Oh but wait… the property market might have crashed by then!?

Hi dbliss,

It could be fear of losing money, or it could be"analysis paralysis" (something I suffered from , but got through due to the people around me pushing me to take action!!)

"Analysis paralysis is where you can’t take any action due to over thinking about the details or over planning and is one of the best “action” killers we can possibly find. Planning definitely helps when we are starting a new project but it should not be to the extent that it overwhelms us and causes us to fail to make a decision and take action.

My advise would be to simply find a very small project, and just GO for it! It is almost worth losing a small amount of money to take the first step, because once you have done so, you will never look back! Others advice will vary on this topic, but just a suggestion.

Agree to disagree?

1. Despite having large amounts of cash in offset accounts, the bank may stop lending to you at a cetain debt level – For instance, even if some people have loans which are fully covered by offset cash, the bank will still only lend up to a cetain level based on serviceability if the borrower was to remove the cash the next day and spend it all on a holiday.

2. Depending upon the age and the 'stage of life' of a person, they may decide that they would like to pass on unencumbered property or other assets to their family upon death, rather than a property with a loan, and a whole heap of cash against it. The latter could cause taxation and estate planning complications.

3. Family/Child support situation where payments need to be made, and bank statements are required to be provided to assess available income.

4. Loan in joint names where one party (ie: husband or wife) wants to spend the available cash "because it's there" where the more investment minded partner doesn't (similar to your discipline comment)

Those are the first few that came to mind.. Happy to consider a few more if you are still interested…

As a side note, I will always have I/O loans with offset accounts, but it isn't suitable for all situations.

…and I'm glad you changed your response from "Never" to "almost never" – thanks.

number 8,

There are several, but never mind, you probably wouldn't be interested.

Hi Tim,

No, unfortunately payments of principal can not be claimed as a tax deduction.

As a general rule, it is only costs incurred in the earning of your investment income which can be claimed.

eg: Interest is a cost of the principal of the loan, but the principal itself is not a cost or an expense.

One word, Delfin

IZ, just to expand on Richard's comment, it is a good idea to set up an offset account for each new property anyway, even if you still have some non-deductible debt.

As Richard said, you would put all spare cash into the offset account against the non-deductible debt until such time as it is repaid in full, however it is good to get the structure for the IP's correct to begin with as well.

it was up this morning!