My partner and I have just purchased our first home and after just reading Steve Mcnight’s book we are now inspired to have a go at this rather secret investing strategy called POSITIVE GEARING!
It seems amazing how even my $250p/h accountant has advised me to purchase my own property and then move into negative gearing to save tax as well as build a property portfolio,although I now realise this does not make sense!
Does anyone out there feel as though we have done the right thing by buying our own home first or should we of kept on renting and putting all of our cash into positive cashflow properties?
If we have made the right move,when will the banks lend us the money for other properties?
Also,when should we start?
Any feedback would be much appreciated!sg
Hi Shane,
There is no clear cut decision as each person/couple have their own reasons for doing whatever it is they are doing.
For example we, after a great many years, living in work related rental properties decided to build our home and set ourselves up with our own little piece of Australia.
Making aggressive additional loan repayments and with the recent growth experienced we have then leveraged off our equity into a stream of investment properties that suit our investment goals. There is no reason why you couldn’t do the same thing either.
Alternatively you could set your existing home up as an investment property (it conceivably could remain as your PPOR for the next six years and remain CGT free) and then rent elsewhere.
Using this approach you can have the best of both worlds – just check the economics of it all as there is little point in making tax savings in making your existing house into a rental property and then paying through the nose for a top of the range rental property.
Mind you if I suggested to the wife thet we rent out our home and renting elsewhere my world would turn a very dark shade of black – it really depends on a whoel range of factors, some of which are purely personal and can only be answered by you and your wife.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks,but when can we start?How can you get away with little or no dep down on an investment property?
sg
Hi Shane,
One of the myths of property investing is that you need a cash deposit to start investing.
In reality if you have sufficient equity in your own home and income to service additional loans then you can start as soon as you want.
Typically lenders will recognise 80% of the value of your property as suitable security. If your loan is less than 80% of the value of your property then the difference effectively equals funds available for a deposit.
Eg House valued at $200K debt $100K. Lenders will recognise 80% of $200K (ie $160K) – $100k loan = $60K to be used as deposit for other property. You can go to a 90% level if you are prepared to pay loan mortgage insurance.
I recommend a discussion with a broker and they will be able to determine your borrowing capcity for you.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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