HI,
I’m after some advice re the best approach to take. At present I own 1 -ve geared property. It’s worth about $360,000 and owe about $240,000 on it. My own home is worth $260,000 and I owe $90,000 on that.
My question is this….Do I sell the IP to release the equity in that to use as deposits for further properties? Do I re finance the IP to release some of the equity as cash for deposits whilst paying an increase in interest on this IP? (I appreciate that this is tax deductible given that it is used to finance further investment?)
Do I borrow 100% of amount for new properties using equity in IP? Should I use equity in my home to fund further IP’s????A few options, I know, but would appreciate some views!!
Di
Hi Dingles,
I wouldn’t sell and also wouldn’t use your PPOR as security for other IP. Use the equity in your IP to fund deposits for other deals but don’t overburden yourself.
Me personally – Im against selling except in desperate times. Since it is -ve geared, you can choose to sell it but I would come up with ways to make it positive. On the other hand, I would sell if it’s gone up in considerable Capital – the choice is yours.
Kind Regards,
George.“If You never never ask, you’ll never never know”
Hi Dingles,
I too hate selling unless absolutely necessary.
Be aware that if you sell the IP you probably won’t have as much $$$ to play with, after sale costs, CGT, etc – and you’ll forgo any more capital appreciation. Only way I’d sell the IP (don’t forget market in most areas is slowing/retracting) is if you could use the $$$ freed up from a sale to fund a purchase or 2 that would increase your cash flow, or make your -ive debt repayments smaller.
Consider restructuring your PPOR loan to release the equity in your home – it would be what I’d do – provided you split the loan to differentiate your personal (existing) debt from the new borrowings (to be used for investment). That’s where the equity is, splitting it will keep you and the taxman happy, and if you want to maximise borrowings use those funds as deposits and get stand alone loans (cheap I.O. ones) for the balance of funds. Too easy.
theloanarranger
Hi Di
one question need to be considered before a decision is made, most importantly what do you see as the potential capital gains for your IP ? If it is low growth for the next 5 years then i’d sell.
if i was in your situation this is what i’d do. Sell the iP and pay any CGT. that will give you about $120,000 cash to buy IP’s with. I’d then sit down and find out where you can best reinvest that money. I’d buy properties that will appreciate and are cash positive. Therefore I’d buy in NZ, i’d buy properties that were showing at least 10 returns (hopefully higher).
Your $120,000 would give you control over approximatley $.5 million worth, all cash positive. I’d do my research carefully though and buy in the right areas.
I say this is what i’d do because it is exactly what i’m doing, as i’ve been mentioning often on the forum (the regulars will be sick of hearing me say it) for the last 12 months i’m continueing to sell IP’s in OZ and investing in NZ.all the best with your decision, my approach may be too radical for some,
regards westan
Do I borrow 100% of amount for new properties using equity in IP? Should I use equity in my home to fund further IP’s????
Hi Di,
The answer to the above will depend on how many IP’s you intend to acquire,If you want to have a substantial property portfolio, then you may want to consider drawing maximum equity, with a split on your PPR loan,as the Loanaranger has already suggested,
You could also have these funds parked in an offset attached to your non-deductible portion of the split loan until required,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
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