Financial Advice needed. Where to start in IP

If you are planning to purchase a new home and you can afford to hold onto the existing house, hold onto it. There is no point paying the selling costs and purchase costs of a new IP.
If you currently live in an area that will rent ok, then hang onto it.
If you are going to go down this path and are currently paying Principal and Interest on your mortgage, I’d consider to going to Interest only. Maybe even upstamp that mortgage to 80% so that you can get access to the extra equity (approx 80k) for future investments.
Basically, stop pumping money into your current mortgage if it is going to become an investment mortgage and start putting the extra aside for the deposit and costs for your new home, or knock off the car loan.

After you get settled in the new home, maybe even before, use part of the 80k equity to purchase another IP. With a 130k income don’t be afraid to go for capital gains and negatively gear, as even after next year tax bracket changes you will still be in the top margin.

I’m no adviser, just a guy in IT on a bit less than yourself, a wife on the same, with a house that is half owned by the bank and a couple of IP’s. We just got started on the properties before the kids.

Good Luck

Mal

Getting out of your comfort zone, can help you become comfortable

Hi dkram and welcome.

Your request for someone to help you make decisions is a potentially dangerous one in that you will get varying views, advice, opinions and you have no way of knowing the expertise of the people providing that advice. Also, if you act on that advice wihout understanding you are handing control of your financial security to someone else whom you may not even know. Admittedly there are some very experienced investors on this forum and some excellent contributors, but until you know who they are and get to know them personally you should be very wary.

What may be helpful is to proceed with your determination to be successful and be prepared to persist and act. Education is critical, a mentor is extremely valuable and a financial plan forms part of your strategy.

The best place to get financial help is through the services of a successful investor who you trust and who understands your specific situation (need not necessarily be accountant or financial advisor). How much you should invest into IP will be determined by how many properties you wish to purchase and in what time-frame (your plan for your property investment portfolio). That to a large extent will be determined by whether the IP’s are CF+ or negatively geared and hence your ability to service those loans. Also, your risk tolerance and exposure to other investments (eg shares) will influence the amount of money you will invest in property.

It’s great to ask questions and I comend you for that but the place to start is with education, which comes from many sources including books as well as experience. Then you can make decisions yourself without having to rely on opinions of faceless, unknown people.

Hope that this is of some help.

Cheers

pr

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Dear Dkram,

1. What are your own property investing goals?

2. How do you want to create wealth through property investing? Via IPs or PPOR route?

3. What are your own present thoughts at this point in time?

4. Looking forward to hearing from you further please.

5. Thank you.

regards,
Kenneth KOH

hi roy
how did you work out he was in vic I asked the question.

here to help

Hi again,

Great goals with which to start out. Many people indicate a desire for financial freedom but that can be very nebulous and mean different things to different people. Do you have a clear idea of what that means to you and what sort of PASSIVE annual income you would require to achieve that? It is important to be specific in order to set the goal and work towards it, and also to be clear in the understanding that true financial freedom involves passive income rather than active income.

You have stated that you would like a couple of residential IPs over the next several years, which is fine but will that be sufficient to provide you with financial independence?

Finally, although it makes sense to legally minimise tax obligations the wise gurus say that the purpose of investing is to make money rather than to make losses, and so investment decisions based purely on tax considerations are fraught with danger. Minimising a loss through tax dedeuctions is still a loss. If you make a real gain after claiming expenses and getting tax benefits then that’s fine but many of the deductions are based on depreciation which is simply effectively a deferred tax. Some properties are marketed to investors on the basis of tax deductions but close scrutiny reveals the flaws.

Financial independence utlimately requires cashflow on a passive income basis and so properties that produce cashflow meet that requirement while those that don’t move you further away from your goal. Capital gains are great but unpredictable. There are still CF+ investments to be made but at any given time they may involve residential properties or commercial properties or shares.

Best of luck in your endeavours.

pr