Extra payments or another investment ?

Hi All,

I am new to this forum and investing in property.My concerns is traditionally my wife and I have always been paying extra on our mortgage. I am now questioning if there is any value in contributing our extra income to this property or if we should use the cash flow we have to save our money or even buy another property?

Specifics as below, what would you do ?

Income 1 - $84,000
Income 2 - $62,000

Property Valuation: $630,000 (June 2012)
Owing: $506,000
Money in offset: $40,000.00

Repayments:
Split 1: $1,864.00
Split 2: $617.00

Total = $2,481.00

Rental return per week: $620.00 * 52 = $32,240.00
Management fee p.a approx: $1,842.00
Other outgoings p.a total approx : $5,200.00

Depreciation 2012 - 2013 = $9,318.00

Also I would really appreciate it if someone could tell us what we can expect to get back from tax .. Im not sure if we are even negatively or positively geared ...

Thank you to everyone who will contribute in advance.
 
Hi All,

I am new to this forum and investing in property.My concerns is traditionally my wife and I have always been paying extra on our mortgage. I am now questioning if there is any value in contributing our extra income to this property or if we should use the cash flow we have to save our money or even buy another property?

Specifics as below, what would you do ?

Income 1 - $84,000
Income 2 - $62,000

Property Valuation: $630,000 (June 2012)
Owing: $506,000
Money in offset: $40,000.00

Repayments:
Split 1: $1,864.00
Split 2: $617.00

Total = $2,481.00

Rental return per week: $620.00 * 52 = $32,240.00
Management fee p.a approx: $1,842.00
Other outgoings p.a total approx : $5,200.00

Depreciation 2012 - 2013 = $9,318.00

Also I would really appreciate it if someone could tell us what we can expect to get back from tax .. Im not sure if we are even negatively or positively geared ...

Thank you to everyone who will contribute in advance.

$32,240 - 1,842 - 5,200 = $25,180
$2,481 * 12 = $29,772

$25,180 + 9,318 - $29,772 + tax = guessing your CF+ ;)
 
It sounds like you are referring to an investment loan above.

I was trying to find out if you have any loan which isn't deductible as it would be much better to pay this loan off first and just pay the minimum on the investment loan.
 
It sounds like you are referring to an investment loan above.

I was trying to find out if you have any loan which isn't deductible as it would be much better to pay this loan off first and just pay the minimum on the investment loan.

We are currently renting, we want to invest in properties with a good rental return rather than putting our money to buy and live in an owner occupied property..
 
In that case you might be better off just putting excess money into your offset account (assuming 100% genuine offset).

After a while you will build up a large sum of money which could then be used to buy a main residence. This will be tax effective as you will be able to claim the extra interest incurred when you use your funds.

If you just paid down the loans this strategy wouldn't be available.

Ps. don't do this if you are tempted to spend money you otherwise wouldn't.
 
In that case you might be better off just putting excess money into your offset account (assuming 100% genuine offset).

After a while you will build up a large sum of money which could then be used to buy a main residence. This will be tax effective as you will be able to claim the extra interest incurred when you use your funds.

If you just paid down the loans this strategy wouldn't be available.

Ps. don't do this if you are tempted to spend money you otherwise wouldn't.

Thats exactly what we are doing at the moment, we are making the minimum payments on both splits and putting all extra money in the 100% offset account.
 
As long as you are not spending the money unnecessarily then this should be saving the same amount of interest as if you were paying the money into the loan instead.
 
depreciation gets you nicely over the line...........

as far as buying another prop - will depend on whether you have the equity/servicability?
 
depreciation gets you nicely over the line...........

as far as buying another prop - will depend on whether you have the equity/servicability?

At this stage we are paying more than double the minimum repayments every month. Im starting to think we could use that extra amount to service 3 or 4 properties.

We are currently under 80% LVR with our first investment and have been told we can borrow upto 1mil..

The question is do we keep making extra payments (into the offset ofcourse)
or is the property already close to positively geared and we should expand our portfolio?
 
Depends on your level of comfort.

The further you leverage the more "risk" you are taking on.

You are now at a point that your property is positive (after taxes) - and your question is really like the age old - how long is a piece of string.

Being in the accumulation phase - the more you take on the quicker you will get to your destination, however the bigger the risk. BTW - what is your destination?
 
Depends on your level of comfort.

The further you leverage the more "risk" you are taking on.

You are now at a point that your property is positive (after taxes) - and your question is really like the age old - how long is a piece of string.

Being in the accumulation phase - the more you take on the quicker you will get to your destination, however the bigger the risk. BTW - what is your destination?

The destination for me is to acquire as many neutral to slightly negative geared properties as possible and manage these for a lengthy period of time .. e.g 10 years + .. The way I see it is I could make extra payments on each property until it is say $200 per week positively geared.. if I have 10 properties all like this that = $200 x 10 = $2,000 per week. Im not after having completley paid of properties. I prefer good cash flow to keep putting into investments. If I get good capital growth thats just a bonus..
 
i dont really understand...
with your splits one is IO and fixed?
if its investment why dont you change your other split (im guessing variable to IO) and put the principal part into the offset aswell?
 
i dont really understand...
with your splits one is IO and fixed?
if its investment why dont you change your other split (im guessing variable to IO) and put the principal part into the offset aswell?

Hi BMAN,

Thats a good poing. Honestly didnt think about that when we structured the loan. Im discussing with my bank to convert the second split to IO aswell and will maintain the extra payments in the offset. Thank you for your suggestion.
 
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