PPOR + IP + savings = Now what?

M

Melbournee

Hi all,

Got a PPOR with 28 years to go, IP with 29 to go.

Now got 30K savings - With wife leaving job it was bloody hard to put together.

Keeping it in an offset account parallel to the PPOR home loan. Cant borrow from the bank (hit my limits with 2 loans) so cant think of another IP.

The way that I look at it I need to make sure it returns something over 7.11% (current home loan rate) to even think about it? Also any earnings will attract more tax,right?

Can I do better with it?

If my wife starts working again we will still be unable to borrow more unless the property market goes up- which for the next year(s) seems unlikely.

I am calculating that by end of 2011 I will have 50K in the bank. Seems a lot of money sitting idle??
 
Don't forget to add the tax on to any comparison return.

Your 7.11% is tax free. For an investment to net that amount, it would have to earn around 11% allowing for your being on the average marginal tax rate of around 30c in the $.
Marg
 
The Y-man said:
Not sure what the relevance of this is? :confused:

The Y-man
Click to expand...

Sorry, should have been more clear. Thats the outstanding bank loan terms on standard payment schedule.

PPOR 300K Loan, 290K to go. (worth 375 as per bank valuation last year)
IP 345K Loan, 340 to go (worth 375 as per last valuation)

the rent on IP is low.
 
I'd keep it in cash.

You've got 750k in property. 30k is 4% and 50k is 6.7% of the property value, which is by no means excessive as a cash buffer.
 
alexlee said:
More 'when does the IO period finish'.
Click to expand...

paulinehanson.jpg


Are u buying one IP after another (IO only) and then start paying off the very first one and then second etc??
 
bene313 said:
I'd keep it in cash.

You've got 750k in property. 30k is 4% and 50k is 6.7% of the property value, which is by no means excessive as a cash buffer.
Click to expand...

Good way to put it. Seeing it that way makes it look small amount. Starting out it makes $$$ look more than they are. I bet some of you guys dont even think of it as money- they must look like simple numbers only!

What %age is considered a good cash buffer??
 
Melbournee said:
Are u buying one IP after another (IO only) and then start paying off the very first one and then second etc??
Click to expand...

Not us. We just keep cash in the offset, if we want to keep the loan alive (to use the cash), or when we really wanted to pay it of (eg our ppor), we just sold some IP's and used the profit to pay our other properties off.

You can't borrow as much with PI.

The Y-man
 
Melbournee said:
Are u buying one IP after another (IO only) and then start paying off the very first one and then second etc??
Click to expand...

I do go IO on all loans, yes.

I don't intend to pay off anything just yet. I'm still in the accumulation phase and extra money would be better used invested in other things or, until I have a place for it, in an offset so I don't have to talk to the bank again to get the money.

In the future, maybe I'll sell some to pay off the others, or, more likely, I'll just keep the loan balances there and fully offset them.
 
Melbournee said:
What %age is considered a good cash buffer??
Click to expand...

The number varies for everyone. Take a look at your own cashflow and determine how long this will last you if you get into trouble (loss of income). Will this last long enough for you to get another job, to recover from an injury or for income protection insurance to kick in?

What else to do with the money if you've got a surplus depends on a number of factors. If you've got 10+ years, I can show you ways to structure the investment over that period, then reep the benefits completely tax free.

There's also plenty of investments out there that have a solid history of returning far more than 7%. Again most 'safer' investments are long term. If you want something safe for only a few years, put the money into an offset account on your home loan.
 
PT_Bear said:
If you've got 10+ years, I can show you ways to structure the investment over that period, then reap the benefits completely tax free.
Click to expand...

Sounds interesting. In another 5 years even if the prop market doesn't go that much up, I should have 80-100K in savings. I am 29 and would only be 34 then. If the banks don't let me borrow by then its not doing much. Have you explained this structuring in any post so far?
 
I know it is a long shot but in a bank liquidation are offsets considered a bank deposit?

Are they covered by the federal governments guarantee?

In the alternative would you have an equitable right to set off? i.e. do bank contracts allow you to say stuff ya I'm not paying the creditors / new owners of my debt the last 30k because they took my 30k that was in the offset account?

Wost case as I see it you have a creditor asking for the loan to be payed up, which while they cannot enforce payment immediately as your contract was for over some time period they can still insist on performance of this contract over time. Then for your offset you are one of many creditors waiting for some portion of your money back with potentially no guarantee.

I should add I don't know the answers only asking the question as I think it is important for people like yourself who use the offset as an investment. Especially if this 30k becomes a quite sizable amount over several years.
 
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