My plan

Hi all,

I been on here for a while now and managed to buy my first property which is a 3 bedroom house and is currently my PPOR.

While I like the house, I do not really like the area as such. It is in a nice pocket in Melbourner's outer north west suburbs but:

1. Its a bit too far from work
2. Its bit too far from the city

Obviously I dont want to sell my house as it would be fullish.
So I really want to buy another property within 2-3 years once my equity builds up. I am also saving my pennies.

Is it possible for me to buy (once I have enough equity and cash saved up) another property in the southeast of Melbourne (Cheltenham, Highett areas) or even northeast? I know it is, but are my expectations reasonable?

I would like to purchase at least a two bedroom unit, ideally a villa unit with a bit more space than a regular shoe shack unit. then my plan is to move out to this new place and rent out my current house and make it an IP.

Suggestions, advice?
Take an interest only loan with an offset account on your current property, that way when you move out and make it a rental you can apportion the interest.
Why wait, why not rent it out now and rent a cheaper place close to work. Nothing like paying a landlord to keep you motivated in saving money. It will also get you used to tax laws, dealing with tenants etc etc.

Good Luck.
Well I currently have one house mate paying me rent and share of the bills, but also getting a second tenant later this year to move in. So this will help me with my savings... I guess I could do this for another year or so and then move out closer to rent or do the whole thing tobe suggested.

Actually tobe, can u shine some light on that?
Interest only loan for around 300-350 K right now?
Hi there Invest.

It sounds like you are off to a great start. Well done!:)

If you are planning to convert your PPOR into an Investment property you can use the money in an offset account to purchase your NEW PPOR, and still claim full deductions on your Interest Payments of your existing PPOR.

This topic is often confusing. Let me try to put it another way.

Most people think it is ok to pay down their existing mortgage and refinance it later when there is more equity to purchase an IP/PPOR and still be able to claim the proportional interest as a tax deduction.

To simplify matters for need to keep the money you plan to purchase the new property with...seperate from the existing property.

What tobe is suggesting is that you set up an Offset Account now to save further complications down the track.

You can place all of your savings and extra repayments into the Offset Account - effectively lowering your interest payments.

(Tip: Don't get confused with the Offset Account Versus a Redraw facility. They are NOT the same.)

If you are with St George, their Offset Accounts behave differently than most. Check with your bank or broker.:)

PS: Interest Only will stop you from paying down your PPOR. Technically, you will still have the same effect of paying down your principal with an Offset Account.

Regards JO
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Working out interest only loan repayments is easy.
Loan amount times interest rate percentage button divided by 12 or 52 equals minimum loan repayment.