Pay off PPOR or invest?

Hi all, I've been stalking these forums for a while now reading and learning as I go even picked up a few books from the recommended list so I thought it was about time I joined up. But I still have a long way to go and definitely do not know enough to be jumping into anything. So I'm just after a bit of advise.

I'm 24 and currently building in Byford Redgum Brook Estate. I Purchased the land in late 2012 and the slab should be going down soon (I wasn't in much of a rush) so that also helped me miss out on MLI. I work in construction FIFO and am currently on 200k-250k (it's hard to judge a yearly income as it depends on overtime worked during the week) but keep in mind this is a very volatile industry and the job has to end so i could be back on 100k in the City in a year or two.

In the coming weeks when my 20% deposit is taken out of my bank account for my ppor I should have around 50k left in my offset account. Now the question is should I just keep piling my income into the offset account, look into buying an investment property asap or hold off until the property is paid off or has a decent amount of equity. I would of liked to wait until my ppor was paid off but the tax man is killing me so getting that tax down while making some good cg would be great.

Thoughts?
 
Why not do both? Pay off the mortgage, then redraw to invest. Over time you will have no PPOR debt and have investment debt only.
 
If I had my time again I'd listened to those whi told me to pay down the mortgage. I"ve made a tadd more money than I could've by paying ppor but not by that much. Too many maibtenance issues with resi that eats profit. I've had good growth! But can't inagune how bad others might feel with slower markets

Hope this helps
 
So there is a bit of number crunching I need to do keeping in mind the capital gains and tax deductions that I would be missing out on not investing.
 
I agree with Aaron. Do both.

Pay down the loan by $50k, then borrow that $50k again. It may sound silly, but interest on borrowed money is deductible if used for investing...

So you would have generated an extra $2500 per year in deductions ($50k x 5%). but still be paying the same interest. This should save you a $1200 per year for 30 plus years.
 
I was in a similar situation to you,high income for a few years,working in the mining areas,I knew it couldn't last as your post has mentioned.

I can only say what worked for me and what I was feeling at the time it happened.

I used forced savings to eradicate my PPOR mortgage over a short time with a bonus of a investment property sale with a lot of profit (and Capital gains :()

This enabled me to use a line of credit to continue my investment career,
50k in your bank is good and something to work on and to make sure it stays at that level,physiologically,you will probably want to keep up with the Jones and buy that boat or new Harley but stick to your guns and the time to purchase will arise near in the future without risking your buffer.

Remember we get old quicker than you think and that high income is just a memory,so invest wisely while you can.
 
We have not paid down our PPOR LOC mortgage.

We still owe a couple hundred grand on it but today have built a Multi $million property portfolio spread across Australia.

The reason is because we can build our portfolio and wealth alot faster than paying down our PPOR and saving on interest payments.

Paying down a PPOR has to be made from post tax dollars...instead of paying the principle back from those post tax dollars, financially it made more sense to us putting those same after tax dollars towards the holding costs of more additional investment properties, thus gaining the compounding Capital Growth a cross the increased asset base from doing so.

The compounding Capital Growth effect on the increased portfolio asset base far outstrips the interest saved on paying down the non tax deductible PPOR debt.

With building wealth, it's not how much you owe/own, rather its the size of the asset base you are controlling whilst others are paying your holding expenses along the way.

Now days we have the option to pay down the non tax deductible PPOR debt but instead of paying it from after tax income thereby reducing our cash flow we can now do it from portfolio capital growth.

I hope this provides some food for thought.
 
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My parents bought a waterfront home in Sydney in the 70s. Cost them $48000.

Imagine if they never paid a cent off their home loan but used it all to invest.

That house would be worth multi millions now and they'd owe $48000. A years rent would pay it off I imagine.

If you are young then invest. Invest. Invest.
 
I personally would look at doing both. But would make sure that you can keep up with the repayments if you have to go back to the city on $100k. Its all good going heavily Neg Gear for some Cap Growth now whilst you're on $200k+ but as you mentioned this might not last so ensure affordability on lower income.

As mentioned above could reduce PPOR borrow same amount of funds for IP which would then become tax deductible. Please don't speak the cash from the offset on a deposit without 'debt recycling' as cash isn't tax deductible :)

Ensure you get sound advise around your structuring early, debt recycling, interest only with offset and no x-coll. Few stuff ups here and could run into some annoying issues later.

Great position to be in. Best of luck.
 
Thanks Brady, that is my plan at the moment I will budget and save aggressively which is quite easy working away as there is nothing to spend money on. So in the mean time I will continue reading the amazing knowledge on this forum and a few more books I have picked up. Then purchase my first IP once my PPOR is complete.
 
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