Sounds well and good, but make sure you have the money to do it. I've seen many of these video, one thing they always forget to mention is that taking out your equity to use as deposit means you have to take out another loan. And that loan is attached to the property you took the equity from, so your repayments are going to go up by a lot and if you can't make repayment, you could lose your property, so make sure you have the necessary funds to service all the mortgages.
Yes, also, they forget to mention that as you use your equity to burrow more in order to buy another property you could be building a house of cards. If for example you loose your income due to employer facing problems or due to injury or illness, then you might have to let go some or all these properties. you are now going to live cashflow poor as you are servicing all these debts for multiple properties. Also, for this approach to work, they will tell you to buy cashflow positive properties like Appartments in order to keep going with more properties. Understand the negatives before you take this route.
i have personally found it best to borrow at 88% LVR as it offers the best balance between minimising what you need to put into the deal and what LMI you need to pay
Great informative vid Ravi, could you please make your next video about asset debt reduction strategies and how to pay down these properties. Do the loans stay IO or do you transition each assets slowing into PI loans? How does this play out, cheers. Keep up the great work.
The information was good. But i need to add , the expenses like strata levy, water ,council rate and vacancy, at the end thia over cost cause a lot pain , but the idea that you explain is good thanks for info😊
Thanks for vid, I learnt a lot. This strategy works if property prices keep rising forever. But we know that Australia property bubble is one big bubble & all bubbles burst at some point. Question is when? We might be close to the bubble bursting
Hi Ravi, I understand the whole borrowing against equity, I’ve been speaking with my broker and he says this doesn’t change my affordability and what I can borrow even tho I have a large amount of equity
The lender wouldn't lend extra money by simply looking at your equity, regardless how large it is - they would need to consider your income too to assess your ability to service the debt.
How do you deal with Interest only repayments actually costing more than principal and interest at the moment? Also I don't get how you are "making" that money when you still have to make monthly repayments, Are we saying that the monthly repayments are less than the rent income and all the expenses associated with runnning a rental?
Where is the LMI cost in both first and second property purchases? And who said property prices will always go up? What about borrowing capacity? Not every person can service a million $ debt on I/O repayments.
This is well and good until banks decline you as you cannot service the loan. Majority of ppl earn less than 100k. If you already debt such as HECs or home loan then it won't work out.
Very interesting. Works in a bull market, but if the property market turns bear (ie. Recession/depression), this strategy could cause a lot of pain. Remember, unlike US, in Aus residual property debt stays against your name if your property gets foreclosed by the banks. If there is a major downturn in the property market, you could face a very real danger of losing all your properties and still owing debt. And if you have done your due diligence, you will know that this is currently a very real possibility; Too many people and banks overleveraged.
You haven't said anything about the new loan that is created by taking out the equity. In principle, you have 2 loans, 1 for the equity part and the other part for the 80% or 90% of the property value.
I didn't know this. I have asked buyers agents about using the equity but I just don't understand how you can get the equity to use as a deposit. I know you can do it, but I don't understand HOW and everyone says "you just take it out" TAKE IT OUT OF WHAT???"
@@Rachel-lr9io You've done the right thing for being skeptical and questioning the buyers agents. "Taking out equity" is such a misleading expression - in reality, it involves taking out a loan (which is secured against your equity), instead of the equity itself.
I’m curious on how I would use the equity of the first property to buy the second property, without selling and if I was renting the first property out how would I pay off mortgage if I would be paying a similar amount of rent myself to have a roof over my head plus, also how would variable and fixed interest rates affect these numbers?
Hey Ravi, thanks for breaking this down for us here in AUS, there aren’t many resources on this that I’ve found, other than this other channel called Hunter Galloway I think. This info will be useful in the future once I’ve saved enough for the first home
Hi Ravi. Great vid as usual. Question for you: I get mixed feedback on purchasing a land and house package (new build off a plan) as an investment property. What are your thoughts? Cheers.
Why do i need to save a deposit on the 2nd or 3rd property when i can use the equity growth on the 1st one to cover the funds i need by cross collateralising. Can do this repeated without out laying a cent from MY pocket.
Borrowing power also decreases as you have more mortages and it is not possible to borrow 90% from banks, unless you make so much money. But if you do make so much money, no reason to use this strategy...
Yes, but if you are smart you have more income streams ro cover the payments, and that coupled with capital growth equals strong financial position down the road
@@Pvtepingpong ideally yes. But, isn't this video focused on poeple who do not have more income streams? Video explains that we need to use equity to buy another property because they have not enough income stream to increase the borrowing cap
I guess it assumes that u rent it out positively geared. Its all "best case scenario ". If you are average earner with annual income of 75 -80K . Bank wont even give you a loan
Hi Ravi how can we borrow more money for the second property since we already have mortgage on first property? Is it because first property already has tenants? We already get rental income so now we can borrow more?
You borrow against equity you have established in the first property. You get this equity by paying down the principle or through capital gain if the value of property 1 has risen, or both, ideally.
Started binging hour videos from yesterday. Your video game has def improved since the whiteboard days! V informative videos! I was saving for my first home, now I am convinced I want to go for an investment property first. I have saved up around 45K so far and thinking of borrowing 30k from fnf to get to thet 70k you mentioned. Do you suppose that’s a bad idea and I should wait until I can make that amount in the next 6 months? Also I just came to Aus last September and have a job with 1 year contract, as is common in academia. I hope this does not disqualify me from getting a loan
Probably your content is really great. But its hard to process. Just imagine I remove all commas and full-stops from a paragraph and give it to you to read and understand. This is what I feel after listening to what you are speaking. There is NO BREAK. Please keep a BREAK in 2 statements so others can understand what you are talking and can process it. Sad I am writing such a review for a youtuber. But I have still liked the video .. because of the quality of the content. Good luck !
HOW CAN I HELP?
🇦🇺 My Buyer's Agency 👉 www.searchpropertyau.com.au
🇦🇺 Email me 👉 ravi@searchpropertyau.com.au
What are your fees? Is it a percentage? You mentioned 12,000 for a 450k is that right?
Sounds well and good, but make sure you have the money to do it. I've seen many of these video, one thing they always forget to mention is that taking out your equity to use as deposit means you have to take out another loan. And that loan is attached to the property you took the equity from, so your repayments are going to go up by a lot and if you can't make repayment, you could lose your property, so make sure you have the necessary funds to service all the mortgages.
So true. Nobody ever mentions that part…
Yes, also, they forget to mention that as you use your equity to burrow more in order to buy another property you could be building a house of cards. If for example you loose your income due to employer facing problems or due to injury or illness, then you might have to let go some or all these properties.
you are now going to live cashflow poor as you are servicing all these debts for multiple properties.
Also, for this approach to work, they will tell you to buy cashflow positive properties like Appartments in order to keep going with more properties.
Understand the negatives before you take this route.
good point
i have personally found it best to borrow at 88% LVR as it offers the best balance between minimising what you need to put into the deal and what LMI you need to pay
Great informative vid Ravi, could you please make your next video about asset debt reduction strategies and how to pay down these properties. Do the loans stay IO or do you transition each assets slowing into PI loans? How does this play out, cheers. Keep up the great work.
The information was good. But i need to add , the expenses like strata levy, water ,council rate and vacancy, at the end thia over cost cause a lot pain , but the idea that you explain is good thanks for info😊
Don't forget maintenance and repairs
and the CGT at the highest marginal rate upon the sale 😂. It's a killer even with the 50% rule!
You can add a tenant not paying the rent and you can’t evict them for long time because of the law
Thanks for vid, I learnt a lot. This strategy works if property prices keep rising forever. But we know that Australia property bubble is one big bubble & all bubbles burst at some point. Question is when? We might be close to the bubble bursting
Hell yeh! Thanks so much for doing the figures on the amount needed incl BA! Was aiming for 80K but $75k and getting a 450k house! Winning
The title is a bit misleading as I thought it was no money down on the first property rather than the 3rd or 4th property
Hi Ravi,
I understand the whole borrowing against equity, I’ve been speaking with my broker and he says this doesn’t change my affordability and what I can borrow even tho I have a large amount of equity
The lender wouldn't lend extra money by simply looking at your equity, regardless how large it is - they would need to consider your income too to assess your ability to service the debt.
Thanks but what about the serviceability of these loans against your name? Wouldn't the bank say no you cant service the loans?
Which bank allow to redraw equity up to 90% ? There is no LMI calculation in your working ? Am I missing something
I'm also wondering the same issue...
I just love these stuff !! Bring on more nerdy stuff !! lol ! Thanks mate for sharing what you are best at !
Doesn't work now unfortunately - serviceability is limited with 6.5% interest rate
So what is a better way than real estate to invest money now?
Surely serviceability will become an issue before you can expand beyond 2 or 3 properties?
How do you deal with Interest only repayments actually costing more than principal and interest at the moment?
Also I don't get how you are "making" that money when you still have to make monthly repayments,
Are we saying that the monthly repayments are less than the rent income and all the expenses associated with runnning a rental?
Where is the LMI cost in both first and second property purchases? And who said property prices will always go up? What about borrowing capacity? Not every person can service a million $ debt on I/O repayments.
This is well and good until banks decline you as you cannot service the loan. Majority of ppl earn less than 100k. If you already debt such as HECs or home loan then it won't work out.
I was thinking same. I've got about 450k in equity but the bank wont look at me because I'm a single parent on a low income
Average house price in Sydney is $1.3mil where did you get 450k? And also you still have to manage do the partial repayment..
Very interesting. Works in a bull market, but if the property market turns bear (ie. Recession/depression), this strategy could cause a lot of pain.
Remember, unlike US, in Aus residual property debt stays against your name if your property gets foreclosed by the banks. If there is a major downturn in the property market, you could face a very real danger of losing all your properties and still owing debt.
And if you have done your due diligence, you will know that this is currently a very real possibility; Too many people and banks overleveraged.
Buyers Agency cost is 13k? What are these fees based on? Where can we get a break down on these fees so we are able to shop around.
Gold Coast agency wanted 25-35k from us to buy interstate during Covid…. No way
Increased interest, decreased cash flow, family plan😢
I couldn’t wait to have a conversation with you and your team Ravi, definitely when I become able I will reach out you guys.
Looking forward to it 🙏
This is interesting! And great information
You haven't said anything about the new loan that is created by taking out the equity. In principle, you have 2 loans, 1 for the equity part and the other part for the 80% or 90% of the property value.
I didn't know this. I have asked buyers agents about using the equity but I just don't understand how you can get the equity to use as a deposit. I know you can do it, but I don't understand HOW and everyone says "you just take it out" TAKE IT OUT OF WHAT???"
@@Rachel-lr9io You've done the right thing for being skeptical and questioning the buyers agents. "Taking out equity" is such a misleading expression - in reality, it involves taking out a loan (which is secured against your equity), instead of the equity itself.
And it needs to be useable equity
RAVI, Please comment on the new land tax 😢.
I’m curious on how I would use the equity of the first property to buy the second property, without selling and if I was renting the first property out how would I pay off mortgage if I would be paying a similar amount of rent myself to have a roof over my head plus, also how would variable and fixed interest rates affect these numbers?
Thank you Ravi, love the content!
great video mate
I am from india
what about long term capital gain tax once we dicide to sell the proptery ?
Please discuss cash flow.
Ravi does this work with low rental yield and not so booming area?
Hey Ravi, thanks for breaking this down for us here in AUS, there aren’t many resources on this that I’ve found, other than this other channel called Hunter Galloway I think. This info will be useful in the future once I’ve saved enough for the first home
nice video
Hi Ravi. Great vid as usual. Question for you: I get mixed feedback on purchasing a land and house package (new build off a plan) as an investment property. What are your thoughts?
Cheers.
Why do i need to save a deposit on the 2nd or 3rd property when i can use the equity growth on the 1st one to cover the funds i need by cross collateralising. Can do this repeated without out laying a cent from MY pocket.
Which bank is granting interest only loans on a 90% LVR at the moment?
Edit: 10% deposit
Will this work with interest rates at 6.5%
Can this be done through trusts? Or does it all have to be in the individuals name?
would you not have more and more mortgages present as you buy more properties?
Borrowing power also decreases as you have more mortages and it is not possible to borrow 90% from banks, unless you make so much money. But if you do make so much money, no reason to use this strategy...
Yes, but if you are smart you have more income streams ro cover the payments, and that coupled with capital growth equals strong financial position down the road
@@Pvtepingpong That sounds like a best case scenario, which unfortunately would unlikely to play out in a rising interest rate environment.
@@Pvtepingpong ideally yes. But, isn't this video focused on poeple who do not have more income streams? Video explains that we need to use equity to buy another property because they have not enough income stream to increase the borrowing cap
I guess it assumes that u rent it out positively geared. Its all "best case scenario ". If you are average earner with annual income of 75 -80K . Bank wont even give you a loan
No, money down!
Hi Ravi how can we borrow more money for the second property since we already have mortgage on first property? Is it because first property already has tenants? We already get rental income so now we can borrow more?
You borrow against equity you have established in the first property. You get this equity by paying down the principle or through capital gain if the value of property 1 has risen, or both, ideally.
I had a bad experience with a very reputable buyers agent. I suggest people approach them with a level of skepticism
100% agreed with this. Some really silly things going on out there. Be careful out there and conduct proper due diligence :)
$450k is like a studio less than 50m2 which banks wouldn't lend any $. This game doesn't work in Sydney in the first place unfortunately.
Even in PERTH under 15km from CBD $450k won't get you a dump.
Started binging hour videos from yesterday. Your video game has def improved since the whiteboard days!
V informative videos! I was saving for my first home, now I am convinced I want to go for an investment property first.
I have saved up around 45K so far and thinking of borrowing 30k from fnf to get to thet 70k you mentioned. Do you suppose that’s a bad idea and I should wait until I can make that amount in the next 6 months?
Also I just came to Aus last September and have a job with 1 year contract, as is common in academia. I hope this does not disqualify me from getting a loan
What kind of house can I get with 450k with capital gain in Australia now?
Probably your content is really great. But its hard to process. Just imagine I remove all commas and full-stops from a paragraph and give it to you to read and understand. This is what I feel after listening to what you are speaking. There is NO BREAK. Please keep a BREAK in 2 statements so others can understand what you are talking and can process it. Sad I am writing such a review for a youtuber.
But I have still liked the video .. because of the quality of the content. Good luck !
I want to buy a property worth $800,000 and I make $75,000 per year. Tell me how to do it, go!?! Fine, I have 20%.
I dont get it, you will have 2 mortgages if you use equity.
Thanks for the video Ravi! Quick question, what happens to LMI? Are banks lending 90% these days?
How do you eliminate mli on 10% or is there a new government incentives scheme ?
Lil bro is speed running the stripper playbook from Big short 🤦♂
I made some money through amzdoge platform and bought a house