Hi Everyone,
I'm new to this site and have just finished reading Steve's book amoung many other points of info. I have been doing allot of research and get differing advice from every person I talk to.Here's my situation:My PPOR loan is interest only, $160k, with estimated value of $320K = equity of $160kMy first PI is interest only, $340k, Rented $400p/w, est value of $380k = equity of $40k.PI is negativly geared approx $140 per week after all expences paid for.Both loans are with the same bank and I got well screwed by the bank when I got the loan for the PI as I didn't know any better. Not going to let that happen again!The thing is I got to this point before reading and researching into investing and now realise that I am not structured right and can't expand much further because I am negatively gearred.I want to use the equity I have to purchase some more PI's that (ultimately) are CF+. I realise I have a great opportunity with so much equity to make use of, so I now want to ensure I make full use of the opportunity.I have organised a meeting with a Fin Adviser and an accountant but want to get as much advise as possible before stepping forward into investing land.I think so far I have narowed my next step to 2 options:1:Move out of PPOR and rent, then rent PPOR for approx $300 p/w, combine loans into a line of credit and use equity to buy new property.2: Move out of PPOR and rent, sell PPOR, pay down PI so that it's CF+ and use the remainder to purchase next PIDoes anyone have some advise to help me ensure my next step is a sound finacial one??CheersCameronAnyone? Please?
There are many different strategies you could use but the most important one is to ensure that you do not mix the 2 loans (between a personal and investment loan).
You could consider selling your PPOR to a Trust at current market value and then the total amount of the interest would become deductible which maybe a consideration if you intend to purchase a new PPOR.
Altenatively if you are considering renting the properties out and you yourself renting then you may better of to ensure the existing loans are restructured in a maner to maximise your deductions yet reduce your monthly outlay.
I do not think a Financial Adviser (although i am one myself) will have idea about loan structuring and may find his sole objective is for you to raise money to enable you to invest in a managed fund or similar operated through his office.
Richard Taylor | Australia's leading private lender
Thanks Richard!
Are you in South East Qld? & could I contact you to arrange a meeting for more specific advise?Thanks again.CameronHi Cameron
Just a couple of quick notes.
1) I don't know Richard and am not associated in any way except that I've seen his advice on the forums for several years now and I can tell you he knows his stuff and is usually willing to share.2) I'm not sure what you mean by "I got well screwed by the bank" but every deal can be renegotiated- getting a better deal may be as simple as asking-now you are a bit more knowledgeable.
3) Richard touched on it above but to add a bit- one of the pitfalls of using one bank is that they will try to cross collateralise ie ALL your property will be used as security for ALL your borrowings- much better from a flexibility point of view to keep your securities as well as your loans separate.
Cheers
Alan
PS well done on your efforts so far.
Thanks Battleships!
I didn't have the knowledge I have now and when I got the loan for the IP I requested to use equity in my PPOR for deposit on the IP. I was discouraged my the Bank Manager and Stupid me listened to the Bank Managers Advise, "you don't need to do that just borrow 100%", and I ended up having to pay mortgage insurance (which I bet the manager recieved a kick back from selling another policy!).
That ended up blowing out my costs and now the property is even more negatively geared.
I'm getting great rental return ($400p/w) and if I could get the loan down it would be a great income provider for the development of my future portfolio.
It's just ensuring that my next step gives me the platform to be able to expand.
Thanks
Hi Cameron yes you could have done a split on the Owner occupied (thus keeping the finances seperate for accounting purposes) and raised the deposit by way of increase to save on the mortgage insurance.
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