Two ways to structure your first investment loan

0:00Let's talk about two structures when you're buying your first investment property. You've taken a little scenario here. I'll explain you very quickly. The property here, the first one that you own, that you live in is valued at $1 million.

0:13The loan outstanding against that is $250,000. So plenty of equity available there. Let's assume you're buying a new investment property. The purchase price is $800,000.

0:25Stamp duty and other costs, approximately 35,000. You need a total of $835,000. Now the bank will loan you all of that as a single loan because you have equity in this property available.

0:39This structure is simple. You've only got two loans. One is your owner-occupier, $250,000. The next loan is $835,000, investment loan, simple, accountant happy.

0:51You've got one repayment to make. The only negative, so to say, is the properties are cross-securitized with each other, which some clients have problems with. But a thing to note, in a few years' time, this property here goes up in value.

1:09Someday it will reach that value there. Once it is there, the loan becomes 80% against the value. You can slip in a discharge form where you can uncross the securities and then these will become independent on their own.

1:24That's structure number one. A tip when you're buying an investment property, make sure every cent you spend is a loan money. That's why we are taking an example, 800 purchase price, 35,000 total loan, $835,000. There should not be any savings put into this.

1:41The loan should be maximum because it's all negatively geared. Structure number two, slightly different. Still same values, same owner-occupier, same loan amount, same purchase price. Everything remains the same except instead of two loans, we'll have three loans.

1:57I'll explain quickly how. This loan remains as is, which is owner-occupier. The other property, because you don't want to cross it anymore, that's separate. The bank is only going to loan you 80% of the purchase price.

2:10So loan number two, $640,000 investment loan. Loan number three, you need 20% deposit. You need money for stamp duty. It has to come from somewhere.

2:22It is coming from security number one, which is the owner-occupier. A total loan of $195,000, 20% to pay a deposit, $35,000 to pay all the stamp duty and other cost. Total loan, $195,000 against this security.

2:41However, you can still tell the accountant, Mr. accountant, ATO, that loan and this loan. Those loans are investment loans, hence you're negative gear on both those loans. A thing to note, the total loan amount does not change.

2:57It still is $1,045,000 regardless of structure number one or structure number two. Any questions, give me a call. DM me.