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How would you spend $350k cash

Discussion in 'General Property Chat' started by LATS, 16th Oct, 2015.

  1. LATS

    LATS Active Member

    Joined:
    21st Jun, 2015
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    Location:
    Sydney
    Our home is in his name but is going through demolish rebuild at the moment, so he has no serviceability left...... But has $350,000 cash.

    How should we spend it?
    capital growth would be great but we've got other places in my name which are doing well for growth. Given his situation, should he:

    - buy a few cheapie units (eg small blocks) outright in rural area, no growth but would be good for cf?

    - buy 1 outright, interstate within budget, eg Logan area?

    - buy a few OTP so small injection now and worry about the rest in say 1.5yr time come settlement time? I know PCs are not into otp, but some of my family members have done quite well buying OTP in Ptta and Rhodes paying mid $500s 2yrs ago and now valued at mid $700s. (Granted this is thanks to the Sydney property heat).

    So, serious question, if this is you how would you spend it?
     
  2. jins13

    jins13 Well-Known Member

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    Location:
    Sydney
    My friend has done well by buying a unit off V by Crown Group (Parramatta) I like the idea of claiming depreciation and also receiving $5k off the stamp duty (NSW) but buying a few OTP is risky now due to the tougher lending criteria, what would you do if you can't complete the contract?

    Everyone's situation is different to one another as some people like to spread their portfolio with several different states to minimise risks and also to reduce land tax. Will you consider doing renos on existing homes? Is there any areas in particular that you have considered?
     
  3. euro73

    euro73 Well-Known Member Business Member

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    I would consider taking the PPOR to firstmac, which would then allow you to access their potent NRAS servicing calc. This may allow you to get servicing some NRAS properties. Use the 350K to cover 20% deposits + stamp duty + cash flow buffers - so you could consider up to 3 NRAS

    This would inject an additional @ 25-30K of tax free cash flow into your household , each year for the next decade. Use that additional money to pay down the PPOR aggressively.

    Or looked at another way - with inflation, you'd get your entire 350K back ( or close to it) across the 10 years - just from the neg gearing and NRAS credits generated by the 3 properties. If reinvested towards debt reduction you will likely have paid down the PPOR mortgage for the new build (or close to it - although you didn't say what the end debt on that will be) and you'd have 3 investment properties that will revert to full market rent by year 11 and self service. Whether they've grown or not you'd have paid down the PPOR and that creates equity and borrowing capacity - even in a flat market (and given the APRA and BASEL changes , a flat market is a near certainty ) to then invest in a significant number of additional properties within a decade, setting yourself up for a strong passive income in retirement.

    Do the maths- this strategy is incredibly effective ;)
     
    Last edited: 18th Oct, 2015
    superace likes this.
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Consider a spousal loan. This could later be refinanced with a major lender if serviceability picks up.
     
  5. fullylucky

    fullylucky Well-Known Member

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    Location:
    QLD
    i'd use it to pay down home loans lol...