good my reno skills are and what of course the all important valuer thinks about it).

That means 13.4% in equity to reach 80% LVR which would mean 80k allowing me to easily pay mum back the 60k.

How would this be structured though for my next IP purchase if I wanted to release the equity to 90% LVR. I could not use say a LOC to pay mum back and also purchase my IP as the loan would become contaminated.

 

[Jess Peletier]

You'd split the loan - one for mum, and a seperate LOC for investment use.

Not sure about the deductibility of mums loan, one of the accountant's could help but I think it should be deductible.