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Hi Ash
Just to quickly answer one of your questions. You can’t keep redrawing because the LVR will keep going up until the bank will stop loaning (as well as serviceability ).
500k house. 300k loan. 200k equity.
You can get a $100k LOC to take total debt to 80%. 300 + 100 = 400 from 500 value.That 100k might split 80k deposit. 20k purchasing costs (stamp duty etc). You use that 80k to buy a 400k house. Now you total LVR is 900k property with 300 + 100 + 320 = 720k means you still have a 80% LVR and you don’t have any equity to redraw anymore – without LMI anyway.
Hope that makes sense. Oh and you’re able to essentially get a 102% deductible loan this way.
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This reply was modified 9 years, 1 month ago by
TheNewGuy.
I’m fairly new, but I immediately see tax implications if you mix the purpose of loans. Eg. You draw a single loan and use parts for income producing purposes (investment property) and parts in an offset against a ppor (?). You could draw multiple loans, the ip and the $75k in a separate account. The ip account interest is tax deductible, if you use the $75K for income producing it will also be deductible.
If you don’t draw down the $75K you don’t pay anything. I’ve had $50K sitting on an account for 18 months.
Someone correct me if I’m wrong.
I agree with Benny. Was this from one agent or from multiple agents? I’d get a second fourth or twentieth opinion.
It sounds like the selling agent is trying to retire from this one sale :)
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This reply was modified 9 years, 3 months ago by TheNewGuy.
Hi Jacqui
– There is no immediate requirement to increase cashflow. I’m still working for the majority of the cash I generate, but I’m still young’ish and in a very stable job – which I enjoy. Plus, my wife is only PT at the moment (in a FT role), so she can always go back to work to generate more. I’ve also picked up a ‘2nd job / scholarship’ for 2 years which will add another $30k+ net per year… if I can force myself to study again. I’m likely to work until I die just because I can.
– The end goal is a paid off PPOR and $100k pa in passive income that doesn’t erode any capital and goes up with CPI. ie. $3mil cash with a 6% return, pay out 3% as income and reinvest 3% for CPI – very broad, but that’s the concept. Obviously I wouldn’t have the $3mil in cash in reality. $3mil will pass down to kids etc in my will.On a side note, one of the reasons I put money into Super is because I split my PPOR loans 18 months ago, fixed a chunk for 2 years and wanted to pay off ~$60k in that period. It turns out I paid off nearly $70k pretty quickly, so I paid down $20k on the fixed (max without penalties), and had only $10k left on the variable. So, I had a few options at that point, but with the high return of Super / tax benefits etc, I decided to pay extra in there even though I can’t get it for 26 years.
In general,
– Should I pay off $50-$60k of the PPOR, redraw, get another IP? adding one at a time in the current market?
– Pay it off completely in 3-4 years, redraw and buy 5 in one go?
– Invest elsewhere? Super, short term loan market etc.I like the first one because it forces me to actual start down the investment path and if I have the bill, it will get paid – like my current IPs. If don’t have a bill (ie. option 2), there is a real chance that I’ll just go on a holiday! My other concern with things like short term lending is it should (all going well) increase my income (actually, it would all go to my wife not me) and then I’d need to come back to this question about what do I do with it :)
If you have anything to add, or think I’m wrong / crazy then let me know.
Thanks again.
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This reply was modified 9 years, 3 months ago by TheNewGuy.
Is your current place ‘a good investment property’? What will it rent for? What maintenance costs are involved? Do you expect any capital growth? Is it new, have a lot of depreciable assets?
Basically, I see 2 options depending on your specific situation. The ideas below are very light on the detail, but hopefully gives you an idea.
OPTION 1
Current PPOR
Value $450000
Loan $240000
~ $160000 equity (have you previously paid LMI? You might get a discount if you have).Keep as IP (very, very rough numbers):
Tax-Deductible debt: $240000 ($12000pa)
Rent: $450pw. ($23400pa)
– Positively geared. After costs, maybe $6000+ gross. This will be split between you and your wife, so while negatively geared it’s handy to have it in the higher income, when positively geared, it’s better to have it in the lower income.PPOR:
Value: Up to $800000
All non-deductible debt :(OPTION 2
Sell. Walk away with $200000 hopefully.PPOR:
Value: Up to $1000000… more with LMI, but don’t do that because you want it as equity for IPs. Less still works as well.
Loan: $800000Redraw up to 95%, $150000 for IP purchase. Then you have a bunch of options, and this is just one:
Buy 3 IPs with $50k redraw each:
Value: $300000
IP Loan: $270000
PPOR held loan for deposit, stamp duty, LMI etc: $50000 (will actually be less).
Tax deductible debt $320000 per IP.This way you have more tax deductible debt and less non-deductible debt, and you can also buy in either your name, your wife’s name, or both. Importantly, you’ll be able to invest in straight up investment properties, this could be anywhere in Australia as chances are there are better places to invest than where your current place is. Serviceability might be a problem holding $1.7+ mil in debt, but I’m trying to show you your options.
— EDIT —
So, want I’m trying to show is that selling and buying again doesn’t mean you’re necessarily going to be behind the eight ball with investing – unless you struggle with serviceability. So I would certainly consider at an option.You seem to be in a pretty good situation. Since this happened to me, I seem to be repeating myself in a few threads, but be aware how quickly things can change when you ‘settle down’ – assuming that you don’t have any kids / wifes (yea, the plural wife is a part-joke / part-serious comment). But my priorities changed pretty quick when I got married, then had one, and now two kids.
Otherwise, you’re in the standard deposit / serviceability / risk category. How much deposit do you have? How much can you service? How much risk are you willing to take on? Then it’s just a matter of determining what to buy :)
On another note, if you have $150k in savings… what are you doing with it if you have no debt?
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This reply was modified 10 years, 3 months ago by TheNewGuy.
Figure out a goal and work towards that. Having a goal will help you make your decisions.
Also, it depends on how much you earn from other sources, like your job since serviceability is important as well.
Without much other information, and if I wanted to stay in my current house. I would probably pay it down, then redraw an investment loan. How much to redraw and where / how to invest would depend more on your current situation. A few other things to consider at your age:
– Are you married / do you have a partner to join in your investments?
– Are you planning on having kids? Paying for them.
– What is your work life going to look like in the future? More money / less money? Want to work more, or less?
– How is your super looking?
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This reply was modified 10 years, 4 months ago by TheNewGuy.
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This reply was modified 9 years, 1 month ago by
