Hi All,
I have recently purchased my third investment property and would love more experienced investors to share there "Must Do's" to maximise the performance of their properties.
I have read a few books and believe I'm doing the basic things right e.g Depreciation schedules etc. But would love to hear from real investors on what really works.Are there any tricks of the trade that anyone can share.Thanks
NOS1For starters, All loans interest only.
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
Terryw wrote:For starters, All loans interest only.I have just purchased my first property, for now a PPOR but will become an IP, and am only 21 years old but I dont get the above.
If your IP is +geared paying Interest & Principal then why wouldnt you do so? In my mind paying interest only doesnt make you any money unless the house is well over +geared as your not paying anything off the actual house?
Please correct me if I'm wrong (which I could very well be as I'm the beginner of beginners) but wouldnt the best option be making money while paying I & P instead of making only slightly more and only paying I?
Also why would you both having an IP properrty thats -geared paying only I…your losing money and not paying anything off the house? Is it all for tax benefeits?
Howard cirumstances change and your loans need to be flexible to work with you.
Imagine you live in your own PPOR for 5 years pay down the debt and then decide to buy another PPOR but want to keep the old place as an IP.
You would need to borrow again to fund the new PPOR and of course all of the interest is now Tax deductible. Whats more the rent you now receive on your old PPOR is now taxable.
With a little loan planning you could have made the PPOR Interest only with an Offset account from day 1 and still have the same interest saving and then when you move out the entire amount of interest on the loan would be tax deductible.
Remember once you have paid the debt down you can not redraw the funds for personal use and expect to get a Tax break.
Even your PPOR should be IO IMHO.
Richard Taylor | Australia's leading private lender
From my experience.
Do not let your rental property turn into a dive. Keep up with maintenance to maximise rent.
Do not be afraid to regularly increase the rent every year or you will fall behind and then tenants will have trouble coping with a sudden massive rental increase from the landlord trying to catch up suddenly.
Qlds007 wrote:With a little loan planning you could have made the PPOR Interest only with an Offset account from day 1 and still have the same interest saving and then when you move out the entire amount of interest on the loan would be tax deductible.
Even your PPOR should be IO IMHO.Ideally that is what I want to do. But I found that offset account is actually costing me more (either higher interest rate or monthly/ annual fee) than just basic loan. Hence I would have thought that one of your property (preferable your PPOR) should be made PI instead of IO. The downturn I found with basic IO (no offset account) is that you can only make 10K extra repayment a year.
What do you think? Or am I missing something here?
Most of our IO loans with 100% offset are being done at around 5.10% variable so not sure there.
Richard Taylor | Australia's leading private lender
5.1% variable with offset account…… How much is the fee ?
God of money
Even the big bank can do you those rates with offset
Combank have 5.04% with 100% offset if you have there pro pack equivelant, this includes 0.7 off their standard variable.
Westpac is 5.21% with 100% offset with there pro pack but you could negotiate to 5.11% depending on your borrowings and circumstancesAlso if you talk to Mates Rates Mortgage brokers they can offer another 0.2% rebate discount on the above from yr 2 of the loan which is then on-going. So thats 4.84%
There are no fees with the above, on all your accounts, including no credit card yearly fees, plus free switching (not fixed) , top ups, est fees on new loans etc.
dont know a better deal…does anyone out there..
Event Horizon
Just to correct you there. CBA is not a fully transactional offset account so doesnt suit the purpose of most borrowers.
The extra 0.15% off the fixed rate is available only through the CBA Pro pack and has an annual fee of $350.
The 0.2% is also available with another major but again has an annual fee.
There are a couple of deals with lower interest rates but that all have some disadvantage.
Richard Taylor | Australia's leading private lender
Is the amount of equity required for I/O any different from that for P/I?
I'd like to ensure that we build equity at the fastest possible rate. I always thought that meant paying off the loan. How can you strucutre your I/O loan with offset account so that you make sure you still build equity as quickly? Would you periodically transfer lump sums out of the offset into the loan? and try to keep up with a PI loan schedule, over the years? Do you structure a seperate loan and a seperate offset account for each property?
cheers
SShales
Q- Do you structure a seperate loan and a seperate offset account for each property?
No need. As long as the loan amount is > than the offset amount you can maintain 1 offset account.
This assumes all of the properties are held in the same entity name.
Richard Taylor | Australia's leading private lender
the important thing about interest only loans is that it increases your serviceability
Hi Alani
Sorry dont always agree with that as most lenders work out what the Prinicipal & interest component of the loan would be even if you take out an interest only loan.
Richard Taylor | Australia's leading private lender
Hi Richard… what do you mean by not a full offset account?
Do you think it is good idea to even pay Interest Only on your new PPOR with a offset attached? I am thinking that is a great idea because you still paying down the principal debt be it in the offset account. You also have access to the equity if you need it straight away. Instead of reapply for increase on loan.
postenterprise you thinking is correct
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