Hi everyone,
I have been watching the site for a while now and it's FULL of awsome info!
I have a question relating to my investments and my structure as I am reasonably new to the scene.
My first investment is a split loan. I have a house I paid $320000 for, $250000 is on interest only and the other $70000 is a guarentor loan which I am paying principal and interest.
I have an offset account set up and have approx $80k in it. It only offsets the guarentor loan though.
i have just purchased another property for $320k but have only borrowed $290k this will be interest only.
I suppose my question is, do you think this is ok? Or how can I better this scenario?
Thank you in advance!
Matt
Hi mwb,
And congrats on your first post….
I agree about the site too – there are some absolute gems sprinkled throughout (posts and people!!).Re your situation, why not tell us a bit more about the other side of things (e.g. incomes, costs, locations, etc) so that the good folk on here can give you the benefit of their knowledge. The more you can share, the more thoughts can come back to you re "how to better the scenario".
Right now, I'm stuck, but congrats too for being one of a few percent of people who are actually property investors.
Benny
Sounds like you have to do P+I on the guarantor loan so that it removes your family commitment eventually.
Generally speaking most accountants (of which I am NOT one) saying that interest only loans with offset accounts are a great way to go.
Being interest only it minimises your expenses, giving you more cash flow to continue investing. It also maximises your tax deductions because your interest isn't going down as the principle is paid off.
I know a lot of people who do interest only on all their investments and use the extra cash flow to pay off their home loan (which isn't tax deducible).
That way their home becomes secure (no loan) and they still have maximum tax deductions.
Obviously seek financial advice on this. There is a fine line between "tax reduction" (legal) and "tax evasion" (illegal)
Ryan McLean | On Property
http://onproperty.com.au
Email MeCheers guys,
The first property is in Townsville and the recent one is in Perth, my income various slightly but is generally between $150k to $200k pa. My partners income is approx $60k pa.
The Townsville property is rented for 340 per week and I am hoping to get 380-400 pw for the new place.
I apologise if this is in the wrong section.
cheers
Hi mwb,
Thanks for the extra info – it all helps….. Here's a few thoughts and opinions (I am not any kind of "adviser", so do check things out with your advisers – accountant, broker, etc).
Quote:….. how can I better this scenario?1. There is $10k of "lazy money" in that Offset Account (and growing, as that P&I loan gets paid down….) Perhaps look to see if you can open another OA against one of the other loans for maximum effect.
With all Interest on the $70k loan being Offset, your current P&I payments should ALL be coming off the Principal – but DO check this, as I have heard some lenders don't allow "100% Offset", meaning that your extra Offset $$ are going to waste.
2. Have you arranged Depreciation Schedules for both IP's? If not, there is some serious money going begging, especially with you on that high wage (with a high Marginal Tax Rate).
3. What are your goals for the next few years? Are you primarily looking for more -ve geared property (and Capital Growth), or is it time to add some +ve geared IP's to the portfolio?
4. Is either property "ripe" for any kind of value add that could lead to a rental increase? e.g. add a new kitchen, carport, etc.
5. How are Perth and Townsville shaping up for future growth? Are you happy with both IP's?
How's that for starters? I hope others who ARE advisers can put me right if I have said something incorrect (I'm here to learn too…. )
Benny
Thanks Benny, some food for thought there, appreciate it
Matt
If the first property was set up as a Family Guarantee loan and the Guarantors are happy for the loan to maintain in some form or shape i would certainly have it switched to interest only. Alternatively split the loan and have the Guarantors be the borrowers instead and in turn onlend the funds to you..
With a 70K P & I loan linked to an offset account and 80K in the offset account this is not effective. This would need to be changed.
Hard to advise more unless we know what your ultimate goals are.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I agree about the site too – there are some absolute gems sprinkled throughout (posts and people!!).
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