Hi Fellow Investors,
Im relatively new to this site, in fact this is my first post. Firstly i would like to say how great this site is, I dont know many people that know much about property investing so I am learning a great deal from the prople on this site. Keep it up guys.I have a question that I would love to get some advice on.
My wife and I have bought a PPOR 1.5 years ago before all the increases in interest rates, we paid 20% amount of the cost of the house upfront to avoid morgage insurance, and as a result reduce our morgage repayments. We now have around 20K saved and are keen to buy an IP. We have recently started looking around for an IP.If we buy another property, our repayments will be around 2500/month for it whilst our repayments for our PPOR atm is about 1700/month, if we were to compare both properties in terms of rental income potential, they would both provide the same rent, around $310/wk. The other difference between the properties is that our PPOR is only 10years old where as the other property would be much older and therefore we cannot claim depreciation on it. My question is which property would we be better off renting out?
How can I determine how our current PPOR will be geared (+ve or -ve) if we were to rent it out, it is under my name and I make around 55K a year (dont know if that helps).
Im ready to soak up any advice as this is all new to us
,Thanks,
Hi I S
Firstly welcome to the forum and I hope you enjoy your time with us.
My 10 year old loves spongebob so i appreciate your Avatar.Whilst i dont intend to comment on either of the properties in regards to the securities themselves as only you know which one is more suited for you and the family I can certainly comment on the structure and finance bits.
Ok first things first.
If you have saved $20K I would not use this as deposit for your IP as the $20K cannot then be borrowed and the interest claimed as a deduction. You would be better off reducing your current loan by $20K and then reborrowing the $20K as part of your investment loan.
In saying this try and structure the loan so that the 2 loans are separate and the securities not cross collateralised.
Dont fear LMI too much as remember it is a cost of borrowing and when used in regards to an investment loan the premium is tax deductible alongside the other loan costs.
Obviously the newer the property the higher the original construction cost so therefore the higher the amount you can claim as a deduction however dont merely buy an IP on Tax deductions alone. On your current income your marginal Tax rate is only 30% so therefore will not make a real big difference.
Bottom line with recent increases in interest rates your serviceability will fall so make sure you dont overcommit yourself.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for the response, you have a good point regarding not putting the 20K as a deposit. I am however struggling to determine if the PPOR atm would be +ve or -vely geared if I was to rent it out.
Any help???Cheers,
Well in respect of a cash outlay it would be – geared.
$1700 / month (which i assume is P & I so IO would be less) repayment V $310 / week or $1342 / month Gross (net of Managing Agents costs would be slightly less).
However without knowing the amount you can claim from a QS report in respect of Depreciation, BWO & your initial loan costs etc it is difficult to answer precisely.
Going to be relatively line ball.
Richard Taylor | Australia's leading private lender
Thanks for that Richard,
I think I really need to get a QS in to look at the property so i can determine how much depreciation i can claim,Thanks for your responses…much appreciated.
,
You must be logged in to reply to this topic. If you don't have an account, you can register here.
