Just interested to see what you would do if you were in my position.
Im into building and developing and currently have $120,000 in cash available to spend/invest/develop. I live in a townhouse worth approx $425,000 and still owe $180,000 (just under $1500 a month repayments)on that and curretly have no other investments or debts.
There are plenty of options:
-buy land for development site
-buy investment property/s
-put money towards home loan
-leave in bank
-do a mixture of thesewhat do you guys think? how would you use this money effectively for the best results?
You should definately pay all of the cash into your home loan, as this is non-deductable debt. You can then loan against the equity in your home for deposits if necessary, make sure this is a seperate loan and it should be 100% tax deductable.
Speak to a mortgage broker about how to best structure this.
Your savings should be offsetting your home loan preferably in an offset account while you decide.
You have plenty of equity available to utilise for investing when you find something suitable while still leaving your non-deductible interest expense at a very low level until you decide to get rid of it.
Robert Bou-Hamdan
Mortgage AdviserWell as I understand it you have loads of options. Another might be to sell your home, either downgrade or rent and use that extra cash to invest in a bigger way. This is the path I chose with a view to buying another home later with CASH once I’ve achieved other investment goals including divesting myself of my JOB. One of the problems with equity in your own home as I see it is that you can only then borrow 80% without penalty. But if you have the cash you can use the whole lot. It helps if you have a business that can rent most of the house you live in and that helps to pay most of the rent. But hey I’m no investment advisor so this is just my own opinion. You need to do what best fits your needs
Good luckMIT | Owen Real Estate
Email MeHey MIT,
Why do you prefer selling your home to buy another when you can own both? Are you content with one property?
Robert Bou-Hamdan
Mortgage AdviserHi MA
Well part of it was to do with the need to sell the orginal one as part of a divorce settlement. I also have an investment unit in Melb, which too is on the market as part of the divorce thing. I want to be able to invest in my own name/Unit trust and also have a parcel of cash with which to invest. The melb one currently has the effect of reducing my borrowing capacity from $600k to just over $300k.
To answer your ? re number of properties, it is my intention to have many not just one, this for me personally is a consolidation period as much as anything else.
Sue
MIT | Owen Real Estate
Email MeI wouldn`t pay the house loan down but still it`s not a bad option.
The power of cash for compounding is far greater than equity, having cash the ball is in your court, they will throw money at you.
Depending what your own strengths are I would probably buy a reno fix up and sell quickly but if you are experienced with developments go that way but hang on to the cash as a buffer, and use all the banks money, you can pay down the house loan anytime you like so there is no rush, having cash like that in the bank will always keep you ahead of the game.[cigar]
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