Building ppor with cash

[Hodge]

I have a hypothetical question. Say for example you are planning to build your ppor. The chance of it ever becoming an ip is 1%.

If you had enough cash in the bank to build the house would it be wise to use the cash to build instead of getting a loan?

Once the build is complete equity could be extracted if funds are needed to purchase ip's.

Can anyone see negatives with this strategy? Would it just be better to borrow and place the funds in an offset against the loan?

 

[Jess Peletier]

Personally I would borrow and offset. That 1% is a bigger chance than you think.

We aren't like our parents who built a house and lived in it forever, on the whole our lives are a lot more flexible and prone to change so I would count on that and plan accordingly.

When you think of the cost of setting up the loan and not needing it vs the cost of NOT setting up and then moving, the lost tax deductions will make more of an impact than the small set up cost (assuming no ongoing fees).

 

[albanga]

I would definitely borrow the money and offset it.
Jamie posted a great thread recently on paying IO on your PPOR and the overall sentiment is that as long as you are a diligent saver and do not spend up the funds sitting in the offset, the benefits far outway the negatives.

Remember cash is king!