hi
its so hard to find a positive income property at the moment. Is an interest only loan the way to go, to make it easier???
also
what about the Morwell area???It all depends on where you look. You need to look outside your own city a lot.
Interest only loans are good but it depends on your own curcumstances on how you want to do your finances. If you go Principal and Interest (P&I) this will get you more equity in the property faster and then you can borrow against this to buy more property.
Have you read any of the positive cashflow books out there? Do so and this will give you more insight.
thanks.
Im looking forward to the challenge, but believe things should be done right. when your talking $100K+ for most properties then 1 mistake is very costly.
I have just brought my 1st investment property and “silly me” only now realising that negative gearing is NOT the way to do things.Should have read “steves” book 1st!!
Knowledge and experince can change a lot of things you do.
Read a lot but don’t rely on 1 Author. There are at least 3 others out there that are Australian that I know of as I have their books.
Yes negative gearing is to be avoided.
thanks.Im looking forward to the challenge, but believe things should be done right. when your talking $100K+ for most properties then 1 mistake is very costly.
I have just brought my 1st investment property and “silly me” only now realising that negative gearing is NOT the way to do things.Should have read “steves” book 1st!!
It seems the light bulb is really starting to go on re interst only loans – have recently reverted all loans to p&i – interestingly the bank was trying to talk me out of it!?[
][][!]Any comments?
Cheers,
Sparkle[
]yea,
there must be a place for interest only loans. Using them you can have positive income from a ppty and use that income to fund other investments. Why is it then that so many people dont use them.
Is there a hidden cost??g’day garfield
heeps of people have interest only loans.
i think due to the ‘hot’ market people are changing back to p&i. more equity is safer
should the market change.hi Aussie,
This is really interesting, whats more important capitial gains or a positive return????
Obviously the best of both worlds is ideal BUT surely “a bird in the hand……!!”
if people think that the market is changing WHY INVEST NOW !!!.
thanks….for your comments.Hi Garfield
your right,[8D] I to have used this stratigy(spellcheck) my thinking is that at this point in the market locking down equity & increasing more funds to redraw on seams a safer option….just my thoughts.
Sparkle[
]thanks Sparkle,
i must say the whole things gives me a headache [
]
If Im confident that my property will not decrease in value then I assume that interest only is the way to go!!
Even if the property does decrease in value then this is only realised if i sell it when the market is down.
Thats sounds like its the best option either way.
what am i missing????Sparkle, you said “It seems the light bulb is really starting to go on re interest only loans – have recently reverted all loans to p&i – interestingly the bank was trying to talk me out “
The fact is that one can have one’s cake and eat it as well.
What are the advantages of paying P& I and what are its disadvantages ?
Sometimes one’s circumstances change. For example borrowers have been sold up by the bank for being behind a mere couple of thousand dollars.
In one specific case I can remember if the borrower had had an interest only loan (with a redraw facility) instead of a P&I loan (and made payments at the same rate as if it was a P&I loan) he wouldn’t have found himself in this unfortunate situation.
All those people who insist on having a P&I loan because of the safety it supplies have got it all wrong.
If one is motivated to reduce the principle amount as much as possible and as soon as possible why not take out an Interest Only loan and make payments as if it was a P&I loan.
If one ever found oneself in the unfortunate situation of having a cash crises the redraw facility will save the day and tie us over.
Pisces133
I agree Peter – the other way is to have an offset account on an I/O loan where you throw all your spare cash and get it 100% deducted from amount owing (hence effectively interest rate return) but it’s freely available to pull out and use anytime.
Offset accounts also have a great tax advantage as per following example:
Have own home worth $200K, loan of $100K. Want to buy new O/O home worth $300K and keep current home as rental. If you refinance current loan back to $180K and use extra $80K as deposit on own home then despite the old home now being a rental, you cannot claim the interest on the extra $80k on tax as it’s PURPOSE is for your new personal home loan [
]. If you’d had the original loan on I/O and $80K accumulated in your offset account, hence you are only paying interest on $100K as per previous, then used the $80K to buy the new home then the full $180K loan on the first house is tax deductible.Make sense? [?]
Mel
[]Changed over to an IO from P&I on one IP and will do so on the other once the introductory rate changes.
I still owe a reasonable amount on my PPOR, so I’m going to work to get that down to zero before doing the same thing on my IPs.
I figure that given I can’t claim tax deductions on my PPOR, I might as well be using the principle to completely get rid of that loan first.
Anyone see any problems with that logic? All loans are separate, so there should be no tax problems.
Hi Melanie
Have own home worth $200K, loan of $100K. Want to buy new O/O home worth $300K and keep current home as rental. If you refinance current loan back to $180K and use extra $80K as deposit on own home then despite the old home now being a rental, you cannot claim the interest on the extra $80k on tax as it’s PURPOSE is for your new personal home loan . If you’d had the original loan on I/O and $80K accumulated in your offset account, hence you are only paying interest on $100K as per previous, then used the $80K to buy the new home then the full $180K loan on the first house is tax deductible.I don’t think I understand what you are saying. If the $80k in the offset is used for OO purposes then why would it be deductible?
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auNaughty Johnny…
Firstly, when are you going to say sorry…
Secondly, where are the WMD’s in Iraq? I reckon you and Mr Blair and George Dubya have had a few chats about them over a couple of frothies…
Thirdly, I’m pretty much taking the strategy of IO on my 6 IPs, while getting my PPOR paid off as quick as I can… it’s got a line of credit as well, which I use for deposits and costs, so the interest on it is deductible (at least that’s what my accountant said)
Cheers
rHi Stuart,
Basically in scenario 2 with the offset a/c, the ACTUAL loan a/c balance never altered from $180K cos it’s I/O (but because there was $80K sitting in the offset a/c your repayments are calculated on having $100K loan only). If the ACTUAL loan a/c balance is decreased, eg through P&I or extra repayments, then you draw funds directly out of the loan and the tax man looks at the purpose for that redraw and if it’s personal, eg deposit for new PPOR, then you can’t claim it.
Make sense?
There are probably lots of other traps and methods too I haven’t figured out yet, but I’m learning heaps from this site.
Cheers,
Mel
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