澳洲Australia property Equity vs Cash Deposit | Sydney


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


I've currently got a property:

Mortgage: $230,000
Property Value: $290,000
Rent received: $320 a week ($1280 a month)

I'm keen to expand my property portfolio but don't know if I'm jumping the gun too early. Based on experiences and knowledge, would you recommend using equity in a property to fund the purchase of an investment property, or save a cash deposit?

If equity is the way to go, the only advice I've heard is to have 40% equity of which use 20% to fund the new property. Interested to hear views on this one.  

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enteraims said: ↑
If equity is the way to go, the only advice I've heard is to have 40% equity of which use 20% to fund the new property.Click to expand...
You heard wrong.

If you went for an 80% LVR loan on your current property, you'd be able to get only $2K. (New loan = 290,000*0.8 = 232,000. Pay out old loan of 230,000 = 2,000 left over). So that's a waste of time.

However, if you ramped the LVR up to say 90%, you'd be able to get around $30K (New loan = 290,000 *0.9 = 261,000. Pay out old loan of 230,000 = 31,000 left over).

So you'd have $31K less mortgage insurance (due to the 80% lend) to cover the deposit on the new property & associated costs like stamp duty etc. It would be a bit tight I think - so you'll have to save a bit more, or wait for more equity growth, or perhaps do a 95% LVR loan (and pay even more in mortgage insurance).

But you're on the road :)  

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enteraims said: ↑
If equity is the way to go, the only advice I've heard is to have 40% equity of which use 20% to fund the new property. Interested to hear views on this one.Click to expand...
That advice basically says to limit your LVR to 80%, so you need 40% LVR to refinance enough to pay for the deposit on the new place. You've ignored buying costs, though.

This is one way, but not feasible for you at the moment. So either wait for your property to go up, save cash to use as a deposit, or go for a higher LVR refinance (and new IP loan).

You should check your cashflow, though. With two high LVR properties, the -ve cashflow may be significant. Can you afford it?  

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Thanks guys. I'm new to the whole IP gig and am slowly reading the books and doing the research. The numerous success stories on these boards are inspiring but I've got to remember to take the slow and steady approach :)  

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enteraims said: ↑
I'm keen to expand my property portfolio but don't know if I'm jumping the gun too early. Based on experiences and knowledge, would you recommend using equity in a property to fund the purchase of an investment property, or save a cash deposit?Click to expand...
I'd always use equity over cash. In terms of jumping the gun - you need to assess your own risk profile and determine whether or not you're comfortable with a high LVR. As prop rightly said, you could possibly top up to 90% (and possibly capitalise the LMI) giving you about $30k for a deposit and purchasing costs on your next IP.

Best of luck

Jamie  

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Equty or Cash? Depends on your risk factor and what you are comfortable with.

If you are able to quickly save up cash for a deposit, then that is the preferred way. Essentially with Equity, you are taking on more debt, which restrict future purchases until the additional debt is paid down or cashflow improves.

We bought our first IP using a 10% equity deposit and 90% loan, effectively funding the entire purchase of the IP with debt, paying off stamp duty and renovating using equity. You can then imagine that with such a high level of debt, our ability to borrow has been seriously curtailed for quite some time to come.

It's been 1.5 yrs since that purchase and we still canworking on swallowing that deal.

Regards,

Daniel  

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One key thing missing, do you own a PPOR and is their a mortgage? All tax paid cash should be directed to that first, prefereably to an offset.

daniellee said: ↑
If you are able to quickly save up cash for a deposit, then that is the preferred way.

We bought our first IP using a 10% equity deposit and 90% loan, effectively funding the entire purchase of the IP with debt, paying off stamp duty and renovating using equity. You can then imagine that with such a high level of debt, our ability to borrow has been seriously curtailed for quite some time to come.Click to expand...

Daniellee, how long would it have taken you to save enough cash to fund the deposit? This would take years for most, by the time someone would save $20k $30k $50k whatever, the property would most likely have gone up by 3 times more than that.

Why not get the property straight away, like you did, then pay it down ASAP, taking that risk of inflation out.  

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Jamie M said: ↑
I'd always use equity over cash.Click to expand...
Agree. Better to save your tax paid cash for other purchases that are not tax deductible, and use OPM.

But everyone's situation is different...  

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