My First investment property

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From: Walter IP


Help

I would like to get started and buy my first IP. I am currently joint owner occupier of a property valued at approx 270k with a mortgage of 186k divided between two.

I have recently sold a business and find myself with 170k cash. Could anyone please help. Would it be better to pay off my own share of my loan or use the money for a deposit on a new investment property.

I am currently looking around the northern suburbs of Sydney.

hope someone can help.

Walter
 
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Reply: 1
From: PT Bear


My suggestion would be to use your cash to pay off your loan. Then use the equity in your home to borrow on your IPs, including costs.

The interest on your (personal) home loan is not tax deductible, but the interest you pay on the loan against your IP is. From a tax point of view, you're deffinitly better off this way. I don't really see how you could be better off by using your cash to buy IPs.

PT_Bear
 
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Reply: 1.1
From: Walter IP


Thanks PT Bear

I think you are most definitely right. I was worried that when the cash was used it would be harder to get a loan with a smaller deposit.

I have seen a new IP that costs 399k so I am trying to see if I can purchase that.

cya in the chat sometime.

Walter
 
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Reply: 1.1.1
From: Paul Zagoridis


I notice you said your are a joint owner.

This can create difficulties in drawing down the equity.

Normally you are joint and severally liable for the entire loan on your residence.

You normally cannot get a loan on just your share of the house.

Something to think about.

Paul Zag
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Reply: 1.1.1.1
From: Carlo Chiodo


Paul is right, although I would consider your tax situation as well. If you are on the highest marginal tax rate, and don't have may tax offsets and are confident of attaining large capital growth you may want to try and pay as little as possible and take the rest on an interest only loan. Thus you would have a high loan, with interest offsetting rent revenue.

Obviously this is just negative gearing in action.

Depends on your risk profile as well.

Personally i would go with PT and pay the loan off if the other party is willing to go guarantor. Always good to get your first couple properties paid off ASAP as this will allow you equity for many more property investments in the future and their rent will also help in paying off future loans, again increasing equity.

Carlo
 
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Reply: 1.1.1.2
From: Walter IP


John

Thank you for your observation. You are right I am having that problem now.

Walter
 
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