All Topics / Help Needed! / Time to invest or time to pay down loans and save ?

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  • Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

     Hi
    With the recent int rises and a possible 2 future ones predicted.Im looking for some feed back from more experienced investors on what are some of my options…
    I have 4 ip's owned under a family trust/company structure. The I.p's are held in the company name and all are with good  tenants.
     
     1, bank valued $165k  loan 99k    7.79% fixed  3 yrs Int Only Balance/31months repay $660  Monthly income 160perW
     2, bank value   $160k  loan 99.5k 7.97% fixed  3 yrs Int Only Balance/31months repay $660  Monthly income  150perW 
     3  bank value   $130K  loan 49K    8.07% variable     Int Only 53K in interest off set  No repaymnt       income 150 perW 
     4  Bank value   $125k  Own this one out right so no mortgage                                                          income 150 perW
     
    PPoR Bank value $340K(3 yrs ago) interest Only investment loan 128k 8.77% variable with 38.5k in interest offset $963 minimum monthly re payment, I pay 1200 monthly +-

    I was thinking that given the above, what are my best options…..
    Do I pay off the 49k loan with cash and use some of the 42k  left as a deposit  and use the equity in IP's 3 and 4 to borrow 80% equity (200k ?)  ?
    I have my eye on a few I.P's with in my budget but I see Interest rates are  going up so I am cautious if this is a good option at the moment.
    I don't think cash flow is going to be a big problem as I live  a pretty simple life style and have a workable budget keeping my expenses to a minimum($1,500mnth) and save the balance of my income into the 2 offset accounts.

    I was leaning towards paying off either the 50K  fixed loan  and or a large portion of the Loan Over the PPoR, and moving the savings on monthly repayments over to the 2 fixed loans and the balance of  which ever offset loan is left…

    Any feed back from some of the more experienced investors on what might be the best option to take would be appreciated..
    thanks in advance to all !

    nucopia                   

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    A  property that returns 20% in today's Aus r/e market?

    Nope.

    It's a scam.

    Maybe a listed property trust may do it; but not direct property.

    I guess if you added the rent return and the cap growth together you can get 20% return.

    If you have any cash, and have non-tax deductible debt, then clear that debt. So, the PPoR, and/or other doodad loans.

    Try to arrange it so that you can redraw the cash if you need to in an emergency; either through an offset on the loan, or a LOC.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Marc

    Another new member offering financial advice dont you love it.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    Yeah Richard;

    it makes me sick.

    That's why I think it is imperative that the more experienced forumites get onto these posts quickly to alert the newer forumites to the (possible) dangers.

    Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

    Thanks Gabriel
    Sounds to good to be true…..

    L.A  …no debt other then the investment loans..  Credit card is Paid in full on statement date, so 0% interest !. (love using their money  but hate to pay interest !)  I am holding all my cash surplus in 2 offset accounts linked to 2 variable interest only loans 50 k is over an I.P 128K is over my PPoR… I can pay the  50k out completely or the other significantly… 
    So the total monthly interest due is well below my cash in every month and the accrued surplus covers all the fixed expenses(rates insurance etc)
    If I have a mortgage over the I.P or the PPoR (both R tax deductible) for investing it does not worry me, and its just a choice of which gives me the most advantage later when I do decide to draw down equity ..
    I suppose I just don't like the feeling of doing nothing when I have  untapped equity  and cash coupled with my desire to acquire more i.Ps .
     Its some thing I will have to get used to.
     Thanks for the advice…  

    Profile photo of Mary WilsonMary Wilson
    Member
    @mary-wilson
    Join Date: 2008
    Post Count: 3

    Wow,

    Marc, Richard, you guys sound a little like forum snobs! Quick to call things scams if you have never interacted with it yourself, Gabriel you seem to have something worth exploring, any chance that you could suggest some sites for further research?

    Cheers,

    Mary W

    Profile photo of red123nzred123nz
    Member
    @red123nz
    Join Date: 2007
    Post Count: 73

    Good luck and very interested to learn as to what eventuates from the advice and what you actually do :)

    Cheers

    Sean

    Profile photo of GN FinanceGN Finance
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    @gn-finance
    Join Date: 2008
    Post Count: 5

    Hi Mary, Unfortunately I cant tell you about specific products in a forum however If you contact me via email I can Send you out the info for you to have a read through. Thanks, Gabriel

    [email protected]

    Profile photo of Aj_RichoAj_Richo
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    @aj_richo
    Join Date: 2007
    Post Count: 18

    GN Finance

    Search the name at http://www.asic.gov.au

    It will tell you all you need to know.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Mary

    I think myself along with some of the older forum members are tired of new members coming on here with an agenda whether it be to promote their own product or service or to offer inacurate advice or information.

    Realisically you have to ask yourself in the current climate how many Capital Guarantee Funds are guaranteeing 12-15% per annum.  Gabriel may well be Licensed (although an ASIC search does not reveal this) however it is dangerous practice and even illegal to tout for investment funds in such manner.

    Funny all the Westpoint promoters who were online a couple of years ago seem to have disappeared.

    I wonder why.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of GN FinanceGN Finance
    Member
    @gn-finance
    Join Date: 2008
    Post Count: 5

    Dear Mary, Richard appears to be threatened by someone else other than him offering help. Unlike richard, I am not hunting down people to try and make a profit out of them. My advice is free and with no strings. I have more than enough clients to keep me happy for a long time, so the petty little man trying to defame me can help you. However if you want free advice and be sent to an advisor in your area, who will pay me nothing for this, then you can contact me.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Lol oh yes i am on the forum just for the business GN.

    Maybe you should have read some of my posts before you make such a remark.

    All i said is if the product you are promoting is such a wonderful new product why not post some details on here so we can all see what we are missing. We dont need the specifics but merely the name of the Company and we can all do our own DD.

    I assure you if you believe your own post you live in cookoo land.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Dont worry we found the existing opportunity we were looking for.

    New" China Funds

    China is experiencing unpredecented growth, and according to the latest statistics will continue to do so until at least 2015.

     

    China is projected to be the world's largest economy by 2025, and has the highest Foreign investment in any nation in the world, with over 50Billion USD invested each month.

     

    For even the most conservative investor, the China outlook is a good opportunity to start investing, as some investment banks are even to guarantee (protect) your capital, and part of your profit.

     

    The time to get into China is now.

     

    To find out more about the various China Investment funds on offer, please contact GN Fiinance. 

     

    To learn more about the China economy, please go to our "Articles" section under Tools.

     

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of GN FinanceGN Finance
    Member
    @gn-finance
    Join Date: 2008
    Post Count: 5

    wow, richard appears to be really threatened

    Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

    Thanks
     to every one for your  specific advice to my post…
    much appreciated

    Profile photo of JohnSmithJohnSmith
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    @johnsmith
    Join Date: 2006
    Post Count: 93
    Nucopia wrote:
    If I have a mortgage over the I.P or the PPoR (both R tax deductible) for investing it does not worry me, and its just a choice of which gives me the most advantage later when I do decide to draw down equity ..
    I suppose I just don't like the feeling of doing nothing when I have  untapped equity  and cash coupled with my desire to acquire more i.Ps .
     Its some thing I will have to get used to.

     
    I would suggest you get used to having the excess cash in offset accounts, unless you can absolutely guarantee that the cash you redraw is going to be used for investment puposes. Otherwise it loses its deductibility.

    If you can use the equity built up in the current properties and use those borrowings, then all of the money used will be deductible. 

    I would only ever use cash if I had no equity left to use.

    Profile photo of GN FinanceGN Finance
    Member
    @gn-finance
    Join Date: 2008
    Post Count: 5

    Some banks have savings accounts which pay 10% p.a paid mothly and also include some capital growth of between 5 and 8%p.a
    Putting equity in there is probably better than doing nothing with it.

    You could also buy clients off a broker or advisor and earn interest from the commissions. The rate of return could be 15-19% if you find a trusworthy proffessional.
    Hope that Helps,
    Gabriel
    [email protected]inance.com.au

    Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

    Thanks John
    Yes I agree, I would only draw down equity for investing in more I.Ps .
    I have an I.P worth  125K  with 100% equity and another worth 130K with 49K owing(interest only loan) fully offset.. I could pay this off with cash and use both to  finance more I.P purchases, figure @ 80% I could use them to borrow 200K and would need maybe 35K cash to cover deposits and settlements. I would need to look at  2 houses in the 115k range I have my eye on a few places that fit this price range in Vic and a couple in N.S.W, The NSW ones are close enough that I can drive out to inspect if needed. Just not sure with the interest rate rises whats the best way to put this together and weather I should look at principal and interest loans now or stick with the int only .I think my cash flow is ok as is my borrowing capacity.
    As you can gather from my posts I dont like debt for debts sake and the way things are going interest only payments are on the increase.
     

    Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

    Hi Gabriel
    "Some banks have savings accounts which pay 10% p.a paid mothly and also include some capital growth of between 5 and 8%p.a
    Putting equity in there is probably better than doing nothing with it."

      I tried this with a CMA with ANZ found I lost most in monthly resident tax i.e interest payment was 450 a month and the tax deducted by the bank was 200+. Why should I wait till tax time to get it back when I wanted it to make the monthly repayment on an investment loan … so I was better off to have the money  in an interest off set account and get the benefits strait away.

    "You could also buy clients off a broker or advisor and earn interest from the commissions. The rate of return could be 15-19% if you find a trusworthy proffessional"
    Can you give me a more complete explanation for this please ..
    thanks for your input …
    Nucopia

    Profile photo of JohnSmithJohnSmith
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    @johnsmith
    Join Date: 2006
    Post Count: 93
    Nucopia wrote:
    with 49K owing – I could pay this off with cash and use both to  finance more I.P purchases, figure @ 80% I could use them to borrow 200K and would need maybe 35K cash to cover deposits and settlements. 

     
    sorry Maybe I am missing something, but do remember that the majority of the loans will be against the new properties, and you will only need to borrow the difference from your current properties.

    therefore why lose the deductibility on the 49,000 at all

    Nucopia wrote:
    whether I should look at principal and interest loans now or stick with the int only .I think my cash flow is ok as is my borrowing capacity. As you can gather from my posts I dont like debt for debts sake and the way things are going interest only payments are on the increase.

    I agree but you dont really have the debt or the payments if the cash is in an offset, and your loans are interest only – placing cash in the offset is better than paying P&I. Of course you still need to be smart about using it if you do.

    Within a short time with the current economic environment, having access to a pool of cash, where it may actually be difficult for you to reacess money, may put you in an enviable postion to pounce on deals that others can't.

    It sounds like you are fearful of your inability to not use the cash, and by making sure you are obligated to make the principle payments you have forced yourself to be smart. The fact you are fearful is being smart, just dont let it rule what you do.

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