- WillKParticipant@willkJoin Date: 2014Post Count: 1
I’d like a bit of advise/opinions on my situation.
I’m 33, living in Sydney I’m employed earning about 96K per year plus super, I’ll be on maternity leave from April with my second child. I have 28K in my offset account, saving for my second property.
I have 1 investment property with a value of 400/410K with a loan of 330K. It’s currently rented and made a profit of 2K last FY, should be a bit more this year.
My husband is going through a long drawn out property settlement so isn’t included on any of my calculations.
I am due to receive an inheritance of about 500K early next year.
So far, my idea is… Put 300K in my offset account so I won’t pay any interest on my rental and purchase my second property and minimise the interest on that one. Use the income of the properties to pay off the bank loans and purchase further properties.
I’m really interested in hearing your opinions on what you would do in my situation.
WillTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
Do you have a main residence? If so then I would pay this off. If not then I would buy one. You can then leverage off that.
Get some legal advice on structuring things for tax effeciency and also asset protection.BennyModerator@bennyJoin Date: 2002Post Count: 1,416
And a big welcome to you too – I hope you find good information on here to help you on your journey.
You have indeed set yourself on a wealth path, and the inheritance can only help….. What you should do may well be quite different for different people, depending on each one’s goals. e.g. Paying off a rental IP would be a VERY conservative move, slowing your path to financial freedom. In return though, such conservatism is a very safe path too.
If on the other hand, you were wanting to GROW your portfolio (as you indicate you want to do) then I would offer an alternative to this :-
Put 300K in my offset account so I won’t pay any interest on my rental and purchase my second property and minimise the interest on that one. Use the income of the properties to pay off the bank loans and purchase further properties.
Terry has already mentioned “buy a PPOR if you don’t have one” – and that is a sensible use IF it suits you to do so (you might be in a situation where purchasing a PPOR doesn’t make sense right now – e.g. if working out-of-state, and wanting to buy only when you “come home again”).
My thought would be to pay down any/all NON-deductible debt – your PPOR (if you have one), car loan, credit card, etc and not even look at paying down IP (deductible) debt at this stage. Instead, use some $$ as deposits on more IP’s, then use the Offset accounts to “Store” cash (and reduce Interest too) until another good buy comes along.
Nothing wrong with paying down debt at all – but do it in the right order (NON-deductible first). The use of an Offset provides a way to simulate “paying down” an IP mortgage without losing the flexibility of access to YOUR $$ when a “better use” option comes along for you.
Bennyvagirl2012Participant@vagirl2012Join Date: 2012Post Count: 47
Def get some advise from a financial planner / lawyer. Paying off your PPOR would be the most sensible option IMHO but you really need to get some proper advice. Good luck!blackhotelParticipant@blackhotelJoin Date: 2010Post Count: 140
Just food for thought – My friend got a large inheritance and paid off her PPOR. However, now separated she is going to lose this $$$ upon the sale of the home (50/50 split). I would make sure you have an agreement with your husband first before paying off PPOR. Also, lawyer told her it would’ve been better for my friend to buy a property in her own name using the inheritance. She would’ve ended up holding 100% of the property.TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
She would’ve ended up holding 100% of the property.
Good point, but this isn’t necessarily the case. It would all depend on a number of factors s79.