Wrong.  Put all cash into :

1. The PPOR offset
2. If the PPOR offset contains a balance equal to your debt, put any surplus cash into the offset of IPs

Reason?  You might want to convert your PPOR to an IP one day.  If it still has a debt on it, you will be able to start claiming interest on its loan on your tax return.  This will not be the case if you pay it off.  And don't think redrawing will help you.  It's a stupid ruling, but that is the way it is.  The moral of the story is, don't bother paying anything off.  Put all spare cash into offsets.  Unless as Terry always cautions people, you are one of those people likely to be tempted to just withdraw cash from your offsets and go on a spending spree with it.

ps if it were me, I'd get some garden rocks from the nursery and create a garden bed along the front of the unit.  Put some lavendar and so on it it.  Pretty, low maintenance, smells nice….

Yes let them pay the bills.  Meanwhile the property goes up in value, so in say 10 years you could sell one property to pay the debt on two or three other properties.  You simply have to be patient.  Acquire some properties and let time do its thing.

Hi Charlie

I presume you are currently renting in a pricey area!

Where is your family support located?

I see you have two PRESCHOOL aged children.  This suggests to me that for quite a few years (ie the entire duration of primary school) the children could share a room.  A room with a bunk bed if need be.  This means you could look at acquiring a two bedroom property with a view to adding a room or two later on when you have more cash.  So.  Why not consider a two bedroom house in an affordable suburb, that has – preferably, space in the backyard to add rooms, or if there is absolutely no other option, to add a second storey.  Keep in mind the cost of construction of a second storey will be higher than adding rooms at ground level.

If you bought a place for $200k, and sold it for $250k, it goes like this:

Acquisition Costs:

Property   $200,000
Stamp duty   $10,000 (approx)
Building & Pest Inspections   $500
Solicitor Fees  $800
Total   $211,300

Renovation Costs:

Let's say $7,000

Holding Costs:

Bank Interest: $520

Selling Costs:

Real Estate Agent (Selling Agent)  $5,000

So it goes like this:

$250,000 – $211,300 – $7,000 – $520 – $5,000 = $26,180

Let's assume you hold the property for a year to reduce the CGT.  So you put a tenant in it for a while because you are not going to spend a year renovating a $200k property, and you won't leave it empty.  So you get the 50% cgt discount.  So CGT will be calculated on half of $26,180 which is $13,090.  This figure ($13,090) will be added to your day job taxable income to determine the overall tax you owe the ATO for the year.  If you are in the 37% tax bracket, you'd thus owe about 37% of $13,090 which is $4,843.30.  So your "true profit" is actually $26,180 – $4,843.30 = $21,336.70.

Now.  Remember that property goes up in price about 10% a year.  Since you originally bought a place worth $200k, the same place would be worth $220k after a year.  Not really worth it in my opinion.  Especially since you are also going to have to pay stamp duty to buy back into the market.  This sort of stuff would be more a buy, renovate, get bank revaluation, use equity as a deposit on another place…. and hang onto the original place as well.

By the way, your property manager does background checks on prospective tenants to see if they have been good rent payers in the past, and looked after previous rental properties.  However, at the end of the day, you cannot be certain the tenant will look after the property.  This is why you have in insurance.  You need building, contents, landlord plus tenant protection insurance.  Try AAMI.

Don't stress.  If the tenant ruins your property, you might be out of pocket say $600.  The excess fee for the insurance claim.  But who cares about $600 if the property went up in value by $50,000 in one year huh?  All you need the tenant to do is babysit the homeloan interest payments for you for a while so that you can be rewarded with the capital growth.  Don't get attached to your pretty walls and your nice benchtop.  It is an investment.  It is supposed to be about numbers.

Hi Kimberly, sent you a PM

You can use a broker anywhere in the country!  Doesn't have to be one in Berwick.

Use Richard Taylor.  Very knowledgeable chap who participates heavily on this forum (userid Qlds007).

Contact details are here;
http://www.tayloredfinancialsolutions.com.au/index.php?option=com_contact&view=contact&id=1&Itemid=79

As the others are saying, if you have a PPOR and also an IP, always put all spare money into the PPOR first and get that paid off, because its debt is non-deductible.

Back to the question about the 221D.  I haven't used a 221D yet but will no doubt have reason to in the future.  Think of it like this:

If you know with absolute certainty that your IP will leave you out of pocket AT LEAST $100 for each and every week for the entire year, I would definitely do the 221D.  Here is why:

Pretend the interest rate is 7.21% and that you are in the 37% tax bracket for income tax purposes.

The first week of the financial year, you "loose" $100.  At the end of the financial year, you would get some of this loss back.  Not all of it – some of it.  Your refund on this $100 would be, roughly, $100 * 0.37 = $37.00.  It doesn't sound like a lot, but when  you multiply that out by 52 weeks a year, that gives you a rough anticipated refund of $37 x 52 = $1924.  It'd actually work out a bit more because if you had those refunds in your pocket earlier, you would be able to whack that money straight into the offset account (or on your PPOR mortgage) and thus save some more interest, instead of waiting till the end of the financial year to get your tax refund.  Compounding interest is evil, and it is surprising how quickly small amounts grow to big amounts.

If you know with certainty you will make a loss, why wait till the end of the year to get your refund? 

Remember if you overestimate your loss, when it gets to the end of the financial year, you might owe the tax department some interest, so be slightly conservative in your estimates.

Shouldn't be too hard if you do your homework and make offers "subject to being able to get approval for this and that"

Just throwing ideas onto the table to get people to think outside the square a little