turning 2 properties to positive to fund a negative?

[jerky]

Hi all

I have 2 loans coming off fixed rate in Feb next year. The loans total 120k which I have managed to save up.
My question is whether I should pay the 2 loans out and then purchase a property that would be negatively geared (I would intend to move in to this one eventually) and then use the rents from the 2 loans I paid out (roughly 14k a year) to help pay off the new one quicker.
Or do you think I should just let them go variable and use the money I have saved as a deposit on the new one?

Thanks for your opinions!
Kylie

 

[turk]

Hi all

I have 2 loans coming off fixed rate in Feb next year. The loans total 120k which I have managed to save up.
My question is whether I should pay the 2 loans out and then purchase a property that would be negatively geared (I would intend to move in to this one eventually) and then use the rents from the 2 loans I paid out (roughly 14k a year) to help pay off the new one quicker.
Or do you think I should just let them go variable and use the money I have saved as a deposit on the new one?

Thanks for your opinions!
Kylie

Hi Kylie

Why not keep the 2 loans plus use a loan with an offset account for the third property, keeping all loans I.O. Keeps all interest deductable and when you move into 3rd property your cash is offset against non-deductable interest.

 

[joeygbh]

I would rather save the 120K and drop it as fast as possible into that new house which will be your PPOR so you can reduce the non-deductable asset as soon as possible.

 

[WillG]

Kylie,

Are you really asking ...

What is the most tax effective way to buy a new house and keep existing IPs ?

or

What should I do so I can meet my longer terms goals or ...

or

What is the most tax effective way to buy a new PPOR, keep existing IPs and meet my longer terms goals ?

There are many ways to answer these questions. Can you provide more info ?

Cheers

 

[jerky]

Hi Willg

I guess what I am really trying to ask, is it more sensible to payout 2 loans and use the equity from those 2 properties to fund the deposit on another property, or use the money I have saved as a deposit on an (expensive) IP. It will only become my PPOR when it is closer to paying off.

I tried to do some reasoning:

Option 1:
Payout 2 loans, use equity in those properties to fund deposit on new property, and rent from those 2 to go toward paying off new property asap:
= roughly 15k of extra payments on the loan per year, thus meaning I should cut the loan on the new prop down to about 10 years (with some thrown in from my own pocket)

Option 2:
Use the saved amount (120k) as deposit and borrow less money, there fore paying it off before the loan is due.

Option 3:
Put minimal deposit down on property (depends on what equity i have atm), leave remaining savings in the bank earning avg interest and just let other 2 loans go variable and keep paying them down slowly.

I have a NAB "Choice" pkg which means I dont have to pay monthy fees, loan est fees etc.


I'm probably talking in circles here,
maybe someone can point out some logic

 

[Belu]

i would do the following if possible:

re-finance the two loans coming off fixed at 80% and then use the $120k you have plus the extra equity and whack it right into the new home.

Net loan amount is the same but now it is sitting in the IP's which are deductible.