Cash Bonds
- Thread starter qaz
- Start date
qazwsx,
Basically a cashbond is an annuity that you buy from an insurance company or other issuer.
What you do is give them an amount of money & they pay it back to you with a bit of interest over a period of time.
For example, you could take out a 3 year cashbond at 4% interest for $150,000 with a annuity provider. On this basis you pay the provider $150,000 cash up front and the provider would pay you $50,000 plus the interest each year for three years (on a monthly or fortnightly payment basis). At the end of the period the provider would have paid out the cashbond & you have your money back plus the interest.
The returns you get from cashbonds will tend to be around the level of interest paid on bank deposits - however different providers are likely to offer slightly different rates & time periods.
The strategy of using cashbonds as income (in a nutshell) is that you draw down equity from IPs (via a loan) and invest it in a cashbond.
The income you receive from the cashbond is tax-free except for the interest component and the tax on this can be offset against the tax-deductible interest charged on your equity loan.
Now this does cost you money - generally you will pay more interest to borrow money against your equity than you receive from the cashbond.....HOWEVER the aim is that as your IP increase in value over time so you stay well ahead.
This strategy is particularly useful for people with lots of equity in their IPs but limited (or no) income. They can convert their equity into income either for living or for use as a proven income stream to increase their loan limit to buy more investment property.
Note that this is only a nutshell explanation & there are lots of apparent holes in the strategy. There can also be ATO concerns over the structuring, however this has proven to be manageable.
For a full overview of how this strategy can and has worked I would suggest you attend one of the seminars by Steve Navra of Navra Invest (www.navrainvest.com.au).
There are also some threads n the forum discussing cashbonds, you can search for them using the Search button above or clicking here: http://www.somersoft.com/forums/search.php?s=
It is a complex area and it is definitely not for amateurs - do NOT use cashbonds in an investment strategy without plenty of expert advice!
Cheers,
Aceyducey
Basically a cashbond is an annuity that you buy from an insurance company or other issuer.
What you do is give them an amount of money & they pay it back to you with a bit of interest over a period of time.
For example, you could take out a 3 year cashbond at 4% interest for $150,000 with a annuity provider. On this basis you pay the provider $150,000 cash up front and the provider would pay you $50,000 plus the interest each year for three years (on a monthly or fortnightly payment basis). At the end of the period the provider would have paid out the cashbond & you have your money back plus the interest.
The returns you get from cashbonds will tend to be around the level of interest paid on bank deposits - however different providers are likely to offer slightly different rates & time periods.
The strategy of using cashbonds as income (in a nutshell) is that you draw down equity from IPs (via a loan) and invest it in a cashbond.
The income you receive from the cashbond is tax-free except for the interest component and the tax on this can be offset against the tax-deductible interest charged on your equity loan.
Now this does cost you money - generally you will pay more interest to borrow money against your equity than you receive from the cashbond.....HOWEVER the aim is that as your IP increase in value over time so you stay well ahead.
This strategy is particularly useful for people with lots of equity in their IPs but limited (or no) income. They can convert their equity into income either for living or for use as a proven income stream to increase their loan limit to buy more investment property.
Note that this is only a nutshell explanation & there are lots of apparent holes in the strategy. There can also be ATO concerns over the structuring, however this has proven to be manageable.
For a full overview of how this strategy can and has worked I would suggest you attend one of the seminars by Steve Navra of Navra Invest (www.navrainvest.com.au).
There are also some threads n the forum discussing cashbonds, you can search for them using the Search button above or clicking here: http://www.somersoft.com/forums/search.php?s=
It is a complex area and it is definitely not for amateurs - do NOT use cashbonds in an investment strategy without plenty of expert advice!
Cheers,
Aceyducey
