Hi
I am considering buying my first IP and have a number of questions about which more experienced forum members might offer an opinion:
1. NRAS: what are the potential pitfalls of this scheme? Is there a danger that the developer you choose might go bust? Will the houses built under this scheme retain their value, or accrue something of a ‘public housing’ feel? Would it be mad to have an NRAS property as a first IP (given my inexperience)?
2. Interest-only loan: There seems to be a difference of opinion about whether you should take an interest-only loan for an IP, or always try and repay principle and interest in order to build equity.
3. Family trusts: Is it better to create a family trust (or unit trust) and place IPs in that, or keep them in your own name? My own situation is that my husband and I both work full-time and have reasonable incomes and pay a lot of tax. We also have kids who are under 18.
4. Is it better to save cash for the deposit on an IP, or draw down on the equity available in your own home? I have quite a lot of equity in my home (about $500K), but also have a large mortgage on it. This might mean acquiring an IP is a pipe dream, but it seems I should be able to make the equity in my own home work for me.
Any advice or opinions appreciated!
Hi Hillcam
Firstly welcome to the forum and i hope you enjoy your time with us.
1. There has been many previous posts regarding the pro's and cons of NRAS so might be easier to do a search and read some of the previous comments.
2. Interest only V P & I loans. There are pluses and minuses of both however where you have a home loan on your PPOR with the interest being non deductible it is better to consider an interest only loan.
3. Again without knowing the full facts it is difficult to provide a recommendation.
What you need to consider is:
A) You are unable to claim the negative gearing on the property (assuming the property is negatively geared) when the property
is purchased in a Discretionary Family Trust.
Land Tax maybe payable where the property is purchased in Trust as there is no exemption. (This may vary from State to
State).
C) Many lenders will have an issue in financing the property thru a Unit or Hybrid Trust.
Of course buying in Trust does have other benefits which are worth considering.4. Structuring the deal is probably the most important part of funding the deal to ensure you maximise your deductions and reduce your risk. Do not use any redraw facility available on your current loan as the interest will not be deductible.
Serviceabiliity is key under the new Credit Act however there is no reason with you both working why an IP is out of the question.
Without further information it is difficult to assess.A good independant mortgage broker should be able to provide you with further option and structured advice.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Land Tax maybe payable where the property is purchased in Trust as there is no exemption. (This may vary from State toYou must be logged in to reply to this topic. If you don't have an account, you can register here.
