Good cashflow and cheap houses, but are there good opportunities for capital growth and is the risk low or high? With property there are three things: Risk, Growth and Cashflow. You rarely get all three on the same deal.

cheers,
Luke.

You may be better off purchasing properties in a trust with a corporate trustee. This allows for better asset protection and you can easily distribute profits to different individuals or companies to reduce your tax bill (if you set up a discretionary trust that is).

Luke.

Sounds excessive to me, I would get one done every 2 years or so for a block of units.

Luke.

There are many opinions out there on where the property market is heading, and there always will be. If you think it will keep rising slowly and steadily, then you would be better off buying property. If you think property will not go up in value anymore or fall in value, then you should not buy property. No one has a crystal ball, so you cant be sure either way I suppose.

Luke.

Can we please get a new state government!!!!!

Agree with Nathamillion.

If property prices increase on average by say 6% a year (a low figure), then a $500 000 property will increase in value by $30 000 every year. Saving $30 000 per year is pretty tough (unless you are on really good incomes with no dependents), so you would probably be better off getting in sooner rather than waiting, even if it means paying LMI and using a deposit less than 20%.

Cheers,
Luke

It is your money, so I cant see why it is a problem with the ATO. You can do what you want with it.

One thing is with tax deductability of the interest of your loan. I am assuming that the home loan that your are withdrawing money from is the house you currently live in. If you decide to move out after giving your parents the money, the interest on that $140k will not be tax deductable as even though it would be on a loan that is an investment property, the $140k redraw is counted as new borrowings and so because the purpose of the loan is a gift it can not be claimed.

Not sure about the FHBG question but I am pretty sure they would still be eligible proved they have never owned a home before. Best check that with someone who is certain though.

Cheers,
Luke

Yes, I think the bank meant no available equity for you to access with a Line of Credt.

Some banks do allow a Line of Credit with total borrowings up to 90% of the value- but you will be up for LMI (probably about $3000-$4000 in your case).

Cheers,
Luke

An offset account and redraw are two different things. I think you should do what Catalyst suggested and start putting excess money into an offset account instead of paying extra off the loan.

When you redraw money from a loan, it is counted as new borrowings. So if you redraw, say, $50 000 from your loan to purchase a new PPOR and rent out yyour existing apartment, this $50 000 is counted as new borrowings and because the purpose of the loan is to buy a place to live in (not an investment), the interest on this money is not tax deductible. If you just leave the money in an offset account however, it is not new borrowings as it was never paid into the loan and you maintain the tax detectability of this money.

Leverage is when you use equity to 'leverage' or lift yourself into another investment. If you own a property worth $500 000 and you only owe $200 000 on the mortgage, you have $300 000 equity. Banks typically let you borrow 80% of a properties value with no problems (provided you can service the loan) so they will let you borow $400 000 against that property ($400 000 = 80% * $500 000). So you can borrow another $200 000 against that property if you wish, to take you up to that maximum $400 000 borrowings. What you can do then is set up a $130 000 line of credit secured against that property to pay for a 20% deposit and costs on a $500 000 investment. Then you can borrow another $400 000 secured against the new investment property. You would then have bought a second investment property using 100% borrowed funds and none of you own cash down. You then leave all of your cash in an offset account linked to your PPOR so if you ever purchase a new PPOR, you can move that money around to reduce non-deductible debt.

Hope I explained that ok, I always seem to confuse people when I try to explain offset accounts. Maybe Catalyst could expplain better

Luke,

I have been reading a lot of Michael Yarneys material lately. I believe he is a bit of a guru in regards to Australian property, and in particular the Melbourne market.

He suggests that there is a looming oversupply of inner city apartments in Melbourne and Sydney. More so in Melbourne, there is a large number of proposed developments on the cards which will then lead to donward pressure on prices. In contrast, planning restrictions and a lack of small scale developments in middle ring suburbs means a shortage of housing stock here resulting in upwards pressure on prices.

My thoughts- I really think you have to research your local area. If there are a lot of buildings going up near you, then this is a bad thing as there will be more stock on the market and you will have competition from newer buildings when it comes time for you wo sell, which will mean a lower price for you. However, if there are still relatively few buildings in your area and stromg competition from buyers, then it may be worth holding onto your property for the medium term and consider purchasing a second property.

I personalle prefer houses on decent blocks of land in the inner to middle ring suburbs due to the rising value of the land component, a shortage of new stock on the market in these areas and the ability to create extra value (by renovating, subdividing etc) these type of properties compared to inner city apartments. But that's just my preference!!!

Luke.