Where I came from, where we normally dont use water heater, we say that the first scoop of water is the coldest. So we throw the first then take the second one! :p
Pls help me with my first scoop. Im freezing confused!
So, early this year, we bought our first PPR. It’s a $420k 3 Year Special Economiser Base Variable Rate P&I loan from CBA. No offset, just redraw. Monthly mortgage is $2150, under my name and husband’s. We plan to save for our first IP in a year or two. And from then, to continue buying positive cash flow IP’s as much as we can. Now Ive been reading about how offset vs. redraw works and Im trying to get my head around it. Im looking at several options (the way i understand things) on how to proceed from here.
SCENARIO 1: Stay in our PPR ($420k loan) then later purchase IP (say worth $500k)
Option A – Save and put extra, say, $100k into the PPR loan. Redraw $100k, then take $400k IP loan (IO).
Option B – Get an offset account and change into IO loan (if possible, im not yet sure). Save and put extra $100k into the PPR offset account. Use extra $100k, then take $400k IP loan.SCENARIO 2: Rent out PPR, then later purchase IP. We can rent a $400/week house.
Option C – Save and put extra $100k into the PPR loan. Redraw $100k, then take $400k IP loan (IO).
Option D – Get an offset account and change into IO loan. Save and put extra $100k into the PPR offset account. Use extra $100k, then take $400k IP loan.My understanding is that, Scenario 2 will make both loans tax deductible, more cashflow in, and property 1 expenses (council rates etc) will be tax deductible. But for other reasons, we could opt to stay in our PPR.
Question:
1. For scenario 1, will it make difference if I change into an IO loan with offset account? How?
2. For Scenario 2, Option D makes more sense to me. Did I get that right? Any thoughts?
3. Can you suggest somebody from Perth who helps those who want to start in property investing? We had a mortgage broker, told her we want a loan set-up suitable to our future investment plans. Well, not her fault, I should have done my part in the first place.I am really overwhelmed by the idea of investing in properties. There’s just so much to learn, to read, to understand. But I know nobody gets anywhere without the first step.
Hi reiya,
Welcome here and yes its overwhelming. First of all, if you have a loan in both of your names that will probably be the biggest hurdle to overcome. I may be wrong, and i am happy to be corrected but this is probably going to slow you down. See what a broker says but in my experience it means you each own 50/50 but owe 100/100. Im hoping someone else will post in relation to this.
Io loans are a faster way to borrow more
Reducing your loan by using offset will improve cashflow, theres heaps of stuff out the to read about paying for everything on credit card and using offset, however you can deduct your loan interest as a cost. Because you can deduct investments and not ppor better to use offset on ppor and leave the investment loan alone.Look at how much just one of you can borrow alone, because that is normally a faster way to buy more houses.
Ill leave your scenarios to someone better qualified to answer but i think you need to step back first and talk to some brokers, there are many on here and hopefully they will help.
Good luck.
Hi Reiya,
I’m with “walking to run” who saysIll leave your scenarios to someone better qualified to answer but i think you need to step back first and talk to some brokers, there are many on here and hopefully they will help.
Yes the whole scenario is complex – but it is like eating an elephant. One bite at a time you can do it.
Getting your finances set up correctly should be one of the earlier steps. In doing so, you will learn much from your adviser re the whole scenario of IP investing. They can also answer some of the deeper questions re IO vs P&I or Offset vs Redraw. so do quiz them.
Right now though, do check this out :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/In that link there are several different subjects approached – go looking for those that are of relevance to you right now.
Regards,
BennyHi Reiya
Welcome :)
Option 2 becomes a hassle if you have children because there is more “stuff” to move, and if you cannot get a rental in the postcode catchment of their school, then they have to change schools.
You don’t necessarily need a broker in Perth. You need a good broker. Most good ones do their work via email/phone/skype these days, so they can be located anywhere in Australia.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi
I’m new to the forum, and thought I’d ask my first Q.
I’ve just re read Steve’s first book – 0 to 130 in 3.5 years.
Of course I got excited and decided I want to do something about investing, and to do it now.
But I was just wondering if the first book is still relevant, can you still find positive cash flow properties (probably yes), but can a brand new investor apply the lessons in the first book and succeed today given the market is different to when I bought the book (when it was first published).
has the landscape changed so much since then that the lessons from the first book are not enough?
thanksArguably in a lot of markets this is the easiest time to ever find cash flow properties considering the historically rock bottom interest rates. Plenty of examples of cheap CF+ properties about – Adelaide is where a lot of these deals pop up: https://www.propertyinvesting.com/topic/5013494-adelaide-property-investment/
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi,
I am also new to the forum and to investing. We’re looking and researching Caboolture (4 bedders) for our first investment – does anyone have any views whether this is a good suburb to invest.
Thank youHi CGP
We have had a few issues with valuations recently in Caboolture.
We are not putting our clients into the Northside at the moment.
Cheers
Yours in Finance
0-40 properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
Can I ask why as it seems there may be some potential cash flow investment properties in that area, are they overvalued?
Yes in many a case this is correct.
We haven’t seen any great number of cash flow properties in the suburb.
Cheers
Yours in Finance
0-40 Properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
We are looking to purchase our first investment property by the end of this year – are you able to advise which areas that you see have cash flow properties in the Brisbane area or surrounds.
Any advice would be greatly appreciated.
Hi
Anyone can give a feedback on a good suburb in perth for subdivision and getting good capital gain and rental return.
I am new to this property investing concept and after reading Steve book 0-300 would like to try my hand in this.
Andy
I am thinking of using a company called BInvested with founding director Nathan Birch, I liked what they have to offer as they are all investors too and use the same principles I use.
Has anyone had any experience with them? and are they worth while having a chat with?
I have found that they have 2 charges;
1 being a mapping session @ $299
2 they will find cash postive investments below market value @ $9990Before I make this big spend what is everyone’s thoughts?
Hi Sam,
There are a few fundamental things to look out for and be aware of before you commit to that kind of fee:
1. At what point do you pay the fees for the service? Are they paid in advance to engage BInvested to go “searching” for the property for you?
2. Who defines what under market value is? What happens if you disagree with the valuation? Is there a third independent party that is able to adjudicate on the properties value?Happy for you to send me a message if you would like to know more about the issues to be aware of when assessing the services of these companies.
Dave Ward | Geronimo Finance
http://www.geronimofinance.com.au
Email Me | Phone MeProperty Investor, Property Investment Expert & Advisor, Finance Expert & Strategist
Sam
You might want to read some previous post on this organisation before you part with your hard earned.
As Dave says who defines whether the property is below market value.
Trust me you won’t get any Bank valuer tell you in writing the property is valued more than you paid for it.
Also what is the definition of a positive cash flow property. I can guarantee if you put 30% down we will find you one in Brisbane.
We don’t buy Units in Cairns due to the high body corporate fees and negative growth.
Think before you open the purse strings.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi all,
I too am looking to take my first step into investing. I have been reading through posts for the last few days and getting some good advice. I would like to start investing near where I live. Does anyone have any good recommendations for properties in the Central Coast region of Northern Tasmania?
Clint.
I haven’t read any of the replies so apologies if this has mention mentioned above already, but I think you could have set this up better in several ways.
1. Just one name on title and loan.
This would have allowed you extra strategies down the track, improved asset protection, improved serviceability overall and have saved you tax.2. Paying PI
Paying off loans is generally a good thing, but having IO can allow for so much more flexibility and assist with the saving of tax and early retirement possibly.3. Paying a deposit on an IP.
If you use offset cash on an IP you will end up paying more tax on the IP and have a higher non deductible debt. Best to borrow 105% for any IP purchase.4. Using Redraw
It is good to pay down the PPOR loan and then borrow, but using redraw will create a mixed purpose loan and you will then lose money by paying more tax as a result. Split before redrawing.5. Consider carefully who will own the next property purchase
Can set yourself up for a few potential strategies years down the track.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
Hi. I’m new to all this. I’ve been reading reading reading and listening. It seems the only way to find cash flow properties is by making them so yourself. Granny flames and the like. I’ve recently made offers on a few properties in Rothwell, Deception Bay areas were new train line is due to open this year.
Is this a good area? I’ve done lots of research but understand that you need to gain experience through actions. I have learnt the hard way most of my life and hope this isn’t the same.
I’d appreciate a heads up on what sort of properties pay for themselves whilst growing in capital.Hi, I am also new.
My partner and I currently have one investment property and a PPOR.
With the equity we are looking to either buy somewhere with potential for granny flat or build a duplex.Would love to hear people’s thoughts on the best strategy going forward.
CheersHi Leigh
Be surprised how many BA Forum clients we have wanting to do the same thing.
Done properly I think it is a good strategy you just need to make sure the post construction valuation is equivalent to at least the initial purchase price + cost of granny flat and that the builder is not making a healthy mark up on your project.
Try avoid those areas that have been granny flatted to death but as far as a cash flow strategy is concerned it works well.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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