G'day all…
My partner and I are both teachers in an Aboriginal Community in the NT and 6 months ago bought our first house in Tasmania. While living in the NT the government pay our housing, electricity, and water bills so the only expenses we have during the year are food, entertainment (minimal) and flights in and out. Our first house cost us $355,000 and we have leased that out for $350 a week since the settlement date and it has just recently been revalued at $375 thousand…
We are looking at buying another property around the $400 thousand range and were hoping to hear some thoughts from some experienced investors. Our salaries are approx $140,000 before tax combined, we have no kids, late 20's and planning to stay in the NT under these conditions for the next 4-5 years. Currently we are easily affording to put $4000 a month into our first mortgage. It would be great to hear some opinions from you guys… cheers
tuggerwaugh
Hi Tugger
Becareful about paying down the existing loan. In a few years you may wish you hadn't if you decide to buy an main residence. The money will be trapped in the old loan and, although it could probably be redrawn, withdrawing it will create tax problems. A far better way to do it would be to put the money in a 100% offset account linked to the loan.
All loans should also be IO to reduce expenses and help you growth faster.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
G'day Terryw..
Thanks for the advice…. what does the IO you refer to stand for? Is it better over a 5 year period to keep the loan repayments to a minimum and put the extra money into a different account? Do you know any good books or websites that can give me the low-down on a few of the tricks of the trade? thanks again terry.
Tugger
Hi Tugger
IO = Interest only. Some lenders will offer the loan over a given period of time others for the life of the loan.
Regretfully you wont read about tricks of the trade in a book or website.
Simple solution would be to contact someone like Terry and get him to structure your loans for you and learn as you go.
If you want to learn something you need to find a good teacher.
Richard Taylor | Australia's leading private lender
Good idea! You can invest on another home…No Problem. But before investing in other property try to clear the existing loan completely,so that it cannot be a burden for you,then apply loan for other property.
I think the balance is somewhere in between. We have 7 IP's (built up overthe last 11 years), and most of them are P+I (principal and interest) loans. By paying out fully each property and then buying another paying it off and so on means that as the property values go up everywhere you have a bigger mortgage each time you buy in. if you buy a property every say 2-4 years, the rents come up and make it easier to accumulate more property. you may owe alot of money but you will also have a heap of equity. worst case property values fall 10-15% and you are forced to sell up you will/may come out with some money in your pocket. If you buy IO and are forced to sell up you have no equity more properties bigger debt and nothing to show for your effort.
it seems to take about 7 years for our property to become cashflow neutral.
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