Hi there all,
I would love to hear what other investor would do in my current situation….
I have a unit that i owe $72,000 on ( it is now valued at approx $270,000 and is currently rented out @ 270 pw.) The loan on this unit is fixed at 7.14% untill Sept 09.
I also have a property that i owe $162,000 ( Is now valued at approx $260,000 and is rented @$190 pw). The loan is fixed at 6.9% untill Feb 10.My wife and i have approx $50,000 saved as we will be purchasing a PPOR in the near future ( We are looking at spending around $300,000 . We will be looking at having a familly in the next few years which means a single wage ($55000 pa approx )for a period
The above properties are in Adelaide and we intend on purchasing our home there too.
How would you guys structure your finance etc.Would love some feedback
NOS
Regretfully when you purchase your new PPOR the interest will not be tax deductible so porbably the initial structure was wrong and means that you loose valuable Tax deductions.
Moving on as no lender will take a 2nd mortgage against either unit you may have to consider breaking one of the fixed rate loans and using the available equity to fund the new PPOR.
If both loans are in Joint names then you might want to look at a prepaying interest for the year ahead when you are both working and taking the rental income in the year when you are back to one salary.
Careful planning will be required to maximise your deductions.
Richard Taylor | Australia's leading private lender
1.You could sell both properties and buy your PPOR and owe little or nothing depending how much CGT you have to pay and how much you spend on your own house. With the equity of your own home you could buy one or two properties to negative gear and have only "good debt". It depends on how badly you want your own castle.
2. One property is +ve geared I think and the other is fairly neutral. You could buy another property to gear with your cash savings and continue to rent. This would help you grow your portfolio. With $50K cash you might even be able to find a +ve cashflow deal somewhere depending on the prices.
3. With your equity and cash deposit, you might be able to buy two properties to negative gear if you are still able to pay the rent.
4. Move into your unit where you only owe $72K. The repayments are probably cheaper than your rent. Use the $50K to buy 1-2 more IP's.
I think it depends on how much you want your own place. With your low debt, cash savings you can't lose. Take on a bit more debt and risk to lleverage your portfolio a bit further. That depends on your attitude to risk. It seems you are quite comfortable.
The unit which I owe 72k on was my PPOR for 7 years I have just started renting it out this financial year. Am I able to refinance this loan to say around 200K so it is negatively geared and use the 128k difference and 50k in Savings to Purchase our new PPOR.
This is how I would like to structure myself
1st unit – Owe 200k rent out @ 270pw (negative geared)
2nd House- Owe 162k @ rent out @ 190pw (negative geared / Interest Only Loan)
PPOR- Owe Approx 125K (P&I Loan)Firstly is this possible and secondly does that look benefical.
Thanks in advance
as i understand it, if you take equity from your investment (1st unit) to put intp PPR, the extra loan would not be deductible. the ato look at what you do with the money….
NOS1
Simple anser to Am I able to refinance this loan to say around 200K so it is negatively geared and use the 128k difference and 50k in Savings to Purchase our new PPOR is regretfully NO.
However depending on numerous factors you might want to consider selling the property into a Trust structure borrow 100% of the current value and use the net amount as deposit on your new PPOR. This way 100% of the valuation becomes Tax deductible however Stamp Duty and possibly CGT (Arguably Not) may be due.
All depends on your marginal tax rate and the State in which the property is located.
Richard Taylor | Australia's leading private lender
Hi, if I were you, this is what I'd do. Look for the house that I can afford and would like to be PPOR in 2 years time. Use the $50000 & if necessary top up with additional borrowing through existing equity – your current lender may agree to give you more than 80%LVR on the new purchase because you have excess equity in the other IPs. This way, you don't need to break your existing fixed loans [well done on that btw].
Then continue renting – your target PPOR will be -ve gearing, giving you tax breaks [a newish house will give you depreciation benefits]
In 2 years time when family needs are in the forefront, do some simple cleaning up, renovate a bit & move into PPOR.
Gives you 2 years to save maybe another $50000.
Good luck,
KY
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