Help I need some advice!

[MC B FREE]

Hi all,

Firstly, would like to say thanks to everyone on here sharing information as I'm a big believer in investing in yourself before anything else. The wealth of knowledge I've found reading different posts is very inspirational.

I'm looking for some advice. I bought my PPOR 4 yrs ago on the Gold Coast for $370k and owe $311k. I would love to start increasing my net worth by purchasing an IP (ideally would like several IP's and one day have a passive income) but don't know where to look or whose advice I should follow in order to get there.

With the view to upgrading in the next 4-5 years, I have previously rented out my PPOR for$385 pw and know I could still get this if not more. With this in mind do I switch to IO and put the savings aside for a new deposit? Or should I keep as P+I and slowly save up another deposit. Ideally, would like to keep our current PPOR and turn into an IP in the future. Do I purchase a PI purely to reduce my tax and aim for CG or doI buy and hold, keep as IO and use any other funds (eg tax savings) to help pay of current mortgage? I'm confused. Your thoughts will be appreciated.

 

[Jamie M]

If your current PPOR is going to be rented out later - change the repayments to IO now and park money in the offset.

Cheers

Jamie

 

[MC B FREE]

Saving this extra cash would be for a deposit for the new PPOR? If I need to borrow more (which I will) won't the lender still question my serviceability of the loan if I'm not paying PI?

 

[Jamie M]

Hiya

If the next purchase is a new PPOR then it's even more important to park funds in the offset rather than paying down the principal.

The reason is due to the current loan soon becoming deductible (it's being turned into an IP - so you want to preserve the principal on this loan).

When you withdraw the money from the offset and place it on your new PPOR loan - your increasing deducible debt and lowering non deductible debt

Having IO for your current loan shouldn't effect the way your next application is assessed (it may slightly effect servicing if you take out the second loan with the same lender) - with some lenders, having IO repayments with other banks will actually improves your borrowing capacity.

Cheers

Jamie

 

[Spades]

Hi MC B FREE,

Personally i'd switch to IO rather than P & I.

Park your funds in the offset to offset interest,be it PPOR or IP.

In the mean time read the forum and ask questions.

Hook yourself up with a good broker as well,plenty on SS that invest as well.

Being interstate means jack with todays technology.

I've used Jamie M myself and another on the forum and i'm in another state.

Good luck with whatever you decide

 

[superAndrew]

Hi there

With this in mind do I switch to IO and put the savings aside for a new deposit? Or should I keep as P+I and slowly save up another deposit. Ideally, would like to keep our current PPOR and turn into an IP in the future.

As previously mentioned before. Definitely switch to an IO + offset account.

Do I purchase a PI purely to reduce my tax and aim for CG or doI buy and hold, keep as IO and use any other funds (eg tax savings) to help pay of current mortgage? I'm confused. Your thoughts will be appreciated.

Your aim, when purchasing an investment property, shouldn't be about reducing your tax. With most investment properties tax reduction will happen only in the first 2-3 years after which your property will start generating cash flow.

Tax reduction has its place but your goal should be to buy a property that is neutral/positive geared (which means it won't cost you much to hold) and has potential for capital growth. This will allow you to buy more IPs in the future.

Regarding your savings: Park them in the offset account of your PPOR. The PPOR mortgage is non-deductible, so you want to reduce the interest of it.

Cheers

Andrew