How To Use Equity As Tax Free Money To Build A Real Estate Portfolio
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- Опубликовано: 15 окт 2024
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passive income from property
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interest rate changes
cashflow positive properties Australia
The challenge is I cannot borrow more...not sure what can be done except selling one to release my borrowing capacity
So I have $65k usable equity but it will cost me $10k for LMI to borrow it as it would take my LVR from 78% up to 90%
Do we need to pay LMI again if we pull equity when the LVR is back to 90% on a higher amount?
Hi Ravi, borrowing capacity? How do you get that second property if your borrowing capacity is maxed out from your first IP. Even if my IP gets me 100k equity in a year or 2. My borrowing capacity is maxed out at 450k.
You dont, unless perhaps you get a positive cashflow property ( extremely rare ) or have the income / cashflow to acquire a second proeprty. Otherwise wait a year or two.
Your borrowing capacity will increase if your cashflow increases. You can do that in a few ways. The main ones are: increasing your income or increasing the rent in your IP.
It's basically impossible atm in Australia to find something positive cashflow, unless ur down payment is huge and u can afford to buy something almost outright
Wow, so based on your formula, my usable equity is $340,000. That's much better than I could have imagined.
Brokers dont apply to multiple banks . That would hurt your credit file. The assessment is an automatic valuation although prior to settlement a valuer will still come to set valuation. You can do this with or without a broker . Brokers are good advisors though and can be creative
But when borrowing against your equity you can't borrowing the full amount, so it wouldn't be 45k.
There is a formula but not the one you showed.
And like others mention, try for 80%, however, for a fraction more at 90% and the fact you can just add LMI to the loan equates to a lesser deposit which make it more achievable for most.
Everyone is optimistic when leveraging their equities on their home loans to buy more properties until the property bubble collapses and the banks started to ask the lenders to topup the shortfall (it has happened in many developed western countries like Australia) or they loose their jobs and couldn’t repay their increased loans. Your video is great but it needed to be put into perspective, e.g., discussion of potential risks of leveraging loans and if the lenders are able to still fund their purchases in such scenarios.
It's not really tax free, becuase you are paying compound interest on your home loan redraw. Effectively a low rate tax. Hower as was alluded to, if your capital growth on a new property exceeds the interest cost on the equity drawdown, it might be justifiable if you can manage the cashflow effects.
It's not the first time this guy is trying to sell the idea that equity is a 'tax free' money.
It is tax free…. Interest is interest and tax is tax
@@Dontargueyouknowitstrue And the reason it's subject to interest (instead of tax) is because it's debt, instead of money that you've earned like salary. Only an intellectually dishonest or ignorant person would suggest that the 'equity' in your property as 'tax-free' money.
@@uberboiz soooo it isn’t tax…
@@Dontargueyouknowitstrue soo it's obvious you missed the point...
I would change the formula to 80% to avoid paying LMI again
Thanks for the update and keep doing what you do. My journey in the current market has taught me a lot of lessons, at the top of that list is that it never pays to live above one's means. I have managed to grow a nest egg of around $600k to a decent 7 figures in the space of a few months. Sad to say but a lot of us have poor money management skills. My 2 cents -get an advisor to keep you accountable and aid you make better decisions, Linda Wilburn has been helping me a lot, all through my journey. I find it better to pay a little bit more for peace of mind than worry about money or market trends and still get >burned.
Linda Wilburn program is widely available online.
Productivity is never accidental; it is always the result of careful planning, dedication, and consistency.
The same high-yield potential exists in both bullish and bearish situations; what matters is how information and technique are used. Not neglecting professional advice.
In a field as rapidly evolving as cryptocurrency, staying updated is crucial. Linda’s continual research and adaptation to the latest market changes have been instrumental in helping me make informed decisions.
2. Just recently purchased a property as owner occupier. Will be watching your videos more religiously now so once I have paid a decent amount off, I can strategise my next move
Can I make a suggestion.
If you know you are going to make a next move then planning for that now is crucial.
Instead of paying off your loan quicker you could build up an offset account and keep the cash in your control instead of the banks. That way you don't have to try claw it back later..
If you want to be more aggressive with this you could go interest only and park what would have been the principal component in your offset to build that account fast.
This will not increase the interest you incur as it is 'effectively' the same as principle and interest.
Apart from maybe a slightly higher rate.
Good luck
1
Man these property investors got to go... Going to have to send a letter or email. As a first home owner i can only get 450k on my 114k income salary.
Every time i go for an apartment from like 339k or 420k. Some old couples / Asians or butt sniff investors are there to price me out or just take my 1 bedroom apartments i like. Why can't they go for the bigger ones like 700k. . Why our first homes these leeches. Hate them with passion and real estate agents just go with them over the first home buyer.
Because it is not the agents who sell properties but their vendors. As a seller, I would not care what you are but only if you are offering higher than others.
@@claudlin9039 Yes we have a term for that. It's called Greed.
One solution (amongst many) is to marry an Asian, someone old, move out of Australia, save more, get a better paying job or work harder. 😊 It’s easy to blame someone else for problems that are not caused by your situation. Cheers.
For those who did not understood:
Market Value of the property: $500,000
Deposit: 10% = 0.1 * $500,000 = $50,000
Loan: 90% = 0.9 * $500,000 = $450,000
New Market Value of the property: $550,000
Assumption: You can get a max loan of 90%.
Loan: 0.9 * $550,000 = $495,000 (Equity)
Previous loan: $450,000
Now you can offset the previous loan using the current equity which is $495,000
Usable Equity: $495,000 - $450,000 = $45,000
Correct me if i'm wrong.
Cheers !!
just remember you will be losing money on interest for the 500k at say 6.5% which will be $32,500 a year so factor that in with the LMI + buyers agent fee.
@@yeeeet4756 Agreed. Lots of things haven't been factored in.
Ravi mixed up the values and at 4:32, he said 500k * 90% = $495k... he meant 550k though 🙂