Next Step???

Discussion in 'Property Investment - Other' started by Paddyinoz, 21st Oct, 2007.

  1. Paddyinoz

    Paddyinoz Member

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    I have just purchased a property in oxenford, for 360000. Its a 4 bedder and 2 bathroom. From when i first got approval I had 37000 of a deposit. I now have 55000 saved and I was wondering should I use the extra money I have saved to purchase another property or should I just pay off the property I have purchased. Its a variable loan. What would you do? I was thinking of borrowing another 250000 and buying around ipswich.
     
  2. Kamak

    Kamak Member

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    Is it a PPOR or IP? I'd be putting the money into my PPOR mortgage then pulling equity out to but the next IP. My aim is no debt on my own PPOR and own 0% of my IPs. Others have different approaches.
     
  3. alexlee

    alexlee Member

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    How much spare cashflow have you got? At 100% LVR with normal IPs you must be losing 2-3% cashflow on them. How many of those can you afford?
    Alex
     
  4. Mark C

    Mark C Member

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    Buy another one.
     
  5. Paddyinoz

    Paddyinoz Member

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    its a ppor,
     
  6. Kamak

    Kamak Member

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    If it was me ......

    Put your cash into the PPOR as the interest on the amount not paid off on the PPOR isnt tax deductible. Then pull out equity for a deposit for the IP (interest is tax deductible). Use as little as possible so you have some left for the next deposit. Talk with Rolf or one of the other Mortgage brokers who are members here to see how much servicability you have as thats the great determintaor. Oh and your philisophy on risk :)

    Or failing that Id go buy a toy and enjoy life.

    Been doing both lately and it works for me.
     
  7. skater

    skater Capitalist

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    Like Kamak said, I'd put it towards the PPOR, then if you decide to buy another, redraw as much as possible (in a separate loan to maintain deductabilty) to use as the deposit on the next.
     
  8. jasperjue

    jasperjue Member

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    Dumb Question coming up

    Scenario
    I have a LOC on my IPs of say 100K
    I owe 100K on my PPOR
    I take the 100K and apply it to my PPOR and it becomes mine. yoo hoo
    I then refinance that 100K back and put it back into my LOC so i arrive at the same state i began with in terms of debt.

    does that mean that the loan is then for IP (investments) and therefore tax deductible. I'm pretty sure i'm missing something.
     
  9. alexlee

    alexlee Member

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    Short answer, the 100k is NOT deductible, because you applied it to your PPOR loan, which is NOT an income producing asset and therefore the interest is NOt deductible. Bottom line, you won't be able to convert non-deductible to deductible just by shifting loan amounts around.

    Having CASH, however, is different. You can use the CASH to pay off your PPOR loan, then redraw to buy investments. This is the basic concept of debt recycling.
    Alex