First IP advice

[Touristy]

Hi all,

Sorry about this long story.

Just wanting to here as much advice as possible about decisions in the near future. Will do as much reading as I can etc but this seems like a good place for advice. Also am going to see a FP at the bank soon but he might be somewhat bias so I will see objectively.

Currently 27 with partner and two young children. Both have jobs in regional Victoria. Earning 60k and 40k each. Only have PPOR with 75% mortgage. No savings. Soon to be receiving 60k cash inheritance. That's where my dilemma is.

Goals of semi retire/comfortable in 10-20.

My original plan that i have been doing was pay as much as possible off mortgage and pay off loan in 5 years or sooner now i am getting that bonus and then get a rental and pay that off even quicker with what was our mortgage payment plus renter payments and continue this for 10+ years. In 5 years turn PPOR now into rental.

Problem i now realise is no tax deductions on interest. So looking to stop paying mortgage and sit it in offset because PPOR would be a great rental and I wouldn?t sell for a long time.

1. Thought i had it al worked out. Anyway what would you do with a PPOR that you would turn in to IP in 5 years while getting a 60K inheritance now. Thinking investment property or two? Everything here is CF+ with not much CG. Will that matter with tax deductions?

2. Is it worthwhile worrying about these tax implications too much with mine/our average wages?

3. What might these tax breaks be each year in total?

4. Is it worth having IP's in my name only because of wage difference?

5. How would i set up offset account to offset what property/s once i have IP? Would you have them 80% with I/O or P+I?

Probably missing a lot sorry. Just hoping for some guidance and trying to limit mistakes at this stage. i know it most important to buy the right IP i just want to know how to set this up and now make a new plan for the future.


Thanks all,

 

[The Y-man]

No savings.

Touristy, is that because you have been paying down the PPOR or just that your living expenses = income?

Also, if you draw down on equity from your PPOR to use as "deposit" on an IP, that portion of the loan is tax deductible.

The Y-man

 

[Touristy]

Touristy, is that because you have been paying down the PPOR or just that your living expenses = income?

Also, if you draw down on equity from your PPOR to use as "deposit" on an IP, that portion of the loan is tax deductible.

The Y-man

Yes I have paid off close to 10,000 in around 6 months.

The deposit bit i think i get but i cant draw off anything later to get another PPOR after i turn this one into a IP. Correct me if i am mistaken. i am just trying to get this set-up correctly for what i want later. It just seemed others had made a mistake of paying their loan then when PPOR turned into IP they couldn't fully maximise deductions, where if they had use offset account instead they could have had fully deductible loan on IP and used account balance for next PPOR.

Thanks,

 

[The Y-man]

I cant draw off anything later to get another PPOR after i turn this one into a IP.

Correct.... unfortunately.

The Y-man

 

[Touristy]

Correct.... unfortunately.

The Y-man

Thanks,

Anyone else have any advice please?

Im all ears.

 

[jingo]

Hi Touristy, I've attempted to answer some of your questions below.

1. Anyway what would you do with a PPOR that you would turn in to IP in 5 years while getting a 60K inheritance now. Thinking investment property or two? Everything here is CF+ with not much CG. Will that matter with tax deductions?

I'd set up an offset account against your current PPOR Loan and put the inheritance into it.

Then I'd apply for a Line of Credit against your current PPOR and get a loan pre-approved to buy an investment property.

Use the funds from your Line of Credit to fund the deposit for your investment property. Leave the inheritance money in your offset account against your PPOR.

Look to buy a property that has some capital growth potential. You may decide to look in one of the capital cities - or a larger regional town such as Bendigo, Geelong or Ballarat for instance.



2. Is it worthwhile worrying about these tax implications too much with mine/our average wages?

Its always good to think about ways to minimize tax, but not at the expense of your overall investment program.



3. Is it worth having IP's in my name only because of wage difference?

Seek some professional advice on this.

4. How would i set up offset account to offset what property/s once i have IP? Would you have them 80% with I/O or P+I?

Its easy to set up new offset accounts against investment loans. Same as you would for your PPOR.

Probably missing a lot sorry. Just hoping for some guidance and trying to limit mistakes at this stage. i know it most important to buy the right IP i just want to know how to set this up and now make a new plan for the future.


I think you are making some wise moves to secure your financial future. You may also consider contacting one of the brokers on the forum who can guide you further on setting up your finance structure correctly.

 

[Touristy]

Thanks,


I'd set up an offset account against your current PPOR Loan and put the inheritance into it.

Then I'd apply for a Line of Credit against your current PPOR and get a loan pre-approved to buy an investment property.

Use the funds from your Line of Credit to fund the deposit for your investment property. Leave the inheritance money in your offset account against your PPOR.

So should i minimise my repayments my mortgage now? i already am using offset account for day to day, wages etc. Why line of credit? Why not use the extra money for deposit?



Its always good to think about ways to minimize tax, but not at the expense of your overall investment program.

Any advice?


4. How would i set up offset account to offset what property/s once i have IP? Would you have them 80% with I/O or P+I?

Its easy to set up new offset accounts against investment loans. Same as you would for your PPOR.

Would you not just have one offset account against your PPOR. You wouldnt want one against IP would you?



I think you are making some wise moves to secure your financial future. You may also consider contacting one of the brokers on the forum who can guide you further on setting up your finance structure correctly.[/QUOTE]

Thanks for all your help.