bought ips, what next?

Hi all,

I've been lurking for a while in these forums, but this is my first post and I'm still learning.

I started buying ips about 18 months ago and have purchased 3 so far. the 3 places are.
1. New Dual occupacy house in qld. one is 3/2/1 and the other 2/2/1. Slightly +ve geared
2. New 4/2/2 house in qld. Slightly -ve geared
3. 3/2/1 townhouse in Melbourne, just started being built expecting completion towards the end of the year. I think this will be -ve geared

All up they are going to be -ve but after negative gearing benefits i should break even.

I earn a fairly good wage but no more capacity to purchase another ip. I have been told previously not to pay off any of the debt as i won't get as much back in tax, but i would like to have +ve geared properties.

I have no bad debt and would like to buy many more ips to eventually be able to live on a good passive income.

Should i put money into the properties to help them become +ve which would also increase my borrowing capacity or invest extra money in other things like shares (or holidays :D)

What do you think?
 
Hi all,

I've been lurking for a while in these forums, but this is my first post and I'm still learning.

I started buying ips about 18 months ago and have purchased 3 so far. the 3 places are.
1. New Dual occupacy house in qld. one is 3/2/1 and the other 2/2/1. Slightly +ve geared
2. New 4/2/2 house in qld. Slightly -ve geared
3. 3/2/1 townhouse in Melbourne, just started being built expecting completion towards the end of the year. I think this will be -ve geared

All up they are going to be -ve but after negative gearing benefits i should break even.

I earn a fairly good wage but no more capacity to purchase another ip. I have been told previously not to pay off any of the debt as i won't get as much back in tax, but i would like to have +ve geared properties.

I have no bad debt and would like to buy many more ips to eventually be able to live on a good passive income.

Should i put money into the properties to help them become +ve which would also increase my borrowing capacity or invest extra money in other things like shares (or holidays :D)

What do you think?

Where did you buy in Queensland?
 
Did you have a chosen investment strategy before any of your purchases?

The original aim was to purchase fast and duplicate based on the increases in Equity. As the price went up for the houses and rent increases made the ips turn positive geared and the loan amount stayed the same i would buy more. Eventually once the houses were worth more i would sell a portion of them to pay off the rest and own them out right. this would give me good cash flow.

But I'm starting to wonder if that is still the best option and as i have extra money avaliable to pay down the loans and increase the equity i can borrow against.

I hope that makes sense.
 
This is what I do, dont know if its the best way to go but i think im a medium risk type person.
All spare cash in an offset account linked to one of the IP's. PPOR loan is already 100% offset. Im happy with my current IP LVR (80%), both negatively geared. The spare cash is accumulating until I have enough deposit and/or equity for IP#3 at overall LVR of 80%.
You should read Rixters posts on investing in townhouses - detailed and informative. (Thanks Rixter BTW)
 
This is what I do, dont know if its the best way to go but i think im a medium risk type person.
All spare cash in an offset account linked to one of the IP's. PPOR loan is already 100% offset. Im happy with my current IP LVR (80%), both negatively geared. The spare cash is accumulating until I have enough deposit and/or equity for IP#3 at overall LVR of 80%.
You should read Rixters posts on investing in townhouses - detailed and informative. (Thanks Rixter BTW)

That sounds like a good compromise. Pay less interest using the offset until you are ready to buy the next ip. This would decrease the wait for the next place :)

I'll have to go have a look for Rixters post.
 
But I'm starting to wonder if that is still the best option and as i have extra money avaliable to pay down the loans and increase the equity i can borrow against.

I hope that makes sense.

Yes, why not. If it makes you happy. It makes me happy. I'd rather pay tax than interest.
 
Choppy how did you come to buy each of these properties?

All brand new... hope it wasn't a 'investment group' selling you some 'premium' properties.

You say you're a high income earner but you have no more capacity. Who has told you that you have no more capacity? Is it your lack of deposit/equity or income? I would hope it's not due to servicing.
 
Yes, why not. If it makes you happy. It makes me happy. I'd rather pay tax than interest.

Yup, paying tax means you're making money which is pretty much the thought behind the post.

Just went and found Rixters post, great read and kinda what i started out doing but explained much better.

I think a combination of these ideas would work for me. Since i have money to add, why not add it as it will speed up the process, this in turn will help me gather a collection of positively geared ips. If they make enough cash down the track, i can live off the income. Add to that by not selling and buying property like in Rixters post, i can get doubling of value for the ips per 10 years, but cause I'm mainly using the income from the positive ips, i would not need to borrow as much (if anything) out of the equity of the ips unless i really need to Or i was purchasing more ips.

I think this sounds like a good plan and i will be able to purchase #4 next year assuming very minimal gains in the ips and by adding a few dollars while i wait.

Thanks all for the advise. Hopefully this all works and i can help someone else down the track.
 
Don't add money off the principal if they're all IP's. Keep the funds preserved in an offset, preferably against a PPOR HL if you have one.

If you chose to reduce the principal you might not be able to extract maximum equity, especially in the case of decrease in value. Best bet in most cases is to throw funds in offset and use as required.
 
Choppy how did you come to buy each of these properties?

All brand new... hope it wasn't a 'investment group' selling you some 'premium' properties.

You say you're a high income earner but you have no more capacity. Who has told you that you have no more capacity? Is it your lack of deposit/equity or income? I would hope it's not due to servicing.

Nah not an investment group. Got some advise on the first one but sourced the area and builders myself, plus i liked the idea of building new. Built my house like that and found it easier than looking for existing. Figured stick with what you know. Plus using depreciation as a tax write off.

No capacity due to deposit/equity. Used the equity in my house for the 3 ips and don't yet have enough savings or equity for the next one. No issue with servicing, using a LOC which drops over the year but at tax time i get enough back to reset to where i started. Have not currently added any of my own money but wondering if i should, hence the post.
 
Don't add money off the principal if they're all IP's. Keep the funds preserved in an offset, preferably against a PPOR HL if you have one.

If you chose to reduce the principal you might not be able to extract maximum equity, especially in the case of decrease in value. Best bet in most cases is to throw funds in offset and use as required.

I paid off my PPOR already although i am using the equity In it for my LOC on the ips. so do you mean create an offset against the LOC but not actually pay it down and kinda use it like savings but rather than get interest on a savings account pay less against the loan And redraw when/if i need it?
 
Wait stop can you clarify how you use this LOC?

Please don't tell me all your rent, income, repayments, expense come out of this one LOC? Who is currently looking after your finance? Broker/banker? Have you discussd you investment plans with them?

I'm saying not having LOC, having home loan with excess funds offsetting the interest charge. But also preserving the funds for future use.
 
.

No capacity due to deposit/equity. Used the equity in my house for the 3 ips and don't yet have enough savings or equity for the next one..


a common percieved challenge, and often not actually true outside of the valuers call for your existing lender.

if you are at > 80 % lvr on your ppor, or you have already doe the valuer shop and maximised what may be available, the i take it back : )

ta
rol
 
Wait stop can you clarify how you use this LOC?

Please don't tell me all your rent, income, repayments, expense come out of this one LOC? Who is currently looking after your finance? Broker/banker? Have you discussd you investment plans with them?

I'm saying not having LOC, having home loan with excess funds offsetting the interest charge. But also preserving the funds for future use.

Ok now I'm a little concerned based on that reply, i have a LOC against the equity in my house with all the cash going in and out from the ips. This was set up by a broker. each property has a loan against it for 80% and the LOC has the rest.

How are you supposed to use your equity if not along these lines?
 
a common percieved challenge, and often not actually true outside of the valuers call for your existing lender.

if you are at > 80 % lvr on your ppor, or you have already doe the valuer shop and maximised what may be available, the i take it back : )

ta
rol

I'm sitting around 80 lvr on my ppor. I think if i really stretched i could probably work out a way to get another. But i figure I'll wait till #3 is built and take it a little slower.
 
Ok now I'm a little concerned based on that reply, i have a LOC against the equity in my house with all the cash going in and out from the ips. This was set up by a broker. each property has a loan against it for 80% and the LOC has the rest.

How are you supposed to use your equity if not along these lines?

Cash is going in and out for IP income and expenses only?

Where does your personal income go into, different account or same LOC?
 
Cash is going in and out for IP income and expenses only?

Where does your personal income go into, different account or same LOC?

All income and expenses for the IPs go into and out of the LOC including rent, interest from all the loans (each ip has 80% loan where the interest is redirected to the LOC and the remaining 20% + expenses is in the LOC), expenses (rates, phone line installation etc..) anything I can claim from a tax purpose is there and nothing that I can not. So no personal money (wages, gifts), no redraw for my self etc... My personal account is 100% separated from the LOC and other loans.

Last tax time it worked great, I passed over the statement from the LOC to my accountant and they could tick off what they needed (which was pretty much everything). Accountant seemed quite happy to have it in that form
 
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