Hello, my original PPOR of 8 years is now an IP which is positively geared. I have built a new house which is my PPOR in another town. Was wondering if there are any strategies to pay off first property faster? I am also looking to invest in more property. Any advise much appreciated, thank you.
Hiya
If you're going to pay down any loan it should be your PPOR – not IP. The reason is due to the PPOR debt not being deductible whereas the IP debt is.
Is there a chance this new PPOR could become an IP as well at some point?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie is correct, if you're going to pay of any loan it should be your PPOR, which will improve your overall tax position. Is there a reason you want to pay off the IP first?
It sounds like you can buy another IP when ever you like by drawing on the equity of your first IP, but we don't know any numbers or whether you want to consider this. Since the first is +ve geared, you could use that income to cover any potential negative gearing of your next IP.
Thanks Jamie. Can i still get deductions on my IP even though it's positively geared? I was thinking, seeing as my IP is now positively geared that it would be a good idea to try and pay it off as fast as i can to get even more of a positive cash flow and create more equity to help fund my next investment? Would like to be out my PPOR by the end of the year leaving it a negatively geared IP for the bulk of my deductions and depreciation claims. Does this sound like good idea?
Thanks New Guy, yeah just to create more equity and get more of a positive cash flow on it as i used some of it for my PPOR. Does that sound ok or am i looking from the wrong angle?
You can get deductions on a property regardless of it being positive or negatively geared. My IP is positively geared in the sense that rent is more than the mortgage, but after depreciation claims it becomes negatively geared. I absolutely still claim it!
Why do you keep moving into the property first? I hate moving and like to stay in the one place to make it 'my home', plus I'm married with kids and they definitely don't want to move. Someone else can answer how this works with acquisition costs for CGT at sale and deductions in the following years, but it would seem easier to just buy an IP as an IP, rather than a mix of PPOR and IP.
I would be considering making the IP interest only and just paying the additional payments into an offset account against my PPOR. Then when I'm ready to buy again I can draw from that. Some of the more experienced people here will provide other ideas.
— Added.
I just noticed you replied above. Were your loans cross-securitised / cross collateralised? ie. Do you have a loan that is secured by both properties? This might have happened when you drew on the equity of your IP to purchase your current PPOR. If you don't know, what is your loan structure at the moment?
Thanks New Guy. No there not crossed at all. That's just how it has worked out so far with moving into the property first. I totally agree being married with two kids and hate moving myself, it's just what I've had to do with work for the last couple of years. I could even be in my PPOR a while longer yet after this year depending on work, but I'm keen to find another IP in the mean time till we get to final place of residency. I'm trying work out what the best way to structure it all, I'll be using a different lender/mortgage broker for my next investment. Any advice in who'd be the best to go talk with in what I'm trying to achieve etc. Accountant, Financial Adviser?
Hi,
I started a post in here asking about financial advisors, and didn't get much response. I got a few leads on buyers agents though (https://www.propertyinvesting.com/forums/help-needed/4349478). I don't have a dedicated accountant, I have so many friends that are accountants in different fields it's crazy, so I just ask them.
You're in a similar position to me, see my previous thread that's along the same lines: https://www.propertyinvesting.com/forums/help-needed/4349433
Basically, I would consider going IO on the IP. Get an offset account against the PPOR (if you don't already) and just pay everything into that. Then when you're ready to buy, use this cash and any extra equity you have to buy the next one.
As you can see, I'm really new here. So I'm hoping someone else will jump in with their opinions as well, since we're in the same spot I'm keen to see what they say as well!
Apprentice Investor. wrote:Thanks New Guy. No there not crossed at all. That's just how it has worked out so far with moving into the property first. I totally agree being married with two kids and hate moving myself, it's just what I've had to do with work for the last couple of years. I could even be in my PPOR a while longer yet after this year depending on work, but I'm keen to find another IP in the mean time till we get to final place of residency. I'm trying work out what the best way to structure it all, I'll be using a different lender/mortgage broker for my next investment. Any advice in who'd be the best to go talk with in what I'm trying to achieve etc. Accountant, Financial Adviser?
Hiya
You’d be better off seeking advice from a mortgage broker rather than a fin planner. If you’re comfortable with dealing over phone and email then you can choose to use any broker in the country.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks for the advice, New Guy and Jamie.
Hi AI,
I see you have joined us recently…. Welcome !!
You have certainly been diligent in preparing yourself for your future – so, well done. I agree with Jamie M – go see a good mortgage broker in preference to a financial planner. Some on here are both anyway, but (for my money) a MB has a lot more direct property knowledge than most FP's do (of course, there will be exceptions out there).
Re this :-
Quote:I was thinking, seeing as my IP is now positively geared that it would be a good idea to try and pay it off as fast as i can to get even more of a positive cash flow and create more equity to help fund my next investment?Hmm, I'd be thinking quite the other way (like Jamie said) – pay it off your PPOR in preference to your IP. Actually, do better than that – pay it into a Mortgage Offset account that reduces the Interest you pay on your PPOR. Save all of your dollars in there (even the rent too, I think – but then, I'm not a MB – one of them can tell you what is ideal).
By putting money into the Offset, it is "like" paying it off your mortgage, BUT the money remains available to you for ANY purpose. e.g. there might come along a sweet IP deal that needs you to move fast – your funds are right there. If you had paid down a mortgage (IP or PPOR) with it, it could takes days or weeks to get access via another loan.
Re paying off the IP loan, every $ you put in increases the Equity by just one $.
But instead, what if you spent $10k on a renovation to your IP or PPOR that created $25k in extra Equity? Hmmm????
Also, Jamie made the point – keep your IP mortgages high rather than paying them down (even your PPOR, since it is likely to become an IP sometime. Your tax-paid $$ would do more good by becoming the deposit on your next IP.
Set up the structure now that suits "where you are going" – and make your moves that align with where you want to be.
Get in touch with Jamie, or one of several other Mortgage Brokers on the website – their names are well-known, and they have a signature that informs you of their expertise. If wanting to "sit down" with one, chose one according to which city you are in now. You have come to the right place, AI – I hope you make contact with a MB soon and thrash out with them just what is "the right way to go" for YOU !!
Benny
Thanks Benny I've booked in to see a MB next week. Cheers
Just to clarify unless your Mortgage Broker is also a licensed Financial Planner he certainly cannot be making any investment recommendations property or not.
A Broker who is not a Financial Planner can discuss a Credit Contract and make suitable lending suggestions however not all Brokers are the same.
Ensure your Broker has bought an IP or three and is not still out there battling to pay off his PPOR.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Apprentice Investor. wrote:Thanks Benny I've booked in to see a MB next week. CheersBest of luck. Don't hesitate to post back on the forum if you're worried about anything.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks 007 and Jamie. Just wanting to start at the lower end of the market for my next IP and looking for positively geared IPs I've found a 1 bedroom unit in a good size town for 45k, its currently rented for $140 A week. The current tenant is planning to stay there for a few more years. The rates are $2200 and body corp is $2000. At 5.88% over 30 years it works out to be $61 a week. Rates and the body corps fees are tax deductible. Any advice on this, cheers.
Hi AI
I'm going to assume that not only the building insurance but also the water bills are included in the body corporate fees – because the body corporate fee is very high. The council rates are also very high (around $500-$600 is what I'd normally expect to see for council rates for a unit).
Remember you will still need landlord insurance, and there is always the odd maintenance bill. Even buying the property for cash (ie no mortgage), there will not be much left over.
If you have $45k you can put it to much better use leveraging into a property that performs better. This one doesn't look so great after you take out all the holding costs.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thank you JacM.
Apprentice Investor. wrote:Thanks 007 and Jamie. Just wanting to start at the lower end of the market for my next IP and looking for positively geared IPs I've found a 1 bedroom unit in a good size town for 45k, its currently rented for $140 A week. The current tenant is planning to stay there for a few more years. The rates are $2200 and body corp is $2000. At 5.88% over 30 years it works out to be $61 a week. Rates and the body corps fees are tax deductible. Any advice on this, cheers.Hiya
Personally, I would give this one a miss.
A property worth $45k is probably not going to provide decent growth over time – therefore, the only way it can make for a semi decent investment is if it were providing decent cashflow and it isn't.
At a cost of $61 per week – that's just over $3k per year. Normally that's not a big deal – but on a property worth $45k, that's quite substantial.
Cheap doesn't always equate to good – especially in property investing.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
You have certainly been diligent in preparing yourself for your future – so, well done. 
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