Buying PPOR and then first IP

[hematite]

I'm in the process of getting my first PPOR and now am looking for an IP.

What is the general consensus on how to save the deposit for the first IP? Personally I see a few options but not sure if they are right....

1. Put all my earnings into my PPOR loan (no offset on this product though, only redraw...) and redraw 10% deposit for the first IP when I am at 70% LVR on the PPOR.

2. Renovate PPOR immediately and get a refinance in the first few months and use excess funds to fund new IP deposit, Not sure if bank would allow this. Also problem is that I may need to knock house down in the near future if zoning changes.

Are there any other options? Any tips would be greatly appreciated !

As I am very new to property my strategy is buying dilapidated homes and renovating them (done for 10 yrs+ with family), hopefully moving onto small developments.

 

[Terry_w]

You shouldn't be using a deposit for the investment because this will mean your deductible debt is still higher.

What you should probably do is to pay down the PPOR loan and then set up a new split and borrow the some for the investment. Don't just use redraw as this will result in a mixed loan will this will hurt your deductibility down the track.

 

[Rolf Latham]

1. Put all my earnings into my PPOR loan (no offset on this product though, only redraw...)
.

so as an aside, that means your current PPOR wont ever become an IP, you will retire there or sell and upgrade

ta
rolf

 

[hematite]

You shouldn't be using a deposit for the investment because this will mean your deductible debt is still higher.

What you should probably do is to pay down the PPOR loan and then set up a new split and borrow the some for the investment. Don't just use redraw as this will result in a mixed loan will this will hurt your deductibility down the track.

Hi Terry, when you mean 'split' does that mean I can segregate a portion of my PPOR loan for investment purposes?

so as an aside, that means your current PPOR wont ever become an IP, you will retire there or sell and upgrade

ta
rolf

Rolf, I plan one of two things for my PPOR:

Demolish it and build units IF it gets rezoned which I am hoping it will (as always no guarantees)

Subdivide and build and retain.

 

[Terry_w]

Hi Terry, when you mean 'split' does that mean I can segregate a portion of my PPOR loan for investment purposes?

.

Yes, keep the 2 portions separate so that you can pay down the non deductible portion independent of the investment portion - if need be.

 

[hematite]

Yes, keep the 2 portions separate so that you can pay down the non deductible portion independent of the investment portion - if need be.

Thanks Terry, your posts are always great! I better find some housemates to help me pay down the loan asap then.

 

[Terry_w]

Thanks Terry, your posts are always great! I better find some housemates to help me pay down the loan asap then.

Watch out for the tax consequences of housemates = CGT unless they are boarders only reimbursing you for food and heating.

 

[hematite]

Watch out for the tax consequences of housemates = CGT unless they are boarders only reimbursing you for food and heating.

In that case I think I'll just enjoy the space. Thanks again.

 

[Jake D]

Or just charge them heaps for "food & heating"