What would you do with $3K?

[Tikki]

Hi all,

I'm after a few ideas here, not advice, so feel free to play around!
I have a friend who has 3 IP's (1 breakeven, 2 +CF) and a PPOR mortgage. She has 20% equity all up, hence no deposit for a new property, and no cash in the bank. Being a SINK (single income no kids!) and after paying the ppor mortgage and living expenses, has and extra $3000 per month spare.

Question is: What would YOU do with this extra cash?

I think I would buy a reno at 110% loan, and use this extra cash to pay interest and fix up the place, then sell and put all the profit into the PPOR mortgage. If she could do this 5 times a year, she'll be laughing. What do you think?

 

[np2003]

Be a frugal.

 

[skater]

Does your friend have any renovation skills? Does she want to do renos?

Just my thoughts, but 5 renos a year is a lot. That would be classed as a business I'm sure & taxed acordingly. Not to mention that a novice renovating is likely to overcapitalise especially if they have to use tradesmen for most of the work.

I would put the extra into an offset account linked to the mortgage for the PPOR. That way it would be available if/when she needed to use it and have the added benefit of reducing the interest in the time being.

 

[Easymonet]

I'd pay off my ppor because it's non-deductible debt. Kiyosaki would no doubt disagree with me though!

 

[Rolf Latham]

Hiya

Theres equity there to be harvested.

If the investment still makes sense then its likely that the existing equity for a deposit and costs can be harvested.


ta

rolf

 

[Sim]

I'd just put the money into something like Steve Navra's managed fund until it amounts to enough for a deposit on another IP.

 

[Mr. Fabulous]

Sim,
That's what I was gonna say. Either that or pay down the PPOR asap.

Tikki,
Your friend looking for a significant other? Hahahaha (no, really.....)

 

[Sunfish]

SS desperately needs another poll, so who's the brave soul to start another?

Q: In the new financial year which of these terms will spring to mind first;

1/ Equity mining

2/ Consolidation.

 

[Mr. Fabulous]

Oh God no, PLEASE not another damn poll!

 

[always_learning]

With only 20% equity on all assets paying down debt on his PPOR (into an offset account) would be very boring but financially sound strategy. Otherwise look inwards/review the current IP assets and see if there is anything that can be done spend to improve yeilds and add value/equity.

Otherwise have 2 kids and send them to private school that will fix up the $3K surplus in no time!

 

[Tikki]

Hmm, interesting variety of responses... and Mark, i do believe she does has a significant other half!

The mortgage offset account is a (boring ) but wise idea, but also very tempting when the cash is just sitting there, hence putting it straight on the ppor might be the way to go too. Wouldn't this option still save you more money in ppor interest than a managed fund or cash bond?

Ultimately she does want to do reno's as a full time 'job' doing everything herself (where legally possible!!), but has no experience in these. I believe she wants to practice on her ppor first to get a realistic price and time as a guide. What then would the average time be for a reno? and if it were classed as a business activity, does the capital gains get taxed as income as well as the CGTax?

tho it would be nice to have an o/s holiday every month...