My husband and I have had a house on the market in Cairns and which is not selling. We have made the decision not to let it go and to become first time investors and place it on the rental market long term then eventually use the equity in the loan for a future IP. We are both brand new to the world of investing but both feel it is the right time in our lives to become investors.
I found this fantastic website two days ago and have read many posts. I see that most investment loans are Interest only with 100% offset a/c's attached. Our P & I loan however is @$400k and I feel we would get about $360-$380 rent p/w, so I am thinking we would be best to try and pay the loan down for a few years first then add savings to it and refinance later on then change the loan to I/Only.
I want to make sure we structure our loan in the best possible way from the beginning and welcome any advice, comments or suggestions.
Make it I/O with an offset account from the start. Do not pay extra money into the loan and redraw later- this will save you and your accountant so many headaches in the future.
Cheers,
LukeI agree! Change your loan straight away so that this loan is your investment property loan (this is important for taxation purposes – you don't want to get your investment debt mixed in any way with your personal (non-investment) debt). Also, try to make it an I/O loan as soon as possible as this will increase your cash-flow from the start – every investor wants to maximise their cash-flow!!
Good luck!
Cheers,
DenHi Marmel
Firstly welcome to the forum and i hope you enjoy your time with us.
Whilst i agree with the advice to date i think there are other considerations prior to jumping in and swiching the loan.
I assume the property is held as Joint Tenants meaning you will both claim 50% of the loan interest and associated depreciation / capital allowances. You may find that one of you is on a higher marginal Tax rate and it may be worth looking to switch the ownership structure prior to switching the loan.
Secondly you might want to also access available equity for a second IP.
A good mortgage broker (especially someone who has experience and maybe own the odd IP or two) should be able to provide you with some advice before jumping in.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Everyone – Thank you for your responses., they are much appreciated.
Yes we were thinking of using the equity for a 2nd IP which would be IO or for purchasing a principal place of residence eventually (as we are currently renting). I was thinking we would then change the first (current) property to Investment after that.
Regards
Marmel
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