Hey guys,
My circumstances have changed a little from previous posts and this is where I am currently at. I would love some feedback on my strategy to make sure we are on the right track.
Wife and I earn a combined income of 160k per year with little expenses due to fuel cards and phones bills paid for etc. We both work full time and are currently 25 yrs old with no kids. We have:
PPOR: On the market for $420000 with a loan of $200000 P/I loan
IP: value $245000 I/O loan. Repayments are $320p/wk and tenants are paying $295p/wk.
My strategy is to move out of current PPOR and use left over funds to buy a smal,l cheaper house similar to our investment property for around $2300000. We would almost own this property entirely, but it would remain on an I/O loan. Quickly pay off remaining balance on PPOR I/O loan. My plan would be to build buffers in the investment property so that they become slightly positive geared. I would then use some of the cash in the IP offset account to form another deposit for a 3rd property. Then I would repeat the process of building up the offset accounts so that they are slightly positive geared and then remove funds for another.
I don't want huge risk and I believe that my strategy allows for interest rate hikes and drops. As the rates go up then I can feed cash into the IPs so that they always maintain a slightly positive gear. If they drop then it'll free up another deposit and I can withdraw some for another IP.
I eventually want to build a duplex and move into one side which is why I wanted to keep my new PPOR as an I/O loan.
Thanks in andvance.
Down sizing is good I think. You can speed things up dramatically.
If you have a non deductible loan and then use money in an offset that is linked to the loan then the interest would increase and it would not be deductible. Possibly best to pay down the loan to a certain level and then set up a LOC to use for deposits for the new IPs. Ideally you wouldn't want to pay down the loan at all, as it could possible become an investment property at some stage in the future. But this will all depend on the equity available. You might have to pay a large sum off the New PPOR.
Also consider which name the new PPOR should be in. If VIC there are opportunities to consider.
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
Ok.
Once I sell my current PPOR and buy my next one, I was planning on keeping the new ppor as I/O as I believe it’ll eventaully become an investment property itself. I wanted to pay it down in full so that we can devote our funds to the offset accounts of the IPs. Im located in QLD so not sure about the benefits of putting it in different names.
Thabks for the info.Hi,
Good idea and why not!!!
The only thing you need to consider is this:
1) When you sell the house you will have to pay agents fees "etc"
2) What if you don't get the price you want? Do you have a back up plan?
3) When you buy a new home you will have cost such as stamp duty "etc"
4)Pay of the PPOR – I will never pay my home loan in full, I want access to my loan!!!
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Hi there
You mentioned "I eventually want to build a duplex and move into one side which is why I wanted to keep my new PPOR as an I/O loan."
Just wondering why you want to do this? Is it because you want a relative to live next door to you or something like that? If not, the goal shouldn't be "to live in one half of a duplex" it should be "to live in a property that you enjoy living in and which is near the facilities you require, and which also leaves you in the best financial position". If that means you live in a small freestanding 2bedroom house and all your IPs are also freestanding houses then so be it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JacM,
The reason i eventually want to do build a duplex and live in one side is for a couple of reasons.
1) We have only ever built properties brand new and we still wanted a "nice" newer house for ourselves. Something that we can stay in for many years while we cement a decent property portfolio.
2) It may sound silly, but we have a couple of nice jet skis and I often have to take one off the double trailer. I need space to do this and a single garage won't cut it.
In regards to a previous reply – We understand that there will be selling costs as well as stamp duty on newer place, however, we see these as a short term cost that will be out-weighed by long term achievements. My initial goal is to become mortgage free. This doesn't mean I pay off my entire loan. My understanding is that our new place will be around the 250k mark and we'll soon have 250k in the offset account. Purpose being that we are then able to direct our finances into the offset accounts on other properties. It also means that when I build a duplex I'm able to take out my finances and turn it into an IP???
Hope I have this all correct as this is the path I've directed us towards.
Just be sure to set the structures and finances up correct from the start or your aspirations to grow your portfolio can come to a grinding halt.
Contact one of the gun mortgage brokers on these forums such as Terryw (who already replied in this thread), Qlds007 or Jamie M
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Guys,
Almost 2 years later and I felt like writing an update:
I am now 27 years old, still married :) and no kids on the scene yet. I’m still property investing and here’s where I am up to:
Combined income is around the same $190000.
Investment property 1: (2012) Purchase price $245000, Bank valued at $305000 on I/O, secured by itself – rent $310 p/wk.
Unit 1: Build price $235000, Bank valued at $300000 on I/O, secured by itself – $295 p/wk.
Unit 2: Build price $235000, Bank valued at $310000 on I/O, secured by itself ($180000 in offset account and I’m living in the unit)
Investment property 3: Purchase price $269000, recent purchase, cash security term deposit of around $56000 – rent $320 p/wkThis is a very neutral type of set up for me and this is how I prefer to do it. I know that I could release some equity and pick another house or two, but I like the buffer they provide and I also like the cash flexibility per week.
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This reply was modified 9 years, 1 month ago by
bullet46.
Good work – what would the PPOR you sold be worth now and do you regret selling?
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
Good question – the PPOR would probably be worth $440000… I will always regret letting that house go however, I really feel that by selling it I have kick started myself to invest further. I also look at the equity I have created in the duplex and can see it exceeds equity I had in the PPOR.
I know that by building up my offset account and then lashing out 20% deposits is probably not the best way to go I.e. Non tax deductible deposit. However, I like the goal of having to build up the offset account each time otherwise id probably spend money on stupid boys toys. I guess if I was 100% driven to not buy those toys then my best bet would be to run the properties at an increased LVR and form tax deductible deposits through releasing equity – something to think about I guess.
It’s quite nice that you returned to let us know how you’re going now after originally posting this thread :) Good on you !
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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This reply was modified 9 years, 1 month ago by
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