Using LOC to assist with holding costs

[bennos]

I have a question about using line of credit (LOC) to assist with the holding cost. I get the general idea of it and it sounds like a good way of minimizing what comes out of your pocket but I need more details. So here goes...

I’ve deliberately left out interest payment in this example. Say your holding is $100/wk. After a couple of years, you have used $10,400 of the LOC. This is where I don’t understand. When do you pay off the 10,400 (or whatever the amount) to bringing the LOC back to zero?

Hope to get some sound replies. This is best site for learning stuff on IPs. We've got our pre-approval and are ready to get going... It's just this LOC thing that I want to completely understand before doing anything.

 

[BayView]

Some will argue different, but I say pay it off as soon as you can.

Debt, whether tax deductible or not, affects cashflow, so the less of it you have the better in all circumstances.

To me, the whole idea with this investing caper is to get to the stage where you live off your passive income (rents, dividends etc) and kiss the boss goodbye on the way out.

It's pretty hard to do that with a neg cashflow, so get it positive quickly.

 

[stumunro]

i think if you look at the bigger picture it might give insight as to what you are trying to achieve, for example if we have one investment property, with a positive cashflow then we are not going to be able to retire off this. If we use equity via an LOC for example to leverage against and invest in more properties, eventually you may get to a stage where you have 10 Ips. Now along this road, your properties may be negatively geared, and your capitalising your interest (debt is going up and up etc), but in doing so you achieve an asset base which, once you decide to stop leveraging will gain a much more substansial increased cashflow and LVR, which will give you the oppurtunity to invest in other asset classes and then begin to pay down your debt. Yes i agree paying down debt and cashflow is important, at the right stage of your investment strategy.

P.S This is just an opinion, best to get some advice from a PROfessional.