Property Investment Options

You could probably do something now without waiting for the loan to come down.  You need to get yourself a good mortgagebroker who will tell you how much money you can borrow.  There are some very good brokers on this forum.  I'm also on somersoft.com.au which also has some great brokers.

Based on your income and equity you should be able to buy something now.

Keep paying down your PPOR loan and set up a split for the equity. Borrow from that new split for the deposit and costs for the new investment property. Never use your own cash, but put it into your home loan to reduce non-deductible debt asap.

All investment loans should be interest only too.

Once you have purchased one investment repeat the process.

eg. if you have a $500,000 house with a $100,000 loan left.
Set up a second loan for $300,000.
Have the original loan of 100,000 still, and don't mix the 2. The $400,000 can be used for investments only and it could be a LOC or a IO loan with redraw.

Terry
Just wanted to check here, I am reading that the second loan is on the first home and if so I thought that would not be tax deductable. 

I would have thought that the second property should have a 80% mortgage using the first home equity as the deposit to get the best tax savings.

Then subsequent purchases could be bounced off the investment property.

It doesn't matter what the security is but what the funds are used for. Keeping the second loan separate to the first will allow access to the equity in the home and this loan can be used solely for investments and all the interest claimed.

Subsequent purchase should be done using the same method. As equity increases you just set up a new loan on each property and use that as deposit and costs for the next one.

hi Nico

Don't worry about paying down the loans at this stage. You first want to get rid of all personal debt. So paying down an investment loan will delay this and it will end up with you paying more tax.

Once you have paid down the PPOR loan and any other personal loans/credit cards etc then you could start paying PI for an investment. But even then i would not for a few reasons.

IO loans are only IO for an initial period of 5 or 10 years. So if you wait they will end up being paid off anyway.
Even if you keep newing the loan as IO you will have rising rents and the debt will be reduced in real terms by inflation.

eg imagine you had puchased a house in Sydney in 1960 for $16,000 and kept the loan IO for the past 50 years. You would be paying $960 per year in interest. You would probably be getting $20,000 pa in rent. So with a few weeks rent you could pay off the entire loan.

ALso think of the lower repayings of an IO compared to PI would mean you have more money available which could mean you can afford more investments.

yes, basically. But you don't really need to change the loan to PI or pay it off. Personal choice I guess.