Hi all,
I was wondering if the experts in the Forum could give me a second opinion about my situation.
I fully own my house worth about $350,000.-, no debts at all and want to start investing allthough I don’t know where to start.
I earn about $60,000.-/year and have $15,000.- cash in the Bank. I also have Supers worth about $80,000.- alltogether.1. Could somebody tell me how much approx. I
could borrow?
2. For Tax purposes I intend to borrow 100%, is
this a wise thing to do?
3. It’s not easy to find an IP based on the 11
sec. rule,
what strategy would be the best in my case?Thanks in advance for the feedbacks!
Prop16,
Based on this information I can see you comfortable borrowing up to $350 000.
Wise to borrow 100%. Take a 20% deposit from your home and an 80% against the new property. The 100% loan – even more if you borrow for the purchase costs too – will be fully deductable.
However there is no real problem with you choosing to use your savings as well.
I would only 100% recommend the 100% option if there was a PPOR debt to be reduced as well.
I just bought a pos cashflow property for $315 000. No real reason why they have to be cheapies!
All the best,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for your quick reply and congratulations with your new IP Simon!
What I don’t understand is the following: “I would only 100% recommend the 100% option if there was a PPOR debt to be reduced as well”.
Do you mind to explain this a litlle bit more?
(I’ve paid off my PPOR).
Could the intended IP also be used as security and hence I could borrow more?With 350k in you PPOR you could borrow 80% to invest giving you 280K for deposits and fees.
So if you find a property for 100k you lend 80% of it 80k get the 20% deposit from the PPOR investment loan of 20k and the fees approax 5k.
So you have 80k on the invesment property and 25k on the PPOR investment loan. 105K loan all tax deductable.
In this example you could get 11 deposits of 25K total 275K.
11 properties at 100k each total of 1.1 million.
11 investment loans at 80k each total 880k loans.
Total loans 1.155 million.So you have 12 properties in all.
11 x 100k =1.1 million
1 x 350k = 350k
TOTAL = 1.45 MillionLoans of 1.155 million this is almosr a LVR 80%.
If you can get positive geared property you will be WAY ahead.
And yes it very hard to find an 11 sec property but it is great when you find one.
ChrisAll post are IMHO.
What I don’t understand is the following: “I would only 100% recommend the 100% option if there was a PPOR debt to be reduced as well”.
Do you mind to explain this a litlle bit more?No problems. PPOR debt isn’t tax effective as you know. So therefore if a client has a PPOR debt (which you don’t) then I usually recommend they borrow as much as 105% (inc buying costs) for the new property and pay any deposit and ongoing principal payments into the PPOR debt. I prefer to see the PPOR debt reduced to $0 before anything gets paid against the IP debt.
There are some additional minor strategies to adopt should this PPOR be only a step towards the dream home when it will become an IP as well. In this case an offset account will preserve the tax deductability of that debt when it becomes an IP and the accrued savings can be put into the new PPOR.
Confused?
Have a great Sunday afternoon!
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thank you so much Chris!
You’ve opened my eyes to possibilities I never had thought before. You also have made Investing in Properties so much easier to understand than the books I’ve read (at least for me).
I hope my example also would be a great help for other New Investors.
Again, much appreciated!Hi Simon,
indeed, very confused! I’ve to digest what you’ve said over lunch I think.
I become an expert at the end of the day if it’s going on like this!
Then, maybe I would be able to help other people too one day.
Thanks Gents! A great afternoon to you all too!
(gtg now)
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