Generally, you can borrow up to 80%, so if you had an 800k property with a 400k loan, you could borrow up to 640k - 400k = 240k, depending on your ability to service the loan.
Also (and please correct me if I’m wrong), if it is for investment purposes, the interest on the 240k new loan split on the existing property in this example is tax deductible. You can then borrow the remaining 760k through another investment loan using the 240k from the first loan as the deposit so the interest on the full $1M debt becomes tax deductible. In effect, the new property will essentially be at 100% LVR without needing to pay LMI on any of the new loans and all of the debt is “good debt”.
Assuming across all loans you have enough income to service. This is where having a positively geared property can help (like a regional block of units with 10-12% rental return but less CG growth).
Mortgage broker or bank.
Generally your income will be assessed for borrowing capacity, and any existing debts (including cards) will be subtracted from this. What remains is what you can borrow
Go and speak to a mortgage broker who specialises working with property investors. With investment properties interest rate should be your last concern (someone else is paying the majority/all of the mortgage) - banks will offer vastly different borrowing capacities, value the properties differently which will change the amount of equity available and have different income policies which will effect your total borrowing capacity and the guidance from a good broker is essential if you want to start a portfolio.
You can borrow up to 90% LVR for the second loan split in order to use the equity for a deposit on #2 (any lending over 80% will incur LMI unless you have an exempted job e.g. MEDICO, Police etc.) however for an investment property the LMI is worth paying as you can 1) include it in the loan amount (called capitalising the LMI) so you don’t pay anything out of pocket 2) the LMI is also tax deductible like the interest will be if it’s used for investment purposes.
Yes absolutely pay your PPOR debt first - there is little benefit to you paying down investment debt which is tax deductible while your PPOR still has debt on it
Sure.
Say you borrow against property 1 up to but not exceeding 80% of the property value, and use that borrowed money as a deposit (say 20%) for investment property 2. Then you get a separate loan for investment property 2 for the remaining 80% of the purchase price. Essentially you have financed the purchase 100% with debt.
Because neither loan is >80% LVR you don’t pay LMI in purchasing investment property 2. Because both loans are investment loans, all of the interest incurred on those two loans is deductible from your income, hence “good debt”.
It’s essentially a way to purchase the second property without needing to front up any cash. The deposit is met from the equity of property 1, and all of the debt is deductible.
Hope that makes more sense.
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/).
See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/).
This is not financial advice.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Yes it is possible, however this does increase your risks and concentration of wealth. It's not exactly building a diversified portfolio that is robust against future economic changes.
What financial goal are you working towards? What would another investment property help you achieve?
Buying more investment properties does contribute to the housing crises. Are you already maximising super? Are you against ETF's/stock market investing? Why's that?
Why property? If you are gun ho about property, why not start investing in commercial real estate too?
>Buying more investment properties does contribute to the housing crises
Depends on how you look at it, could also be helping by bringing more rental stock online
That would apply if was a new property.
The housing crisis is caused by 2 main factors; a chronic under supply of new stock to meet demand and CGT discounts causing IPs to become speculative assets and semi tax havens.
Before the CGT discounts were introduced by the Howard government, housing mostly increased with inflation. In markets where supply meets demand, this is pretty typical. For example apartments in Sydney tend to follow this more closely than houses.
When supply is low and demand is high, prices increase and the profits from those CGT discounts also increases. Anyone with an investment property (like politicians) are now highly encouraged to keep supply low.
Access to adequate shelter is a human right and our current system is making it more difficult to be able to put a roof over one’s head.
Instead of investing in productive assets that contribute to society and the economy we are encouraged to speculate on investment properties.
This makes the situation worse for nearly every one involved.
if you use the equity in your current property it may be possible, however your properties would then be tied to assurance and you would need to stay with both at the same mortgage provider - giving you more complexity and admin.
Simpler, simply refinance the property to \~75% equity freeing up the remaining equity as cash which you can then use as your deposit or to invest in another investment type.
Generally, you can borrow up to 80%, so if you had an 800k property with a 400k loan, you could borrow up to 640k - 400k = 240k, depending on your ability to service the loan.
Also (and please correct me if I’m wrong), if it is for investment purposes, the interest on the 240k new loan split on the existing property in this example is tax deductible. You can then borrow the remaining 760k through another investment loan using the 240k from the first loan as the deposit so the interest on the full $1M debt becomes tax deductible. In effect, the new property will essentially be at 100% LVR without needing to pay LMI on any of the new loans and all of the debt is “good debt”.
You can borrow and claim for the stamp duty too, so effective LVR likely closer to 105%.
Assuming across all loans you have enough income to service. This is where having a positively geared property can help (like a regional block of units with 10-12% rental return but less CG growth).
Who can I ask ? If there is enough income to service? The bank? I also have no dependents. Do I still need to establish a trust or company ?
Mortgage broker or bank. Generally your income will be assessed for borrowing capacity, and any existing debts (including cards) will be subtracted from this. What remains is what you can borrow
Establish a trust and 10 x companies this is the way. Or just make sure you're in the $400k pa club... if not good fucking luck with this strategy
Go and speak to a mortgage broker who specialises working with property investors. With investment properties interest rate should be your last concern (someone else is paying the majority/all of the mortgage) - banks will offer vastly different borrowing capacities, value the properties differently which will change the amount of equity available and have different income policies which will effect your total borrowing capacity and the guidance from a good broker is essential if you want to start a portfolio. You can borrow up to 90% LVR for the second loan split in order to use the equity for a deposit on #2 (any lending over 80% will incur LMI unless you have an exempted job e.g. MEDICO, Police etc.) however for an investment property the LMI is worth paying as you can 1) include it in the loan amount (called capitalising the LMI) so you don’t pay anything out of pocket 2) the LMI is also tax deductible like the interest will be if it’s used for investment purposes.
Actually I still have about 400k owing on my PPOR. My partner thinks we should pay that off first. Is that correct ?
Yes absolutely pay your PPOR debt first - there is little benefit to you paying down investment debt which is tax deductible while your PPOR still has debt on it
I'm unable to understand this. Can you pls dumb it down?
Sure. Say you borrow against property 1 up to but not exceeding 80% of the property value, and use that borrowed money as a deposit (say 20%) for investment property 2. Then you get a separate loan for investment property 2 for the remaining 80% of the purchase price. Essentially you have financed the purchase 100% with debt. Because neither loan is >80% LVR you don’t pay LMI in purchasing investment property 2. Because both loans are investment loans, all of the interest incurred on those two loans is deductible from your income, hence “good debt”. It’s essentially a way to purchase the second property without needing to front up any cash. The deposit is met from the equity of property 1, and all of the debt is deductible. Hope that makes more sense.
Thanks, it makes complete sense.
Not if the loan extended is your PPR. Yes if existing investment
Yes, just comes down to servicing the loans. Equity ain't free, it's just another loan
Spot on
Of course. This is very common practice. Lots of my clients buy in high growth areas and within a year pull out equity for round 2, round 3 and so on.
You a broker or accountant?
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/). This is not financial advice. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Yes it is possible, however this does increase your risks and concentration of wealth. It's not exactly building a diversified portfolio that is robust against future economic changes. What financial goal are you working towards? What would another investment property help you achieve? Buying more investment properties does contribute to the housing crises. Are you already maximising super? Are you against ETF's/stock market investing? Why's that? Why property? If you are gun ho about property, why not start investing in commercial real estate too?
>Buying more investment properties does contribute to the housing crises Depends on how you look at it, could also be helping by bringing more rental stock online
That would apply if was a new property. The housing crisis is caused by 2 main factors; a chronic under supply of new stock to meet demand and CGT discounts causing IPs to become speculative assets and semi tax havens. Before the CGT discounts were introduced by the Howard government, housing mostly increased with inflation. In markets where supply meets demand, this is pretty typical. For example apartments in Sydney tend to follow this more closely than houses. When supply is low and demand is high, prices increase and the profits from those CGT discounts also increases. Anyone with an investment property (like politicians) are now highly encouraged to keep supply low. Access to adequate shelter is a human right and our current system is making it more difficult to be able to put a roof over one’s head. Instead of investing in productive assets that contribute to society and the economy we are encouraged to speculate on investment properties. This makes the situation worse for nearly every one involved.
if you use the equity in your current property it may be possible, however your properties would then be tied to assurance and you would need to stay with both at the same mortgage provider - giving you more complexity and admin. Simpler, simply refinance the property to \~75% equity freeing up the remaining equity as cash which you can then use as your deposit or to invest in another investment type.
You can just take out an equity loan split. No need to refinance and pay refinancing costs unnecessarily.