Hello,
We had discussions with two property investment companies (Merlot and Park Trent) because both of them got our attention by saying there is a way to pay off our home mortgage quicker using IPs. Their concept was that negatively IPs generate cashflows that can be circulated through investors’ home mortgage’s offset account.
This is one of their main selling points in the initial telemarketer’s call and the second 90 minute presentation (Park Trent) / in house discussion (Merlot). In my opinion, ParkTrent and Merlot misinform the potential clients.
They say that the tax returns for negatively geared properties can be arranged to receive with the pay (weekly, fortnightly etc, which is true) and combining this with rental income, there is a cash flow that is pumped to the offset account of the home mortgage (home that the investors live in) before getting it back from at the end of the month to pay for the mortgage premium of the IPs.
This does not make sense at all to me. In fact, I have asked both Merlot and Part Trent representatives about this who were adamant that this was the ‘secret’ behind paying off the home mortgage quicker. On the contrary, my calculation is that the cash flow of a negatively geared property (rent + tax refund because of the negative gearing + tax refunds for depreciation) is always lower than the mortgage premium of the IP, therefore, there is no accruing benefit that would speed up the paying off of the home mortgage the investors live in.
If anything, the only benefit is that the investor gets is the rent at the beginning of the month, but pays the mortgage of the IP at the end of the month, so the rent can be held in the offset account of the home mortgage. The effect is equivalent to paying a one-off payment to the home mortgage to the value of the rent generated from the IP.
Have I got this wrong? Are Merlot and Park Trent correct?
Thanks
We had discussions with two property investment companies (Merlot and Park Trent) because both of them got our attention by saying there is a way to pay off our home mortgage quicker using IPs. Their concept was that negatively IPs generate cashflows that can be circulated through investors’ home mortgage’s offset account.
This is one of their main selling points in the initial telemarketer’s call and the second 90 minute presentation (Park Trent) / in house discussion (Merlot). In my opinion, ParkTrent and Merlot misinform the potential clients.
They say that the tax returns for negatively geared properties can be arranged to receive with the pay (weekly, fortnightly etc, which is true) and combining this with rental income, there is a cash flow that is pumped to the offset account of the home mortgage (home that the investors live in) before getting it back from at the end of the month to pay for the mortgage premium of the IPs.
This does not make sense at all to me. In fact, I have asked both Merlot and Part Trent representatives about this who were adamant that this was the ‘secret’ behind paying off the home mortgage quicker. On the contrary, my calculation is that the cash flow of a negatively geared property (rent + tax refund because of the negative gearing + tax refunds for depreciation) is always lower than the mortgage premium of the IP, therefore, there is no accruing benefit that would speed up the paying off of the home mortgage the investors live in.
If anything, the only benefit is that the investor gets is the rent at the beginning of the month, but pays the mortgage of the IP at the end of the month, so the rent can be held in the offset account of the home mortgage. The effect is equivalent to paying a one-off payment to the home mortgage to the value of the rent generated from the IP.
Have I got this wrong? Are Merlot and Park Trent correct?
Thanks