Help me define a strategy

Discussion in 'Investment Strategy' started by Sasy, 10th May, 2020.

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  1. Sasy

    Sasy Member

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    Hi all,

    This forum has been a guide for me for the past 3 years. I learnt a lot, discovered new things but yet there is lot to explore.

    My current position is as below. Currently I feel stagnant and looking for next steps to better improve my portfolio. I didn't do anything much to my portfolio in the past 2 years except refinancing recently and lowered interest rates . And I don't have many savings or any other investments in shares.

    PPOR (Sydney)
    loan 700K P&I (Joint), equity 200K

    IP1 (Sydney)
    loan 780K P&I (Joint),equity 100K ,yield 4.9%

    IP2 (Melbourne)
    loan 370K P&I(Joint) ,equity 100K ,yield 4.7%

    My goal is to make a better performing portfolio, medium risk profile, capital growth focus, reduce tax

    1. Any suggestions on how to better use the equity?
    2. Is it better to sell an IP and invest further for a better financial position ?
    3. I would like to diversify but I am not comfortable in shares. Are there any other options to diversify?
    4. I welcome any other insights or feedback.

    Many thanks to the forum
     
    New Town likes this.
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Is that useable equity?

    How much cash?
     
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  3. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Hi Sasy
    Any reason why you are making P&I repayments on your investments whilst you have your owner occupier loan?
     
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  4. Trainee

    Trainee Well-Known Member

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    Joint with who?

    at 80% lvr there isnt much usable equity.
     
    Last edited: 10th May, 2020
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  5. Sasy

    Sasy Member

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    Hi Terry,

    It's not usable equity.
     
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  6. Sasy

    Sasy Member

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    Joint with spouse.

    Yes agree there it is not much usable equity.
     
  7. Trainee

    Trainee Well-Known Member

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    2.25 assets, 1.85 loans. There is no equity to use.

    so unless you have the serviceability, there isnt much you can do. Not that you have the deposit anyway. Even selling does nothing for you. You dont have enough equity to diversify into shares, unless you sell two, which seems counterproductive unless you expect prices to crash.

    focus on the job and save? Your situation is actually pretty dangerous without a buffer. In this environment, something happens to your job or the tenant doesnt pay....
     
    Sasy likes this.
  8. Sasy

    Sasy Member

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    IP1 was interest only for the first year . It was made fixed recently .
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    1. There is no equity you can use

    2. You will likely lose out if you sell, but it could free up serviceability.

    3. There is only 3 things you could invest in really
    a) property
    b) shares
    c) business - which you would do as a shareholder generally

    4. keep saving as much as you can and store in an offset while you plan ahead.
     
    Sasy likes this.
  10. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    If you can, I'd suggest changing your inv loans to IO.

    that will be the quickest way to fine tune your strategy if you don't want to sell anything...IF you use the saved cashflow effectively.

    You'd need to pay down your OO home, and/or buy other assets using the saved cash.

    Otherwise you'll be in waiting around mode for quite some time...
     
    Sasy likes this.
  11. igor1234

    igor1234 Active Member

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    I dont actually understand why IO is always better than PI, even if you have a loan on your PPOR. so for instance: for IP with ~ 300k loan u would pay P&I ~ 1300 vs interest only ~ 1000 at a higher rate. so u can then move 300$ into your PI of PPOR. but for PPOR interest charged is lower so its not 1:1 saving, even after the taxable deduction. Also, dont you gain this extra ~ 300$ in repayment of the principle as your equity? so lets say after three years, u basically have access to same 10k ($300*36)?

    probably when you limited by cashflow, its a no brainer, but if you are not, then is there an advantage?
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Its not.
     
  13. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    It’s NOT always an advantage. It’s one moving part of an overall strategy, and what you do with the cashflow has everything to do with its success.
     
    igor1234 likes this.