Forums / Property Investing / Help Needed! / How to structure my loan

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  • Profile photo of Free@last[email protected]
    Participant
    @free-last
    Join Date: 2005
    Post Count: 13

    Hi All,

    I am looking for advice on how to structure my loan before embarking on my investment journey. My wife and I are in late 30s with two young children and based in Victoria.

    We have paid off my home now worth $800k and have $150k saving. I want to get the structure right from the beginning. My first thought was if I used up all my $150k saving for my first investment (say a $500k property) in order to arrive with LVR below 80%, then buy the subsequent properties ($500k each) by releasing my $800k equity keeping the LVR below 80% for each loan. So to be conservative, I could buy six properties in total, most probably units in outer suburbs of Melbourne. They should be in own land to maximise growth thus villa/townhouse type units. My strategy is buy and hold for 10 years while working full time with combined income of $200k.

    If I want to avoid cross-collateralise from each investment property, is this the way to go? Could you give me some tips/directions how to be cost effective in the long run and minimise tax? Is it worth to setup Trust Account?

    Thanks in advance.

    Regards,
    Jan

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    If I was you…

    Probably borrow up to 80% of the home loan on owner occupied rates and use this to purchase the investment property without mortgaging it. But it sounds like you want more properties than 1 IP so go for 80% LVR on the investment property as well.

    Once settled use the main residence loan to pay down the IP loan (to save interest on the higher rate).
    When coming up for the second IP redraw from the loan on the main residence and borrow 80% against the new property.

    For the third one do the same until you have used up the main residence loan in full. Then ideally you could try to increase the main residence loan more, or redraw from IP1 to pay the deposits.

    Each loan should have 1 security
    Becareful about hte tax aspects as easy to contaminate loans in this situation, but by doing it you could save a fortune in interest each year.

    And get an offset set up on the loan with the highest interest rate. But before that seek legal advice on which names to purchase in and have an offset account on the most tax effective and estate planning effective loan.

    A trust may or may not be good so seek specific legal advice – which only a solicitor or barrister could give.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of JaxonJaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 282

    I can answer all of this (bar the legal advice, but I can give general information to help inform you on different trusts)

    more importantly what is the end goal???
    because if its a $200k income PA from investments I would question if your on the most appropriate path there.

    happy to chat.

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