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  • Avatar of gronk007gronk007
    Member
    @gronk007
    Post count: 54

    Hi All,

    My wife and I got as pretty big shock today – grandfather gave us $250,000 as part of an inheritance…so we’ve got options at the moment…

    We’re 29 & 30 respectively, in full time jobs. We only have a PPOR in the Inner West Sydney worth $400,000, which has a $300,000 mortgage on it presently.

    My immediate thoughts:

    – Put $180,000 in the mortgage (leaving us an LVR of 30%)
    – $60,000 into medium term Imputation Fund in Colonial First State (would expect to get high single digit, low double digit over 5-7 years)
    – Keep $10,000 for discretionaries in the short term.

    We want to have a child in the next 24 months so my wife can have some time off, I earn roughly $100,000 per year.

    My wife is probably more risk averse than I am, but we want to stay in our PPOR for another 3 years, so with all the equity we’re about to have in our mortgage, we can go into lots of different directions.

    All thoughts about my immediate plans are very welcome!

    I would love in 5 years to get to a house, and have 2 IPs working very nicely, with the CFS Fund like a “Baby Fund” for example and speedhumps along the way. More interested in wealth and growth rather than income at this stage…

    Thanks!!

    Avatar of melb15melb15
    Member
    @melb15
    Post count: 16

    What sort of return do you want from your money and what are you looking to get out of it from investing?

    Are you after a passive return or do you want to work to make the most from your money?

    No point in looking for low single digit returns when you can get at least 6.4% by just sticking it in a bank account (see http://abetterdeal.com.au/).

    Liam

    Avatar of gronk007gronk007
    Member
    @gronk007
    Post count: 54

    Hi,

    I think my post says high single digit, low double digit growth….

    There’s a big difference between simply putting the money into places like ING or BankWest, I have no interest in those kind of accounts for this kind of money..

    I intend on re-investing the distributions of the Imputation Fund back into the fund…The advantage of the Imputation Fund is that it already provides a tax effective income that can be re-invested..

    Avatar of melb15melb15
    Member
    @melb15
    Post count: 16

    My bad! I was skimming instead of reading as usual and now I am in trouble!

    You will have to excuse me as I am not aware of what an imputation fund is, how do they work and what do they involve? Also how do they remain income producing as well as tax effective as the two don’t often go hand in hand.

    Liam

    Avatar of mathewc73mathewc73
    Member
    @mathewc73
    Post count: 241

    Hello,
    If if was me I would put it all on the PPOR. Then use the PPOR as security for any future investments. That minimises my non deductable expenses and still allows me to leverage into shares or other property.

    eg: Reduce loan to $50,000. This is non deductable.
    Draw another loan of $60,000 secured by your PPOR and purchase your fund. This is now tax deductable.

    Seek tax advice first before you do this… I think it would work.

    Mat

    Avatar of snowkiwisnowkiwi
    Member
    @snowkiwi
    Post count: 40

    First of all, my condolensces on the loss of your grandfather. While it is fortunate for you that he was able to leave you something as an inheritance, it’s still not the same as him being there to share it, is it.

    As to the options, just as a different angle, how would this look?

    1.240k into PPOR. Putting it all in, then redrawing 10k for discretionary spending must get messy.

    2. redraw 140k for investment purposes so that much is tax deductible, as suggested by Mat. This would leave your PPOR with 50% LVR. Not quite as much as you initially suggest, but if you keep the same repayments, you’ve now increased the equity build-up by around $150/wk.

    3. put $40k into the fund

    4. put the other 100k into positively geared property that includes growth in the equation. Call me biased, but I strongly believe in well purchased property as a wealth creation vehicle and that you CAN have growth property that is positively geared. And after all, this IS a property investing forum. You have already stated you want to have 2 IPs in 5 years, so why not start now? In 5 years you may have more than 2.

    Mat suggests you should seek tax advice before you do this. I agree, but make sure you get wealth creation advice, not just tax advice. Anyone can say “lose money on a house” (a.k.a negatively gear a house) and you’ll save tax. But some tax advisers also know how to maximise wealth. That is who you should talk to.

    Anyway, just my 2c worth.

    _______________________________________
    Ask me about Joint Ventures earning 15+% COCR.

    Avatar of HutchHutch
    Member
    @Hutch
    Post count: 137

    hi gronk,
    heres my 2cents worth……

    Have you looked into separatly purchasing 4 x IP’s and leaving your PPOR alone?
    *4x $50K (or less) deposit on each of 4 x IP’s (+CF should be found in rural towns/suburbs)
    *$50K balance in the bank to relieve any repayment pressure if the tenants dont pay on time or for repairs etc…

    Just something outside the square to think about. This way, you are already head of the IP game instead of waiting 5 years when prices will have gone up (by approx 70-100%). It sounds as though you alone are on a sustainable wage to be able to this. It may sound too simplistic, that’s because it is… But it does work. I know this because I was in a similar situation as you 2 years ago.

    cheers
    hutch
    [biggrin]

    Avatar of toni89toni89
    Member
    @toni89
    Post count: 125

    Hi
    I would put it all on my PPOR as there is no advantage in still paying this off.
    If this were me, I would then get a line of credit on my PPOR and, depending on your servicability, i would use this line of credit to purchase IP’s.
    For each IP I would use the line of credit for the deposit and closing costs and establish a separate new loan on each IP.
    You are then able to claim a portion of the interest as a tax deduction.
    You would be unable to do this (claim the deduction)for the mortgage on your PPOR.
    This way, you would have your home paid off, and as many IP’s as you can service, all on the banks money !
    Make sense?

    cheers
    Toni[exhappy]

    Avatar of toni89toni89
    Member
    @toni89
    Post count: 125

    well not exactly paid off but you get the picture

    cheers
    Toni

    Avatar of Simon CSimon C
    Member
    @Simon-C
    Post count: 51

    Simple one. I’d pay down the mortgage and work on paying off the other $50k. At the same time I’d unlock the equity in the current property and look for an area and strategy to invest in property’s using a trust structure.

    You’d use the equity loan to fund deposits by gifting it to the trust, and borrow 80% against the property you have chosen. You could also choose to use some of the funds as deposit and only pay off a portion of the loans.

    I suggested the first method as you cannot claim interest deductions on a PPOR where as you can on an IP.

    Nice problem :)

    Cheers
    Simon

    Avatar of gronk007gronk007
    Member
    @gronk007
    Post count: 54

    Thanks for everyone’s help – things are heaps clearer now :)

    Anymore thoughts, especially outside the square are appreciated…

    Adrian

    Avatar of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Post count: 1,031

    hi all
    well done toni you have been listening and yes I would do the same.
    I would throw the lot into the ppor and get a split loan so you can redraw as you need.
    then I would do double investing first set up a structure ( accountant required) then find a posi income shares, LPT or comm.
    if a property
    a comm purchase and then do a 65% refinance so you got alot of your cash back.
    then go for a resi neg in a high growth area and make sure that the posi and neg cancel each other out so the investment is neutral.
    and then leave to grow and each 4 years refinance with the growth in the resi and make sure that the posi has a structure with in it to grow.
    so if a comm 6% cpi increase in rent.
    and re invest.
    if your risk profile is better have a look at my post if I gave you 1million dollars for some high return investing put I would not recommend those unless you understand investing.

    250k is a relatively large amount of money and as I said the accountant is the first step the second is to understand your risk profil
    in the short term I would throw it off the ppor but into a split loan so you can get access to it.
    and try as toni has said to use lenders money to make money its alot cheaper and alot more profitable.
    and good to hear from you again toni

    here to help
    If you want to get involved in some of the projects I’m involved in email to ultraclean@hotmail.com

    Avatar of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Post count: 1,031

    hi all
    well done toni you have been listening and yes I would do the same.
    I would throw the lot into the ppor and get a split loan so you can redraw as you need.
    then I would do double investing first set up a structure ( accountant required) then find a posi income shares, LPT or comm.
    if a property
    a comm purchase and then do a 65% refinance so you got alot of your cash back.
    then go for a resi neg in a high growth area and make sure that the posi and neg cancel each other out so the investment is neutral.
    and then leave to grow and each 4 years refinance with the growth in the resi and make sure that the posi has a structure with in it to grow.
    so if a comm 6% cpi increase in rent.
    and re invest.
    if your risk profile is better have a look at my post if I gave you 1million dollars for some high return investing put I would not recommend those unless you understand investing.

    250k is a relatively large amount of money and as I said the accountant is the first step the second is to understand your risk profil
    in the short term I would throw it off the ppor but into a split loan so you can get access to it.
    and try as toni has said to use lenders money to make money its alot cheaper and alot more profitable.
    and good to hear from you again toni

    here to help
    If you want to get involved in some of the projects I’m involved in email to ultraclean@hotmail.com

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