Is this posible

Discussion in 'Property Investment - Other' started by Collector, 11th Mar, 2009.

  1. Collector

    Collector Member

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    First some of my details:

    - Paid off mortgage in July/08 on PPOR, looking for opportunities for IP.
    - PAYG of $80,000 (wife $80,000) = total of $160,000, also get car allowance of 12k and all fuel
    - Currently saving at least $1200 per week - saved $82,000 since July/08
    - Will have tax bill for this financial year of $30k - to be paid May/10
    - A little concerned about job security, but i am very motivated and have not afraid to do anything to feed family etc.


    What i would like to do:

    - Keep saving as much as posible to increase buffer if needed at later date
    - Purchase 2 IP's before end of 2010


    Is it possible to get LOC of say $250k on PPOR,use this for all costs including deposit. stamp duty and outgoings for IP. Get Loan for IP for something like this .

    Income/rent from property pays down LOC.
     
  2. want2bewealthy

    want2bewealthy Getting wealthier

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    Holy crap... why not just retire now? :p
     
  3. Jamie_D

    Jamie_D A numbers man

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    Hey Collector

    You are in a great position to acquire IP's

    I would start by moving forward with a pre-approval based on current scenario and actively hunt for properties with good rental returns.

    I don't know your situation intimately however if you're earning that sort of income then best you sit down with accountant and MB and take advantage of situation

    Obviously they need to know your short and long term plans and arrange lending packages to suit

    Yes you could set up a LOC ready for funds towards IP, but I recommend discuss your plans further with experts first

    Are you based in Melb?

    Cheers
     
  4. Collector

    Collector Member

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    Sorry, i didn't really ask the right question,

    What i would like to know is:

    1. Can a LOC be used like a transaction account, with regular redrawals for outgoings including interest payments and for deposits of rent - basically how do LOC work?

    2. Is the interest on both the LOC and IP loan deductable?
     
  5. Collector

    Collector Member

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    Thanks for your reply, - im in Sydney
     
  6. HiEquity

    HiEquity Member

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    Anything is possible!

    Gday

    Thoughts that occur to me on this situation:
    - You are in an excellent position to start investing.
    - Why only 2 IPs? Why not ramp it up a bit with more IPs, which you are quite capable of doing if you buy them with a good yield? The number of IPs you can comfortably buy is only limited by their yield!
    - As you intimated, you don't need to use any of your savings. Get the LOC first with one bank, then use it for deposit/costs with other banks. It may be worth crossing up one or two IPs to get a pro pack discount but you should have a chat about the benefits / costs of that with a broker.
    - I assume you are only comfortable with resi IPs? I suggest taking a look at commercial / industrial to get the necessary yields as per second point above before you jump to any conclusions. Of course there are risks - just as there are with resi...
    - Main point though is to get moving! Doing something is better than nothing...

    And by the way, I know nothing! Just some bloke on a forum so do your own research etc etc!
     
  7. Property Meister

    Property Meister Member

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    Not too sure if its enough to retire unless you want to live off instant noodles for the rest of his life...
     
  8. Jamie_D

    Jamie_D A numbers man

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    You can set up a LOC for personal use and transact like a credit card with a lower IR
    Interest is calculated daily and debited monthly - no need to make repayments. Just arrange wages to be directly credited f/n or mnthly

    If you use it for IP then do not transact as you will not be able to claim interest etc

    You could however set up a few LOC's
    1 for personal
    2 for IP

    Makes it easier when tax time comes around

    Hope it helps
     
  9. Rolf Latham

    Rolf Latham Member

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    Hiya

    Id recommend against LOC for such large volume use and instead use long term IO variable IO Term loans with 100 % offset because

    1. A single LOC will land you on twouble with the ATO if you use it for IP loan AND salary credit etc . This can be worked around though as Jamie has indicated with 2 LOCS, though may not work as cleanly

    2. Many LOCs. while evergreen, they technically dont have a loan term and indeed some can be recalled literally " on demand". Others have annual review periods. Terms Loans with IO periods are arguably less likley to be hammered if you get into strife

    3. Broker Commissions,many lenders only pay to 75 % of the limit of the procut regardless of whas used.

    4. LVRs can be higher with Term loans, though not always.


    The ONE major advantage that a LOC has over a term loan, is that some LOCs allow proper capitalisation of interest.

    Think and FEEL through your structure.......................there is more to it than just numbers...........the soft data often needs a bit of encouragement to come out ..


    ta
    rolf
     
  10. HiEquity

    HiEquity Member

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    Hi Rolf

    Agree with everything you said. One question though - I have capitalised interest with a variable interest term loan with redraw just by not drawing to the limit of the loan in the first place and allowing capitalisation from there. I assume this is still "proper capitalisation" as you define it or am I missing something?

    Thanks!

    Antony
     
  11. Rolf Latham

    Rolf Latham Member

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    Hiya

    Im ok with that, BUT im not your accountant :)

    Many of our clients do it that way.

    ta
    Rolf
     
  12. want2bewealthy

    want2bewealthy Getting wealthier

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    Lol, I'm not 'serious' serious...

    if the person in question had invested all his money he could be retired now theoretically.
     
  13. Jamie_D

    Jamie_D A numbers man

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    FYI - I'm also not suggesting LOC is the most appropriate option

    Term loan I/O with offset is the way to go

    LOC's are good for personal usage