Do I use a cash deposit?

Do you have the spare cash? If so will you need it for other non investment expenses? If so, then you should probably borrow, if not why not use some of that cash.

On the other hand, you can always borrow as much as possible, then put the cash into an offset account – just in case you may need to access it later.

Terryw
Discover Home Loans
North Sydney
[email protected]

Tax wise the higher the interest amount paid the higher the amount of tax relief you get however remember that the tax relief is only as good as the rate of your tax liability so you will still be out of pocket by the difference between your expenses paid out and the tax refund you receive back.
If you do not need the cash for other purposes you are probably better to use some of it for the deposit – this will have the effect of giving you a higher positive cash flow or a less negative cash flow position.
You should probably sit down and work out your cash in hand position using both scenarios – if you do not know how to do this see an accountant or financial advisor(if you know a decent one) and have them work out these out for you.
The other consideration should be the purpose of your investment.Remember that the higher your income from salary or rents the higher your tax liability howver you are still going to end up with more in hand with a good positive cash flow property.
Personally I would use some of the cash for the deposit and get on with finding the second IP !!!

MIKALA

If you borrow 100% and put the cash into a offset account, this will give you maximum flexibility. Tax wise if may be the same as borrowing 80% anbd paying a cash deposit. But if you were to use the cash for something else, then the tax deductions would rise automatically (more interest would be charged if money withdraw from savings account).

If you pay a cash deposit you would not have this flexibilty.

Terryw
Discover Home Loans
North Sydney
[email protected]