Hi,
This is my first post in this forum so hopefully I am in the right area.
We are in a situation where I am a little unsure as to whice direction to take. We currently have a rental property that is pretty much neutrally geared (-$300 month) on the Coast near the water. I have secured free rent for the next couple of years, so my wife and I (no kids) have just been putting all our wages on to the loan to get the mortgage down. We estimate that we will knock off about 20% of the loan each year.
I was wondering if during our free rent period we might be able to take a few calculated risks and invest in different options wheter it be property or the sharemarket. I am a little hessitant in long term property investment as we will not have rent free for ever and I don't want to be over capitilised once our rent free period runs out. So I was looking at the following options:
1. Keep paying our mortgage down and wait until our PPOR is stabelised to see what we have left
2. Invest heavily in the sharemarket while we can take these risks and scale back once our free rent period is over
3. Build a new home and try and sell it within our free rent period. worse comes to worse we just move into our new home after our two years of free rent.If anyone else out there has other ideas or suggestions then it would be great share them with me.
Thanks in advanced.
Hi,
After reading a lot of posts, I just thought that I would add a bit more detail to our situation
Cashflow – very good, essentially we have very little expenses, no rent.
Current Investment Property – very good location, worst house in the best street scenario, not really looking to renovate however we do eventually want to knock down the house and rebuild. Tenants are good and have signed a 12 month lease.
Family Status – Looking at having kids late 2010/2011, so the cashflow will be a little less after that
Mortgage – P&I loan, no fees, 100% offset account, variable interest rate
Hope this helps.
Hi
Do you intend to live in the rental property later on? If not, I would be reluctant to pay down the loan as once you pay it down, any withdrawal later will mean the interest will only be deductible if the funds are used for investment/business. So you may end up with a investment property with a very low loan, no cash, and then wish to buy a house to live in and have to borrow the lot. Better to use a 100% offset account.
These day I like shares more than property. You must be very careful though as things can get rough, so you need to do a lot of research and minimise your risks as far as possible. I think since you have free rent, then you might as well invest at least what you would have been paying in rent, and maybe more.
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
Hi Thanks for the reply. Any property that we buy would purely be for investment. Our primary resident will be the location where we have the free rent.
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