Rent and Invest

[seano87]

Hi all,

I recently purchased my first PPOR. Been living here for about 8 months now.
The Mrs. and I would like to rent an apartment with friends in the city and rent out this property we currently live in.

We have an Interest Only loan with a 100% offset account. What should we do with the money we currently have in the offset? We have around $30,000 sitting in there reducing our monthly interest.

When renting the property out, it will be negatively geared. I understand if I pull this money out, the property will be even further negatively geared, giving us a better tax benefit, but ultimately putting us at a further loss.

What would you do with this cash in the offset?

Thanks

Sean

 

[Aaron_C]

Leave it in there.

 

[Singo]

If your mortgage rate is say 5%, the cash in the offset is earning 5% return. So unless you can use that cash to buy something with more yield, the best option is to leave the money there. Probably you can save more money in offset to buy your second property!

 

[seano87]

If your mortgage rate is say 5%, the cash in the offset is earning 5% return. So unless you can use that cash to buy something with more yield, the best option is to leave the money there. Probably you can save more money in offset to buy your second property!

Thanks.
I suppose it's also 5% tax free (effectively).
Sorry, one additional question to make sure I've got my cashflow estimates correctly. Are there any additional major expenses in renting a house outside of the following:

Mortgage Interest
Rates
Building/Landlord Insurance
Water services
Advertising/Letting/Management fees
Maintenance