I'm currently living with my parents while paying off an "investment property" of which I owe just under $180,000. I currently have $56,000 saved up in the bank and am eligible for the First Home Owner Grant since the property I'm paying off was purchased after 2000 and is purely an investment property that I haven't lived in. I'm at the stage where I want to move out of home and as I see it, I have two options:
1. Put the $56,000 I have into the investment loan and just move in to the investment property. That would probably give me less headaches as I would then be able to pay the loan off much quicker without worrying about getting another loan which could take some years to pay off.
2. Use the $56,000 I have as a deposit, and also get the $14,000 First Home Owner Grant and buy a property to live in while also keeping the investment property which currently has tenants and enjoy the tax benefits.
I know this is something that "I" have to decide on my own but any help/advice would be much appreciated.
Hello theplatypus
That's a hard question to answer with the information given.
We have no idea of your income; what price range you are thinking of buying a PPOR; is your IP negitively geared and by how much per month (i.e. how much it costs you out of pocket per month ); how much equity do you have in your IP; has the area that you are thinking of buying your PPOR in a good capital growth history.
And most importantly ….. are you really interested in property as an investment tool.
BTW I do hope you have that $56K in a 100% offset account coupled to the loan on you IP.
Cheers
ElkaTo answer those questions, my income is $60,000pa of which most of goes towards the investment loan as I have very little other expenses, I currently pay approx $2,300 per month for the loan (the minimum required payment however is much less due to the interest rate cuts since last year) and yes, it's negatively geared. I owe just under $180,000 while the property would be worth about $320,000. I'd most probably be looking at buying a 1 bedroom unit in Sydney's eastern suburbs for under $250,000. I want to move out of home in a few months so my dilemma is whether to move into the investment unit and put all my money into that one and not bother with the hassle of getting another property. Or is it a smarter idea to take up the $14,000 grant and buy another property to live in and keep the other as an investment.
I think the FHOG is not going to be around for long and it is a good time to buy property, so I would favour option 2.
But ideally where do you want to live?Either way I would immediately stop paying extra on the investment property and would change the loan to interest only and put all your money into a 100% offset account. If you do buy a new property to live in all the extra payments will be locked into the IP and you won't get the full atax advanatages available.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Totally agree with Terry on both points.
My opinion is that 100% offset accounts are the best thing since sliced bread, if one is financially disciplined.
In your position I would even make the new loan for your 1 bedroom apartment IO with a 100% offset account and deposit all your income into this. That way you get maximum interest savings and leave all options open for the future.
Cheers
Elka
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