AU$350K to invest ? PPOR or IP

[jazzlobber]

Hi there, we are just about to sell our property in Ireland and have recently moved to Melbourne, when the monies clear, would expect to have in the region or 340-350K AU$ depending on exchange rate etc.

Just to give you an idea the irish property market is totally nuts has been in boom for last 10-15 yrs, bought jan 2003 for 225K euro and sold for 401k euro in June 2006. i figure that kind of growth can't go on forever and feel the market could collapse over there and since i wasn't there just sell the place.

We are currently here living in a rental in Altona and are interested in maybe purchasing our PPOR, in western suburbs, maybe something in Point Cook for example, thus we have the option of purchasing a 2nd hand home and having no mortgage, i.e. buying a house with the readies from the house we sold in Ireland, that would probably get a nice 3bed in point cook.

This would leave me the option of getting a mortgage here with a bank and purchasing an IP, i'm not sure but would reckon a lender would probably lend me around 300K AU on myself and my partners salary, but not sure, need to speak to a financial advisor first.

I'm interested in maybe getting one IP and testing the waters with that and see how it goes, as i'm new to property investment etc

Any advice on what is best to do with the cash? i'm not looking for anything too risky,

We currently have a lease here for another 11 months so i'm not going to jump into anything quickly and plenty of time to do more research and speak to lenders etc.

But i get the feeling that Melbourne is slowly starting to get back on track with respect to growth CG in property.

cheers

jizz

 

[The Y-man]

, but not sure, need to speak to a financial advisor first.

cheers

jizz

Being pedantic, but don't talk to a financial advisor about this - talk to a good mortgage broker
(I'm sure that's what you meant)

Cheers,

The Y-man

 

[Dazz]

Classic name.....you're obviously not a woman.....extremely surprised they allow a name like that to be used on here. I read somewhere this site was meant to be G rated ??

 

[pete_w]

if i were you i would buy a ppor, get an interest only LOC on it, and use that for deposits on ip's as much as your servicability will allow. so you buy a house for $350k, once thats settled, go see a mortgage broker and arrange a LOC against it, so you can access the equity. accessing will incur interest payments, but providing you use it for investment only the interest paid will be tax deductable. once thats established you can use your LOC as a source for a deposit on an ip + expenses. each ip should be financed seperatly from your ppor to avoid cross collaterisation, which will tie up any subsequent equity from any capital gain.

when you get your ppor, be wary of the expenses involved, bying furniture, stamp duty etc, they can all add up though will vary depending on how much stuff you have already. you can use you LOC for non investment purposes to pay for that sort of stuff but it becomes a bit of an administrative burden when it comes to calculating what % of the interest you can deduct. if you use your loc for income producing assests (investing) as well as personal expenses you can only deduct the % of interest used for investing, so its best to avoid using it for personal stuff to save the hassle.

 

[alexlee]

You can also get a 80% LVR on the PPOR and put the rest into an offset account. Better setup if you plan on moving PPORs in the future.
Alex

 

[jazzlobber]

Classic name.....you're obviously not a woman.....extremely surprised they allow a name like that to be used on here. I read somewhere this site was meant to be G rated ??

I'm sure i don't know what your ever on about, its the title of a FNM song from years ago.

LOL

 

[jazzlobber]

if i were you i would buy a ppor, get an interest only LOC on it, and use that for deposits on ip's as much as your servicability will allow. so you buy a house for $350k, once thats settled, go see a mortgage broker and arrange a LOC against it, so you can access the equity. accessing will incur interest payments, but providing you use it for investment only the interest paid will be tax deductable. once thats established you can use your LOC as a source for a deposit on an ip + expenses. each ip should be financed seperatly from your ppor to avoid cross collaterisation, which will tie up any subsequent equity from any capital gain.

when you get your ppor, be wary of the expenses involved, bying furniture, stamp duty etc, they can all add up though will vary depending on how much stuff you have already. you can use you LOC for non investment purposes to pay for that sort of stuff but it becomes a bit of an administrative burden when it comes to calculating what % of the interest you can deduct. if you use your loc for income producing assests (investing) as well as personal expenses you can only deduct the % of interest used for investing, so its best to avoid using it for personal stuff to save the hassle.

Thanks for that information Pete W - it sounds like a very tax efficient method of getting the first IP, i do a bit more thinking and research about that cheers

 

[landlubber]

You're in a great position !!

Jizzy,
I'm assuming that (1) you're planning to settle in melbourne for "a while" and (2) you and your partner have "reasonable" salaries with "reasonable" security of tenure 3) you HAVE read Jan's books so you understand clearly the detailed mechanics of IP investing. THEN ...Here's the plan.
a) put $50K in a cash management account (that's your security blanket and for IP emergencies.)
b) go and buy the PPOR that you LOVE the most in the area you love the most. (It would be ideal to pay up to $300K, but if the propertry you love is a bit more, buy it ..a small mortgage(say , up to $100K) is not a huge burden.
c) lenders will then "love you long-time" and will advance you up to 80% of the value of your PPOR less mortgage. (Let's say your PPOR costs $400, so you'll have a $100K mortgage...then the lender will advance you 80% ($320K) less the $100K mortgage is $220K. You can then use that $220K as the "20% deposits" and go and invest in $1.1million dollars worth of IPs. The interest on these loans will be tax deductible. You will then own (with your PPOR) $1.5million dollars in property. In ten years, if history repeats itself as it has done for a long time, that will double to $3.0million and you will be a REAL net-worth millionaire. I'm assuming you buy the RIGHT IPs here (median or below...READ JAN"S BOOK) so that cash flow is manageable for you (Don't buy ONE Toorak mansion !! The cash flow will HURT !!)
There are a LOT more details you have to leanr, but that's the basic plan.

You're in a great position and, yes, Melbourne peaked in late 2004 so we're probably very near the bottom of the "slump" that follows the peak. Next two years will be the best buying.

Good luck.
LL
PS This is exactly the strategy we followed during the last cycle..except even more aggressive with much larger $$ outcome. What fun !!

 

[Trogdor]

I'm sure i don't know what your ever on about, its the title of a FNM song from years ago.

LOL

1 entry found for lobber.
lob ( P ) Pronunciation Key (lb)
v. lobbed, lob·bing, lobs
v. tr.
To hit, throw, or propel in a high arc: lob a beach ball; lob a tennis shot over an opponent's head.

I wont bother finding the meaning for the prefix in your name, its a G-rated site hahahaha

nice name...

Havent heard the faith no more song though...

 

[Glebe]

Jizzlobber lyrics

If anyone has seen the Kevin Smith movie Clerks, they'll know what a mopper is also.

 

[jazzlobber]

Yeah sorry, don't want to offend anyone with the handle, the song is one of Faith No More's heavier efforts.

Thanks again for the advice you guys, i will get the Jan Somers, have read another PI book but the somers book is highly recommended here i know that much

cheers

 

[Mr. Fabulous]

For me it's a no-brainer. Buy your PPOR with cash, draw down as much equity as you can to put into investments.

Mark

 

[handyandy]

Go with Pete and Mark's (and landlubber only just read it ) suggestion. Use the money to buy a PPOR outright and then get a LOC on the PPOR and use those freed up funds for investing.

As mentioned using the money in this way and because the money is used to invest and generate investment income, interest costs are then tax deductable.

If you hold any money back with an intention of still have a loan on your PPOR then the interest payable on your PPOR will not be tax deductable.

A lot of forum members have a strategy of reducing their PPOR debt (often refered to personal) and transferring it to investment debt. With your situation you are ideally position to achieve this immediately.

Cheers

 

[Jacque]

Hi Jizzy
You're right in that Melb is getting back on track. Figures from the March quarter indicate a strengthening trend, and with a combination of low supply and higher demand, it would appear that Melbourne is in a recovery phase. Experts such as BIS Shrapnel are referring to this phase as a "rational" one, with consumer confidence up and buyers steady.
There are plenty of forumites here who can help you with specific info on Melb suburbs, Jizzy, so feel free to keep asking questions.
Oh, and welcome to the wonderful land of Oz