Hi there,
Long time reader, first time poster! Heh heh!
Seriously, not too far into this game, and thought getting some advice from some seamingly seasoned players here would help me out!
I purchased a cheap property at $65K using first home owners grant eighteen months ago (very little of my own money had to go into it as being less than $80K there was no stamp duty!). At the earliest convenience made it interest only, and rented it out (CF+).
I just recently used the equity in this to pay for the mortgage insurance, stamp duty, conveyancing fees etc on a 100% loan and purchased another property worth $195 (am OOcc’in this one). Now I have two properties worth a combined total of mid to high 200’s, having put in a couple of grand total!
Up until now I’ve been taking 10% pre-tax out of my salary and paying it on top of my car loan. Is this the best move? My question is should I:
a) continue to pay off my car loan, then use the money I use for payments plus the 10% towards next property (by then would have built up more equity in these two places)
b) put the money into the OOcc stream of my home loan?
c) Invest in shares / managed funds?
I know it’s pretty personalised info, but some ideas / experienes would be absolutely sensational!
Thanks,
Michael
Michael
Having a car lease as part of pre tax dollars is nothing really special since FBT came in. It is only a slight advantage.
The real advantage is being able to claim all the expenses like petrol, reg, insurance from pre tax dollars. So keep it going I suggest, but it may depend on you tax bracket.
One thing I did do was have my wife buy a car outright, which I then leased back from her through the company I worked for. My company then made pretax payments to her of P&I. Now the principal is just her getting her money back, but the interest, she had to pay tax on, but she was in a tax bracket much lower than me. Even if she borrowed money from a cheaper source and then bought the car, it would work. In essence I was transferring part of my wage to her. Of course you should see your own tax agent who could advise you better.
You can release a car at the end of the lease – remember it is the costs paid out of pre-tax dollars that are cream.
In regards to paying off the properties – always pay down O/O first to reduce interest you can’t claim.
Regards
JohnInspired Finance
(02) 9944 7776I wouldn’t pay down your current home unless you know you will be there for a long time.
Put the money into an offset account instead. Has the same effect and if you do rent this property you can draw the funds from offset without affecting the tax deductibility of the original debt.
I would be either:
paying down the car loan
or investing in alternative investments.
When you have built up more equity in the home you can borrow it for the shares and that loan will be deductible.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Ah yes, the converting the O/Occ to IP wasn’t something that had entered the equation… although now that you point it out, it seems so obvious (don’t plan on being in it more than a year or so).
I guess now it’s just a matter of tossing up between paying off my bad debt (car loan) or investing the surplus money…
whats an OOcc? I have only heard this term here on this thread and have no idea what it is.
Can someone shed some light on this please?Thanks Christopher Fife.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
