Hi All,
I'm only new here but have so far found this forum extremely helpful!
I have just purchased my 2nd property (1st Investment) a house in Tasmania for $140k
I have calculated the repayments to be about $155pw interest only or about $185pw principal and interest.
Once i have cleaned the place up i should be able to get $230pw rent. Seeing as i have brought this for a short and long term capital growth investment,my question is am i better off paying interest only and putting all the profit back into the property for a tax break or let it pay itself off?
I don't need the money, i need to pay less tax!.
Cheers
Pagey
Hi pagey
Welcome aboard.
Do you have any other non-deductible debts such as an owner occupied home, credit cards, personal loan, car loan, etc?
If so, then it's worthwhile knocking these debts on the head first before you start paying down a deductible investment debt.
This article that I wrote for Australian Property Investor magazine explains the concept.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie, thanks for the reply.
I do have a car loan but this is set up as a private lease to claim back on tax for work purposes so is a set rate for another 2 years.
My PPOR i have only also just brought a month ago which i am moving into to claim the FOHG. After this (6 months) it is my intention to rent this out also as i work away and do not need a house necessarily. Therefore setting both properties up as investments.
Are there implications with renting my house out then renting a room back for 'storage' and claiming it as an investment?
Based on your article it would appear that i should be putting both properties on interest only. Is that your recommendation?
Cheers
Pagey
No worries at all.
Personally, I'd set up both as interest only with an offset attached to the one that's currently your PPOR.
I won't comment on the renting a room for storage point – it's the domain of an accountant.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The answer to your question is dependent on what your investment (whether thats inside or outside of property) is for the next x years.
Are you planning to purchase your next IP or invest the money within the next say 3-5 years?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thanks for the reply guys! .
To answer you Shahin my ideal plan is to keep investing in property, im 26 years old, single and earn good money. I'd like to buy a couple houses a year (or more!) and set myself for early retirement. So yes property is my target at the moment.
Cheers
Pagey
Hi Pagey
Now you just need to execute your plan.
Buying a couple of properties a year will require careful planning. The structure needs to be sound and the right lenders need to be selected at the right time as you continue to accumulate properties.
Best of luck.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Pagey
You already have the answer here but you have touched on wanting some strategy/direction based on Steve's books.
Have a look at the following passage from his most recent.
Instead of trying to ‘buy’ your financial freedom by acquiring a large number of relatively low output positive cash flow properties, the new (and improved) model I recommend for going from zero to financial freedom today has these three steps:
1 Acquire an income accelerator to supplement (or perhaps replace) your earned income.
2 Invest in ‘generic’ or ‘manufactured’ growth assets to accumulate an asset base.
3 Once you’ve achieved the required asset base, redeploy your capital away from growth property into debt-free positive cash flow real estate.
McKnight, Steve (2012-11-13). From 0 to Financial Freedom: How to Do It Today (Kindle Locations 442-448). PropertyInvesting.com.
What we need to do is constantly be assessing how our capital is being used.Can it be put to a better use? Can you get a better return? How is this investment going to get you to your goal of financial freedom?
I found the book a good read and a sound broad approach.
Ok in that case your biggest hurdle in the short to meduim term is not necessarily going to be cashflow but more so equity and savings. Therefore you may want to consider having your deposit as liquid as possible so that equity is available for subsequent purchases. This means that you will want to have the 'cash' sitting in your offset account linked to your IP.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
All good points made so far.
With limited savings / equity might want to keep your cash in savings and consider a 100% standalone investment loan.
We are finding many investors are seeking such a product and spent a while trying to put such product together.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for your comments Don,
What do you mean by an income accelerator? I earn good money (about 180k per year) and am currently putting most of this into my first 2 properties, they are both in need of renos which will increase the capital and give me approx. 100k in equity (about 70k profit) in 6 to 12 months.
I have done some research on manufactured growth and found the below article which was very hepful! I have looked at doing a similar thing with units in the past, which may be next on the cards after finishing these two houses.
Thanks for your comments Don, definitely put some ideas in my head!
Cheers
Pagey
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