Hey everyone,
I was a left inheritance totalling $300k two years ago. Since then, it has been sitting in a bank on a term deposit, gaining some interest. I am now ready to take the next step and move into investment - property investment in suburban Adelaide is my preference.
I'm not ready to buy a house yet - in fact, I'd be more than happy to rent out another property and buy an investment property and begin investing straight away - if that is what is better financially.
Which is it? Or do you mean you're not yet ready to buy a house for yourself?
What do you think about this?
Sometimes you have to make up your own mind. Get the options in front of you and work out the pros and cons. If you can do some basic excel spreadsheets, you should be able to work out the financial pros/cons, but there's more to it; lifestyle, risk appetite, future plans such as travel, work commitments.
Also, could somebody please explain to me 'interest-only loans'?
On a "regular" loan, you pay the interest and some of the principle, hence principle and interest. IO, you only pay the interest.
eg. $100,000 @ 6%.
P&I over 30 years, monthly repayments = $599.55
IO = $100,000 * 6% /12 = monthly repayments = $500
After 5 years, your P&I loan will be paid down a little bit (say $98,000 - I'm too tired to work it out), your IO loan will still be at $100,000. BUT, you've freed up $100 pm to use for something else.
So for investing, you've not put any of your own money in (theoretically) and maximised your tax deductions.
This structure doesn't suit everyone.
Also, I want to buy in a suburb that is obvioiusly close to transport, cafes and entertainment, but I also fear spending too much money...
I have a total of 350k in inhertiance, and don't want to risk putting it all towards an investment property. Is there a chance of taking out a loan? Would that be wise? What is the best way to go about this without spending too much?
Without knowing your personal details such as income, etc, no one can tell you whether you can get a loan or not.
However, one way to minimise your risk is to put down a large deposit (say $100,000) and then borrow $250,000 (assuming this is for a $350k investment). Your remaining cash could sit in an offset account, waiting for you to use for something else, and you won't pay ANY interest!
Then when you DO spend your $250k on something else, the rent should well and truly cover interest and costs with a bit left over, and the interest will be tax deductible.
Check out some of the blogs for some detailed discussion on finance structures.
I would also recommend you speak to an accountant to help with your decision and structure. Not a financial planner, as they'll probably want you to put it all into managed funds.
Hope that helps.
PS. I'm not necessarily an "experienced investor" as the thread title requests!