What is the best way to buy IP #2 ?

[Gordon Gekko]

Hi All,

Maybe this post should be in another section but I am sure it will get moved.

On the hunt for IP number 2. I am just wanting peoples views on the best to finance it.

I have $600k equity in IP 1 and PROR.

I have no debts and am on only $45k salary

Looking at the figures, buying a $212k unit, maybe costing me $230k all up, lease out for $185 per week, giving me a 4.1% return Hmmmm

So what is the best way to fund this IP? By using equity in IP 1 or from PROP?

$230k loan at 6.5% over 25 years is $1552.00 less the $800 rent is a short fall of $752 per month i have to come up with, right ??

Any help would be great,

GG

PS Yes, I will be visiting a Morgage broker at some stage. Thanks

 

[Mr. Fabulous]

You could use some of the other equity to put into an income fund of some sort which will provide you with an income to cover the costs.

Mark

 

[agent007]

Looking at the figures, buying a $212k unit, maybe costing me $230k all up, lease out for $185 per week, giving me a 4.1% return Hmmmm

So what is the best way to fund this IP? By using equity in IP 1 or from PROP?

Hi GG,

What's the CG you're expecting for this IP and for the existing 1 as well as for the PPOR?.

In regard to question # 2, Are both loans interest rates the same?. I'd use the 1 with less %. If both are equal then, I'll borrow from IP1 (just to keep things separatly).

Good luck,

James.

 

[Rixter]

Hi All,

Maybe this post should be in another section but I am sure it will get moved.

On the hunt for IP number 2. I am just wanting peoples views on the best to finance it.

I have $600k equity in IP 1 and PROR.

I have no debts and am on only $45k salary

Looking at the figures, buying a $212k unit, maybe costing me $230k all up, lease out for $185 per week, giving me a 4.1% return Hmmmm

So what is the best way to fund this IP? By using equity in IP 1 or from PROP?

$230k loan at 6.5% over 25 years is $1552.00 less the $800 rent is a short fall of $752 per month i have to come up with, right ??

Any help would be great,

GG

PS Yes, I will be visiting a Morgage broker at some stage. Thanks

Redraw equity from IP 1 to fund the 20% deposit + purchasing costs for IP 2, then borrow the remaining 80% using a new loan secured against IP 2. By doing it this way all your tax deductable debt is kept together, separate from your PPOR, and there is no cross collateralisation thus you have more flexibility.

 

[Gordon Gekko]

Redraw equity from IP 1 to fund the 20% deposit + purchasing costs for IP 2, then borrow the remaining 80% using a new loan secured against IP 2. By doing it this way all your tax deductable debt is kept together, separate from your PPOR, and there is no cross collateralisation thus you have more flexibility.

Rixter,

1. Are you saying use a LOC for the 20% deposit and costs (using IP 1)

2. How do you borrow 80% of IP 2 using itself as security?

Thanks,

GG

 

[Mr. Fabulous]

Gordon,

What you do is get a line of credit against IP 1. You then use some of the money from IP 1 as your deposit and get a loan for the rest.

Mark

 

[DavidMc]

1. Are you saying use a LOC for the 20% deposit and costs (using IP 1)

2. How do you borrow 80% of IP 2 using itself as security?

1. Yes, this is the way to go, although unless you plan on doing many redraws on this account there are cheaper products than a LOC out there. I usually set up just a basic IO variable product set to the size of my deposit + my costs, draw it down on settlement and leave it there.

2. This is quite standard. With your deposit + costs in hand, approach a lender and say 'I'd like to buy that property please, here is my deposit' (or better yet, use a mortgage broker). They will lend you the remaining amount which is to be secured by the new purchase (and not by your existing IP or PPOR).

 

[Rixter]

Rixter,

1. Are you saying use a LOC for the 20% deposit and costs (using IP 1)

2. How do you borrow 80% of IP 2 using itself as security?

Thanks,

GG

GG, YEs On the Deposit & Costs you can use funds via a LOC or IO loan secured against IP1 as Mark & domcc1 have explained. Then simply borrow the rest (80%).

In other words the funds to puchase IP2 come from 2 separate loans so as to not x-coll secuirites.

Hope this helps

 

[Rolf Latham]

Hi GG

The best way is to go and speak and work with a good independent mortgage broker - use someone that has a good broad client base, someone that has a few investors under their belt and can build your future vision and wont do something to constrain your future potential .

ta
rolf

 

[Rixter]

GG,

A couple of great Mort Brokers frequent this forum - Infact from what Ive been told the best one may have already posted you a reply to this thread

 

[WillG]

Hi Gordon,

A good mortgage broker is the way to go but you need to clearly articulate what you are trying to achieve when you see him/her.

For example ...
'I want to finance a new IP in the cheapest most flexible way so I can continue to borrow to buy further IP's in the future'.

Some of the answers have already pointed in this direction by suggesting 'don't x-coll secuirites' and there are cheaper loans than a LOC. Extracting the 20% deposit from the existing IP rather than the PPOR has probably been advised because if if it all goes 'pear shaped' you may loose your existing IP rather than your PPOR.

A lot of refinancing options will depend on your existing loans, breakout costs and your choice of new loans - your mortgage broker should be in a good position to advise you on these matters.

Cheers

 

[Gordon Gekko]

GG,

A couple of great Mort Brokers frequent this forum - Infact from what Ive been told the best one may have already posted you a reply to this thread

Thank you all for your advise, once again, this forum is fantastic.

Rixter, looks like that person comes from Sydney or Brisbane I am in Melbourne

GG

 

[pjb89]

Hiya GG

Distance is not a real problem. I have been using one of the resident mortgage brokers on this site since the beginning of my IP journey and only met him (face to face) after he had set up our third IP purchase. Note that I live and work o/s so I am prepared to do these things on remote.

ciaoo

Pedro

 

[Rixter]

Thank you all for your advise, once again, this forum is fantastic.

Rixter, looks like that person comes from Sydney or Brisbane I am in Melbourne

GG

GG, I believe Victorian clients are catered for.

 

[skater]

Thank you all for your advise, once again, this forum is fantastic.

Rixter, looks like that person comes from Sydney or Brisbane I am in Melbourne

GG

Distance really doesn't matter these days if you have a good one. Give them a call you may be surprised.

 

[Gordon Gekko]

GG, I believe Victorian clients are catered for.

Time to talk to a Broker.

Rixter, can you give me some names, please

Thanks

GG

PS Do other people use Brokers from this forum? The reason I ask is, do you feel a bit funny that somebody on the forum knows every little detail of your financial situlation?

But not for one minute do i think any of these good people would reveal any of that private info.

 

[skater]

PS Do other people use Brokers from this forum? The reason I ask is, do you feel a bit funny that somebody on the forum knows every little detail of your financial situlation?

But not for one minute do i think any of these good people would reveal any of that private info.

YES!!!! I use Rolf. Before I started using him I had all sorts of problems. All solved now, I'm glad to say. Been with him for 3-4 years now. Haven't looked back since.

 

[Rolf Latham]

Hiya All

Privacy..................

Many years ago, I worked for a company doing in homes with leads provided by their telemarketing team, cutting my teeth on mortgages, property, and financial planning.

One Saturday Morning I get a call from my Dad telling me my 15 mins of fame had come and that I and the company I was working for at the time were on a page 2 of a major newspaper, due to an investigation by the privacy commissioner - one kind and logical PA at that company decided that we had better recycle office paper rather than shred and pulp.

Since that time and even before one of the most important things that I cover off with people that refer me clients is that their business stays their business. I even carry a page of confetti shred in my display book right after my MIAA Certificate, to make the point.

Anyways, the only public discussion of material is where that info is already in the public domain.

ta

rolf

 

[Rixter]

Time to talk to a Broker.

Rixter, can you give me some names, please

Thanks

GG

PS Do other people use Brokers from this forum? The reason I ask is, do you feel a bit funny that somebody on the forum knows every little detail of your financial situlation?

But not for one minute do i think any of these good people would reveal any of that private info.

Hi GG,

Cant think of his name straight off but if you look at post #18 on this thread I am sure his name will come to mind.

Cheers

 

[Gordon Gekko]

Hi GG,

Cant think of his name straight off but if you look at post #18 on this thread I am sure his name will come to mind.

Cheers