Practical Advice Please

[Shelley]

Hi

Wondering if anyone can give me some practical advice re our investment strategy.

We have a PPOR in Canberra which we have a 300K limit LOC against , we have drawn this LOC down 117K to use as deposit/costs on IP.

The balance of 383K for IP is in separate loan.

We currently have 295K in cash which will reduce to about 165K in December when we return to live in Australia.

My question is do I put the cash in an offset account against the 383K loan, which will effectively make this IP CF+ at least for this year or do I just put it in a high interest account.

My husband is on a higher earning at the moment, we earn AUD and pay tax in Australia.

We also want to buy 3-4 more properties.

We will increase the 300K LOC now to the maximum so we have deposits waiting.

Then we plan to borrow the balance for each property against itself.

The IP we are looking at are in the 500K range so 20% deposit plus cost is going to eat up our LOC pretty fast, do many of you use a 90% LVR and is it cost effective to use it?

I want to keep the cash as a buffer and to use for repayments should we need it.

I guess once we have the 5 properties we could put the cash in an off set account against each of the IP loans, reducing the repayments but probably still making them CF-

Any advice would be greatly appreciated

Regards
Shelley

 

[The Y-man]

Need more info.....

What sort of income/tax bracket are you going to be in?
How long will you (both) be working for?

The Y-man

 

[Dazz]

we have a 300K limit LOC against , we have drawn this LOC down 117K to use as deposit/costs on IP.

The balance of 383K for IP is in separate loan.

Hi Shelley,


Which one is it ??


1. You've made a typo.

2. My maths is really bad.

 

[Bigtone]

go 90% and hold back the cash

 

[Rolf Latham]

90 % LVR is "cost effective" in terms of the LMI premium

Does depend on various personal circumstances as to what the right lender when etc

ta

rolf

 

[Shelley]

Hi all

Thanks for your replies

My husband is in tax bracket $80,001 – $180,000 , higher end now and about 90K when we return at end of this year.

and i'm in $35,001 – $80,000 (mid)

We will be working for at least the next 10 years, just booked the kids into private school

IP is 500K, 117K for deposit and costs was drawn against LOC on our PPOR

then the 80% balance of 383K is against the property.

My main question is whether to put the 295K cash in an offset account against the 383K effectively making the property CF+ or keeping it in a high interest account and using the interest toward payments.

Although this would only be temporary as the cash will go down to 165K in December.

We have a share portfolio and our accountant in Canberra has been great with that but when i ask him anything about property he tells me not to do it!

I need a new accountant!

Thanks guys

 

[wobbycarly]

Hi all

Thanks for your replies

My husband is in tax bracket $80,001 – $180,000 , higher end now and about 90K when we return at end of this year.

and i'm in $35,001 – $80,000 (mid)

We will be working for at least the next 10 years, just booked the kids into private school

IP is 500K, 117K for deposit and costs was drawn against LOC on our PPOR

then the 80% balance of 383K is against the property.

My main question is whether to put the 295K cash in an offset account against the 383K effectively making the property CF+ or keeping it in a high interest account and using the interest toward payments.

What's the difference? There was another thread recently that suggested that the spread between the interest rates will determine the best course of action. If you're putting "interest earned" (which will be taxed) into the payments, may as well offset the loan and not have the (taxed) payments in the first place.

Although this would only be temporary as the cash will go down to 165K in December.

We have a share portfolio and our accountant in Canberra has been great with that but when i ask him anything about property he tells me not to do it!

I need a new accountant!

Thanks guys

Our accountant advised us against another property too. I've just learnt I don't ask him for investment advice. Now I tell him what we're going to do and ask for advice on the structure.