Hi,
New to this game but having read quite a few books on +ve cash flow properties etc I would like to know what the general consensus is on paying off your own home and then using that equity to finance investment properties, or whether it is better to leave some alance on your home loan and use the cash as deposits for possible cash flow properties – especially at this stage of the market cycle. I am coming into a decent amount of cash after a business sale that would pay off my sizeable home loan and leave me debt free abeit with a reduced personal income. I wish to start investing in +ve cash flow properties and do have both a family trust and company to do this with – is the trust a better idea?
Any thoughts would be helpful.Woodo[strum]
Must admit with my wrap business we have always been advocates of + cash flow so maybe a little biased.
What is to stop you doing both. If the cash flow is + or at least not negative then the IP loan will cost you next to nothing and you can still reduce your non tax deductible debt.
Important thing to remember is to ensure that you structure the loans correctly to ensure maximum tax effectiveness as well as accessibility when it comes to your funds.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Dear woodo,
If I were you, I will use the equity in my current property and the cash from sale of the business to invest in properties.
The trust and company set up is the way to go from asset protection point of view. Bear in mind there will be ongoing fees (ASIC, accounting, etc) but its a small price to pay to protect your
ass(ets). You will need to seek legal and finance/acountint advice if you decide to do a trust and company setup.
All the best,Sanjiv
“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
I would prefer to pay down my home loan first, and then immediately redraw and invest. It works out the same, but you are increasing your tax deductions of interest.
Terryw
Discover Home Loans
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I think it is important to talk to a accountant and mortgage broker about this. You have to be able to clearly demonstrate that you used your loan on your PPoR for an investment.
You may have to restructure your loan to achieve this.
But in general you will be better off by first reducing your home loan.
Good Luck
I agree with Terry;
get rid of the non-deductable debt, then immediately redraw some of the equity to invest in more assets with deductable debt.
The accountant can advise on the structure.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Thanking all for their advice on this topic.
I see the overwhelming response is to pay off the PPoR , but as I understand it retain my original loan as like a line of credit , using these funds to purchase the IP’s. The only concern I would have is that would this mean I am using the equity in my PPoR as collateral for the IP’s? In his books, does Steve not say that it is better not to use equity in a current proerrty, rather to buy using a 20% deposit of cash the loan the 80%?
Thanks for any responses.
Woodo
[strum]Woodo
Keep you loan as is and get another loan as a LOC secured against your home. This loan can be used as deposits so your new IP loans can be stand alone – ie not cross collateralised.
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks TerryW I will look into it that way.
Woodo[strum]
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