Hi,
I've recently been thrust into the world of investment property because I've moved inter-state. I've leased my Sydney property and I am renting in QLD (with a view to buying in the next six months). Now this may be a big question, but can any one advise me on how to structure my mortgage/property to maximize returns/tax and is this a good investment property to have?
Below is a quick summary of my position:
Property value $750K
Remaining mortgage $370
Rent p/w $747
Total Expenses for the year (including mortgage interest) $33kDoes anyone have any ideas?
Hi Daniel,
Your mentioned the "remaining" mortgage amount.
My first suggestion would be to change the principal and interest loan over to an interest only loan with a 100% offset.
This way, you can keep all the money in the offset for when you buy a PPOR, and still preserve the deductibility of the investment property when you pull the cash out.
In terms of whether or not it is a good investment property to have, it's too hard to say without more info.
YI has beaten me to the punch but a clean Interest only loan with 100% offset account would certainly be the way to go.
Direct all of your income, rent etc into the offset account and then have the monthly interest swept from the same account.
When you buy your new home in Qld split the loan so you borrow 80% of the purchase price on the security of the new property and the balance of the 20% can be secured against the existing IP. Might have to switch the offset account to the secondary split loan to make sure the right loan is having the interest offset against it especially if the new home is for owner occupation.
Richard Taylor | Australia's leading private lender
You have a lot of opportunity. You are in a nice position. It may be worth your while sitting down with someone to start learning and learning well. A several paragraph response should not be enough to outline /plan your future. I know Richard who often responds on this site is in QLD.
Hi Guys,
Many thanks for your feedback. I think the interest only is the way to go.
Young Investor – re: your comment on whether it is a good investment. I've worked out that by the end of the year I'm about $5k positively geared. Is that good? The property itself is an 8 year old 2 bed, 2 bath unit in a block of twenty in Balmain. The big selling point is that it has uninterrupted 180 degree views of Sydney harbour facing west.
Your thoughts?
@ Daniel – You say it is $5k positively geared and you ask if that is good. See the problem is what is good for one person might not be good for another person. For someone earning $40k/year in their job, an extra $5k from their investment would be awesome. But someone earning $200k per year, then $5k would be pocket change.
It all depends on your goals and what you are trying to achieve from investing. I can achieve $5k per year (almost) in passive income on a property worth one tenth of the price of your property. Does that mean it would be a good investment for you? Not necessarily. It depends on your goals.
Do you want growth? Do you want passive income? Do you want to invest in capital cities because you feel they are safer?
Your property sounds pretty good. Having $230k in accessible equity puts you in a really good position to buy again.
I would look at buying a place to live in in QLD, but I wouldn’t stop there. If it were me I would be looking for a whole bunch of cheap positive cash flow properties to get your passive income up and spread your risk and growth potential over a few different areas.
Having tax benefits on losses is good, but it is always better to make money and pay tax than to lose money and save some tax. Well I think so anyway.
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click AwayRyan McLean | On Property
http://onproperty.com.au
Email MeA "good investment property' is a property that you would buy for investment purposes. Is your existing property is a desirable investment? ie readily lettable at a good rent with potential for capital growth.
Is major capital expenditure requiring special levies likely in the next 10 years?Get a depreciation schedule done.
Ryan,
….and the exit strategy for buying a "whole bunch of cheap" is what (particularly if the property market trends south and you have purchased a whole bunch)? Is that cheap, as in nil growth -cheap. Oh that is right, all properties are the same and grow equally, as you mentioned in another response this morning.
You may need to back up your response with a little evidence, as you may be misleading people.
Hello Friend..
As is the case for any other investment, high returns in property investing can be achieved if one can sell considerably higher than the purchase price. Such a strategy will be highly profitable, since it will allow large capital gains (the difference between sales and purchase price). Simple logic suggests that selling at a price that is considerably greater than the purchase price requires that:
a) The value of the property increases considerably after its purchase
b) The property is purchased considerably below its market value, because of a rushed sale or other special circumstances.
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Montgomery County Real Estate
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