Borrow to invest $15k/year in shares

Hi all,
I'm wanting to start borrowing to invest in shares. What's the best way to go about borrowing $15,000 per year? Do I get a line of credit for $75,000 @ 5years IO, and just tap into that every year? Or is there a better way to get $15k yearly? I'm obviously doing this for debt recycling and tax deductions.

My figures:
PPOR: $538k in equity.
$332k remaining on mortgage for 19 years.
$10.5k already invested in Vanguard funds.
Salary: $104k gross (with two years left of HECS repayments at 8%)
No other investments.

Cheers,
Boy

 

That's a good slab of equity just sitting there..This is only my simple opinion-but 15 k per year will not get you into a early self funded lifestyle that will take time ..Maybe just open the link below and sign up to top level information on where different markets are heading every day,with the right risk levels and mindset and 50% of the equity levered ..imho..

CommSec - Online Share Trading. Get going with more value.

 

Sorry, forgot to add, that I'm 31 years old, so in it for the long haul.
A recent serviceability calc put me as being able to afford $600,000 loan, which I'm not sure will get very far in Sydney. I'm contemplating property interstate, but thinking about what small changes I can make to get me on the right path, right now.

 

Lookup debt recycling ...

 

Curious why $15k per year, rather than investing all of it? Are you trying to dollar cost average?

 

Don't know what dollar cost average is. I'll look it up. It's my first venture into investment so want to take it slow and manageable and ramp up as I feel comfortable with the risks.
I also still haven't locked out property investing, so don't want to blow a chunk of my serviceability on shares.
I just today received Motivated Money so have some reading ahead of me

 

Since you are in for the long haul why not salary sacrifice into your super. :

• Max contribution up to 25,000 is taxed at 15%. On a 37% tax bracket, it is 22% return right off the bat each year, compared to taking a loan and paying interest.
• The earnings will also be concessionally taxed at 15%. That is again a saving of about 22%
  
• Superannuation like Australian super will allow you to trade most of the shares and ETFs through your super with minimum admin and transaction fees. Member Direct | AustralianSuper.
• Saves you all the trouble of book keeping and tax returns, as superannuation automatically does that for you.
• Only drawback I can think of is the lock in period.

 

Thanks Migrant. Already got Super sorted. My employer pays 15.4%, so it was a no-brainer to top up to max $25,000. I think it was only $340/fn pre-tax to get there. I haven't missed the $110/week.

 

Does $538k equity mean your PPOR is valued at $870k?

If so, you could refinance up to $696k @ 80%.

So you have $364k potential refinancing available which can be used for investment. Will have to pay interest of 5-6%, but should be able to get circa ~30% back in tax... so interest after tax is roughly 3.5-4.2%

Where can you invest your money and earn a higher return than your interest? Buying an index fund would historically give you around 10% per annum.

A good fund manager may be able to earn a higher rate of return around 15%. Obviously there are not many fund managers out there with this kind of track record.

I personally have my money invested with two fund managers in Sydney, Castlereagh Equity and EGP Capital. EGP is now closed to new investors. My investment in Castlereagh Equity has returned 14.1% p.a after fees in 3.5 years

castlereaghequity.com.au

https://egpcapital.com.au/

 

Yes, that's correct. At least $870k. Haven't had it formally valued yet.
I'm still doing as much research as possible, trying to get my head around the lingo and loan structures.
Say I do the usual loan structure of splitting from my PPOR mortgage to get a new loan account and buy the shares with it. I then get the dividends paid into my PPOR's offset account.
What happens to the IO payments on the new loan? Do I need an income source to pay that down as I go?

@D.T., now that I've done some reading, I believe I am trying to do a dollar cost average of sorts. I'm already in Vanguard's retail funds, so I have BPay all set up for regular payments. I'd like to put a few $100 in each week, or equivalent per month. With a pool of emergency funds to pull from to buy more shares when opportunities arise.

 

You would have to pay the loan monthly as per normal.

 

Welcome @ShireBoy

Interesting thinking, great to see you are being proactive early on
It is nice to have some equity hey, just be careful moving forward...

I redrew on my home loan years ago to buy shares (lost the lot )
My current accountant tells me that I am claiming the percentage borrowed , BUT, as I pay down my loan that percentage claimable also reduces
Maybe @Terry_w can clarify better than my understanding/explanation/poor advice........

There are HEAPS of available threads on buying interstate

There is a few of us in "THE SHIRE", maybe its time to organise a SHIRE meet up ????
(I never seem to be able to make the city or Western Sydney meet ups )

Cheers

 

Cheers @Stoffo I'm starting to think that an IP interstate is the way to go with the bigger picture. Hopefully get something CF+ and use the +ve to pay down PPOR and syphon some off to my share portfolio.
I'm keen for a Shire meetup

 

This is why you should split the loan before borrowing - or after. You can then make sure the non-deductible debt reduces first.

 

Just to bump this thread, what would be the best way of being able to borrow to purchase shares if you had no equity in any properties to tap into, and all your cash was in offsets or savings accounts? Sorry if it's a bit of a newbie question.

I have looked through a bunch of Terrys tips but I'm not sure if I've missed something as I'm a bit confused about the best way to go about it... Thanks in advance.

 

Nab has a product. Have a look for the thread here (can't link at the moment). Nothing in the Ppor to make a separate split?

 

@ShireBoy, to present the other side of the coin - imo debt “recycling” often doesn’t work as promoted as it makes assumptions about market direction that are anything but guaranteed and does not give any consideration to psychological effects and subsequent actions of an investor should things start very differently to the very nice looking charts and forecasts. Because of our inbuilt activity bias it seems much more attractive than it really is imo.

I’d be keen to catch up for a coffee some time, @Hodor is also local.

 

This is the thread:

NAB Equity Builder - too good to be true?

 

I've got a refinance and split happening from my PPOR for a new IP but there won't be much left after that. I might be able to take out 10k out of my existing IP but that would Max that out as well. So yeah, cash heavy but not sure of the best way to go about it for tax benefits.