Advice Required - Full Financial Situation Given

That is a very difficult question to answer. Let's just say I do not want to lose all my money because my office job isn't exactly stellar paying. I would fall into a depression. I don't want to take a level of risk such that the odds of me being wiped out are reasonable, but equally I'm willing to lose a chunk of my wealth (e.g. 30%) in order to be exposed to significant investment upside. In other words, I'm willing to lose an amount of wealth that I can recover from given my age etc.

 

Im boring too, I would recommend as someone else said and buy a future family home/unit. Rent it out and keep renting in your share house. Atleast then you can claim the negative gearing benefits and get more back each year than if you just live in it at first, especially if you buy in a suburb that you don't want to move to yet.

 

If you want to debt recycle, keep a bigger buffer, invest at owner occupied rates then...get advice.

 

Ok, so I have done a bit of reading on debt recycling. Does it go something like this:
So I have $195k which I can use as a deposit. I convert entire $195k into cash to buy PPOR.
I buy a PPOR property with 70% LVR, so I buy a property worth $650k (455k loan, $2093 per month repayments, $25000 per year repayments). It's a 2 bed unit, I rent out 1 room, live in other.
I rent out 1 room @ $300pw, so $15600 per year. I can claim a tax deduction on a portion of the home loan interest in relation to this due to room I rented out, but not all of it. Question: Should I opt for an interest only home loan or interest + principle for this debt recycling strategy?
I save $34960 P.a in my desk job ($1700 per month current savings plus $280 current rent * 52 I'm no longer paying) and I use this, plus the rental income of $15600, total $50560 to pay down home loan at end of year 1.
At end of year 1, I take out a line of credit for $50560 against my home (so LVR remains at 70%), I get the same low interest rate as the home loan but now I can use this money to invest in shares. The interest on my LOC loan is tax deductible completely (Good debt) as it's being used to generate income (i.e. my shares).
The income/return from shares (dividends) are used directly to pay off the home loan, meanwhile replacing it with more Line of credit whilst maintaining a LVR against the house of 70% or something a bit lower, or whatever I'm comfortable with.
Any major errors with my understanding? This seems like a viable option potentially for me. The obvious risk is another 2008 style event which will probably completely wipe me out..

 

What do you mean by buffer? Are you referring to cash I should just hold on hand to protect myself in case home value or shares fall in value?

 

That would be one way to do it. You wouldn't get owner occupied rates on the LOC though.

but this way is not something that I would recommend if you were a client of mine.

 

If you had say $30k deposit for a $100k property and you used all the $30k and got a $70k loan you would have no cash left over as a buffer.

But if you used $20k and borrowed $80k you would have $10k left over as a buffer.

Imagine if you had cash flow issues. The second method could extend the time before you go under and start missing payments etc

 

Cant help but think what the op could have achieved with even one sydney property in the last couple of years.

Conservatism can hurt.

 

Well in fairness he does have bitcoin... which up until last November had did a bit better than anything else.