Hello.
Long time reader of the forums.
I have read with much interest the strategy of using IO loans with offset accounts for IP. However my situation may be a little different.I am about to start a job paying above average wage and wish to purchase an IP ASAP. I have a reasonable deposit saved already from working part time. Basically my new job will be in the resources sector in a very regional area and I am not sure how long I will be working in the position. Original plan was 2 or 3 years and saving very heavily, before moving back to Sydney.
Would you advise someone in my position to look for near cashflow positive, place large deposits to make them positive or at least slightly negative and hope they become positive in 2 or 3 years? When I started looking into property investing I wanted to place as small as possible deposits to allow me to purchase the next properties quicker. However my situation may be a little unique. Any advice or guidance would be much appreciated, I'd love to get on the right track from the start!
Finally, I have gained much knowledge from people such as Richard on the boards. I am just wondering, if I would like to use his services or others here, and I am now living in a regional area, is it still possible without much difficulty? Thanks so much!
Hi Grug
Love the avatar by the way.
To be honest personally i would still look to use as 100% offset account on an interest only basis at least for one of the properties even if you place 20% deposit down on the first purchase and keep the rest up your sleeve for future deposits.
The funds in the offset account will still make the properties positively geared as you will only be paying interest on the net balance yet preserves the deductability of the interest and the flexibility of the account balance in case you need to access for non deductible purposes in the future.
Remember this could include a deposit for a PPOR.
Be happy to assist you if you want to drop me a line and we can run through some ideas.
Have 101 forum clients scattered all over the Country and with email and electronic loan lodgement these days distance has never caused a problem.Richard Taylor | Australia's leading private lender
Hi Grug,
I am a long time reader of the forums also.
I recently took the plunge into property investing with Richards help.I highly recommend him. He is professional and thorough.
I live in sydney so distance isn't a problem at all.
I will not hesitate to use his services again in the future.
Good luck, go for it!
Kimc
Thanks Kim
Hope you are having a good restful day.
After a frantic week we got there in the end.
Richard Taylor | Australia's leading private lender
Oh, Hi Richard,
Your welcome,…you've worked hard this week and I know that for a fact!! If it hadn't been for your help and sense of humour…I think I would have cracked under the pressure.Yes, you're are right, we did get there in the end.
Thanks
kimchi Grug
I don't think your situation is unique, so the standard advice of Richard should apply. Even if you have high income, don't pay extra off any loan as you don't know when you will need access to your cash again. Best to use IO loans on all properties with spare cash saved into a 100% offset.
The only time this wouldn't be recomended is when you are the type to start spending all spare cash – ie a spendaholic.
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
Thanks for all the responses.
The reason I asked if it is advisable to pay down some of the loan, is that I am not planning to stay with this job for more than a few years. If I then return to a low income, I am worried about the repayments. Ideally rents would have increased.
Terry is right if you think you are ill disclined then pay off the loan and the positive cash flow will serve you when circumstances change.
If you are good at budgeting then interest only will serve you well in the long run.
Richard Taylor | Australia's leading private lender
Its always good to pay down debt, but I think it can be even more effective if you keep the money in the offset – after all you can transfer it to the loan any time. Keep it separate incase you want to use it for a personal expenses, non -deductible, such as a deposit on a main residence.
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
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