Hi Guys,
Just a quick question re . cash vrs loans. I recently acquired sone substancial money (300k) and wondered what strategy to adapt re. investment property i.e buy property cash or use as heavy deposits, any ideas? I guess buying property cash you put all your eggs in one basket but at least you are not paying interest charges. Initially I have been looking at buying cash property and using for cashflow to pay for second property and slowly build a portfolio in this manner.
Any thoughts or advice most welcome.
Many thanks
Kurn
Hi Kurn,
First of all, you should pay off any bad-debts (car loan, credit card, store cards, etc.)
You should consider diversifying between property and share market (may be 2/3, 1/3 split).
With property investment, I think you should look buying more than one property. Use some of your cash for deposit and closing cost and get IO loan for the rest. This gives you some diversification within property market as well (remember, each state in Australia has its own property cycle).
Hope this helpsWhat are your longer term goals?
Once you have them articulated the answer will be clearer.
Do you currently have a high income? If so then unencumbered IP income will be taxed pretty high.
I would need more info before making suggestions.
Ciao,
Use it wisely!
Just another point in addition to the above, if you buy a property outright for 'cash', which of course gives you some serious negotiating power, you can always borrow against this later, (up to 80% would be my max suggestion/preference) and as long as you only use the borrowings then for income generating/investment purposes you will still receive the tax deduction benefits you would have if you borrowed the 80% initiailly. Of course, it does depend on your plans, and what you intend to do property wise. If you don't have your own home, but want one, buy that for 'cash', or pay off your current loan (if you have one) outright, then borrow against your own home for purchasing additional investment property then……
All the best.
(Alternatively, give me some, and spend the rest!) Cheers.
Give it to me!
I'll look after it as if it were mine (LOL)
thanks guys….bit more info.. low income hence was looking at some positive cashflow to use a little personally and the rest to use towards a second property….long terms goals maybe four..!! one idea is , looking at private house and let to overseas.students….just unsure as whether re.tax etc I would be better off using cash to by one then re-finance for another or better to use as deposots but would need rent covering loans as low income….thanks again and to those who kindly volunteered to look after the money let me think on it !!!!
thanks again
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