Hi all, I'm looking at getting opinions on which direction i should take. Current position IP 1 Former PPOR turned into IP. Current value $380k IO loan of $290 with $40k in offset acc Rents for 390pw IP 2 Current value $ 381k IO loan $326k with only 2k in offset acc Rents for 390pw I'm 37, married, rentvesting and will be on 180k p.a for another 18 months before i will work a bit less and likely earn around $100k p.a. Super is about 130k In the coming weeks i'll receive around $50k from a private sale I'm struggling to determine concrete goals on my own but realistically I'd like to get to a point where i obtain a passive income of 50k per year. Now the questions Who do i see to develop an actual step by step plan? Do I continue to pay down loan debt or build up offset accounts Do I diversify and invest in LIC's? Perhaps the 50k i'll receive shortly Do I continue to save in offset accounts until i have another decent loan deposit and buy another IP? Any help would be appreciated.
Hi @Darwin55 Technically the only type of professional that is allowed to give you a full "investment plan" is a financial planner. Their licensing permits it. Most operate under big chains and are obliged to advise you into their products such as managed funds for a certain percentage of your portfolio. Accordingly, you need to be pretty clear in your mind whether you are more on the property side of the fence than shares and managed funds and be firm in expectations on reasons to be convinced otherwise. Some mortgage brokers and buyers agents will be able to see very clearly how to get you to your goal but must be careful in what is communicated, since we are seconded for individual transactions not full life path plans. From the two IPs you have, if the mortgages were paid down, they would collectively produce a net yield of about $30k (not including taxes). This is because about 30% of the rent gets chewed up in costs such as council rates and insurances. That might give you a bit of an idea of how much more rent roll you would require if trying to assemble your $50k via property only.
The first question is - at any point, will you need to buy a PPOR? From there, the other answers will follow.
Thanks Jacqui, I'm thinking of making an appointment to see one. I'm just hesitant as like you mentioned I've heard their likely to offer products like managed funds which I really don't know much about.
If you might buy a PPOR anytime in the future, keep saving into your offset accounts rather than paying down the INV loans. The main thing is that when the time comes, you don't want to have a lot of PPOR debt. It's going to depend on the time frame to buy, and how much you can save in the interim. Personally, I'd be looking to have at least a 20% deposit ready to go on the PPOR when the time comes, either saved in offset, or in investments that are easily liquidated. If you're more agggressive, or have excellent potential to save, you could buy another IP BUT you'll want to be sure that it's not going to ruin your borrowing capacity, especially considering that your income will be dropping in a couple of years.
Thanks Jess, That will be pretty easy to have a deposit sitting in the offsets. I'll have that in the next few weeks. So if I pay down the two current houses i'll have a net yield of around $30k. That means i need to find another $20k from somewhere else. I'm interested in studying up and diversifying. Very roughly, what size portfolio would i need to get an income of around 20k? Assuming i bought LIC's (ARG, AFI, MLT, BKI) I've obviously got a lot of reading to do, just looking for general advice.
I’ve still got around three years until my loans revert to P+I. What about the safe and steady option of refinancing them to a low P+I rate back out to 25 or 30 yrs. At least they would be paid off before retirement. I’ve now got around 70k in offsets and should be able to save around 100k in the next 12 months.
Who do i see to develop an actual step by step plan? A financial planner. Do I continue to pay down loan debt or build up offset accounts, essentially the same thing and you have to pay your repayments anyway correct? Do I diversify and invest in LIC's? Perhaps the 50k i'll receive shortly, this is a option, would have to chat in depth Do I continue to save in offset accounts until i have another decent loan deposit and buy another IP? this could be a great step as part of a long term stratergy
You could look at that, but assuming your borrowing capacity is good and likely to remain so, I'd be more looking at that after your IO term runds out, so you can get your deposits and cash buffers sorted first (assuming you haven't already).
Hi all, I'm still working toward a goal of 50k passive income. Since asking these questions well over a year ago I've bought a PPOR and continued to pay down some debt whilst starting to diversify with some shares. (AFI, WHF, ARG, BKI, MLT, VAS) Up about 6% since starting and re-investing it all. Ive got it up to nearly $30k. Small for most of you but a good start to me. I'm just putting a small amount away each pay until i reach $5k then purchase one of the above then and there regardless of what the market is doing. I continue to put a bit more into super each pay getting it up to $162k My two IP's are ok for cash flow each month which i have been using to pay down the IO loans. Down to 301k and $279k. I have set both offsets for these accounts to my non deductible debt. I have been paying down this debt purely from my wages One of my IP's has badly underachieved. Purchased in Palmerston, NT for $415k around 7 years ago, I think it would only sell for $370k absolute max.... My new house has a granny flat which i will eventually rent out Now for the questions... Do I use the extra cash flow to now only pay down the non deductible debt? Do I sell the dud property and continue to concentrate on the shares? Any other advice greatly appreciated.
Is there any particular reason there is some money offsetting each loan? Although it may not make a huge difference I would have thought it is worth having all money offset against which ever loan has the highest interest rate? (I could very well be missing something, just trying to offer suggestions to help )
Amended - Usually this would be PPOR but may not be if paying a sky-high rate with a lender of last resort on an IP.
