All Topics / The Treasure Chest / How financialy creative are you?

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  • Profile photo of DinoWebDinoWeb
    Join Date: 2003
    Post Count: 59

    Here is a chance to test yourself against the other “guru’s” on this forum to see if you can come up with the best, and most creative way to maximise the investment potential of the following scenario.

    A man in Qld owns a PPOR and an IP.

    The PPOR is currently valued at $175,000. It was purchased a little over twelve months ago with a P&I loan for $145,000, with $143,000 still owing currently at 5.77% variable.

    The IP was purchased seven years ago (as the original PPOR) for $100,000. It’s estimated value is now $138,000. There is an IO loan of $80,000 at 6.02% variable, and is rented for $180/wk.

    These two properties are adjacent to one another, with similar size blocks and both therefore have similar council rates of about $1,300/yr each.

    The man manages the IP himself, ie there are no management fees currently associated with it.

    He has little or no cash savings at the moment, but no other debts, and can probably spare another $60 per week towards investing.

    The man would now like to invest in further properties, but is undecided on the best course to raise the capital.

    Selling the PPOR is not an option, but almost anything else is.

    Taking into account any and all applicable fees and charges (eg CGT, loan refinancing etc), what can he do?

    (OK I am “the man”, and I’m really just looking to get cheap advice. Any ideas?)


    “If you don’t know where you are going, every road will take you there.”

    Profile photo of battz71battz71
    Join Date: 2003
    Post Count: 95

    Cheap advice? You know what they say about paying peanuts……[;)]

    Profile photo of Brett2Brett2
    Join Date: 2003
    Post Count: 29

    If you own both and have good amount of land maybe a subdivision might be an option if you dont want the back yard. Depending on what blocks of land are worth at the moment and whether you have enough land.
    Regards Brett

    Profile photo of AdministratorAdministrator
    Join Date: 2013
    Post Count: 3,225

    Please, can you provide:

    Monthly repayments for each, P&I components.
    Other costs apart from council rates for each.
    Annual income, not including rent.

    Also, what investment vehicle do you prefer:
    Direct equities
    Direct property
    Other – please specify (eg gold, bonds, etc)
    Managed funds (indirect investing in one or several of the above)

    Lastly, supperannuation amount and approximate years to retirement.


    Profile photo of AdministratorAdministrator
    Join Date: 2013
    Post Count: 3,225

    Hi Dino. You still there? If you’d rather email the information, try [email protected]

    If you don’t need any further help, no worries.


    Profile photo of ANUBISANUBIS
    Join Date: 2003
    Post Count: 559

    That’s great Dino.[:D] Had a good chuckle at the creative scenario. Hope you get some good advice.

    Profile photo of crashycrashy
    Join Date: 2003
    Post Count: 736

    sell to a developer with a 1st option or buyback clause

    Profile photo of BillfromozBillfromoz
    Join Date: 2003
    Post Count: 381

    G’day Dino….

    You said “creative”…try this. The ATO recently lost a court case regarding what I’m about to show you….so it’s legal.

    Assumption: That both your loans are with the one Lender. If not consider changing, so that they are with one lender.

    You have one loan @ $143,000….no tax deduction.

    The other loan ( on IP should be a Revolviong line of Credit (RLOC) for say $110,000)
    Total of 2 debts is $143,000 + $110,000 = $253,000
    Once the IO loan is paid out you have $30,000 available as deposit and costs for another IP.

    With the RLOC you have a monthly interest bill of $568. Insread of paying interest on this loan you reduce the principal on your PPOR by $568. The interest is compounded on the investment property until such time as your PPOR loan is zero. You also pay the IP rent into the PPOR loan. I could do the sums for you…but I won’t. Your PPOR will be zero within 5 Years or so…maybe less.

    Your lender is only interested in your total liability and of course your current payments…you just need to set it up differently. They will accommodate this “creative approach”. Effectivley you get a tax deduction in month 1 for the interest, and in month 2 tax deduction on interest plus the interest on the interest.This continues until you have zeroed the debt on your PPOR.

    If I have lost you…send me an email and we can swap tel. numbers

    [email protected]



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