Maintaining discipline - what next after paying off PPOR

When we bought our PPOR pre kids (9 years ago) we were very disciplined and used all our spare cash to pay off our home loan. We went on basic holidays, bought 2nd hand cars, bought cheaper furniture, kept to a budget and kept track of all our expenses.

Now we've just paid off our PPOR and we have 4 investment properties (20% deposits funded via equity releases from PPOR). The last one bought 3 years ago.

We've also splurged a little on house renovations and nicer holidays etc and we have the temptation to do further renovations (at the risk of over capitalising) and also buy new cars.

We would like to buy a bigger PPOR at some point in the next year or two for our growing family, but it would be a reasonable step up and we are enjoying not having any non-deductible debt.

I'm also about to buy into the Accounting firm I work in (we don't need to provide security for the first 5 years as it is secured against the firms goodwill), It is because of this that we haven't considered buying another investment property as I will be taking on more debt.

We're saving quite a bit at the moment, but want to be wise in how we spend it. I'd prefer not to see the cash sitting in offset accounts (despite the tax benefits) as it can be too tempting and I also don't want to repay too much of our investment properties as we will have non-deductible debt in the future.

My current thoughts are:

1) Convert all investment properties from IO to P&I repayments (also reduces the interest rates we're paying)
2) Repay business loan P&I rather than IO despite not having to provide any security
3) Repay equity releases (secured by PPOR) faster than other loans to grow equity in our PPOR if we decide to sell it in the future to fund an upgrade or to take on security for the business loan in 5 years.
4) Draw down on our home loan to invest in shares and deposit our savings into offset account (goes against what I said above re not wanting to use offset accounts). Use the savings from the offset account as a deposit for new PPOR effectively making our home loan tax deductible if we decide to rent out our current PPOR.

Does anyone have any thoughts on how they have maintained their discipline once they've paid off their PPOR?

Ben

 

Why do you need to be disciplined? What are you trying to achieve?

 

Ideally we would like to be in a financial position to keep our current PPOR as an investment property when we buy a new PPOR.

 

You are already able to do this. Think bigger. Ability to retire early, help kids into properties, more balanced portfolio, etc?

 

I’d be putting all your investments houses on p&i first up

 

Yeah but why? What's your end goal? Sounds like you're just hoarding property for the sake of hoarding.

 

If you plan to buy new main residence you would want to make sure you have enough to cover that completely.

Then are you and your spouse on same taxable incomes? If not then consider paying into the offset account attached to the lower earners offset.

Then prob best to pay down highest interest rate debt.

If other tax entities involves consider gifting or interest free loans to these May give more tax flexibility.

 

I've never really liked selling because of the costs involved in selling. I prefer a buy and hold strategy.

 

What do you mean by this? Saving 100% of PPOR cost before buying?

 

Could you make your current PPOR larger? You're in an excellent position. Congratulations!

 

At this stage you should be thinking about the end game. Buy and hold is fine. Then what? How do you get cashflow to replace your income?

 

Thankyou. We live in regional NSW, we've considered extending, but our house is only 14 years old and it would be cheaper to sell and buy a bigger house.

 

If u plan to buy a new PPOR do you have enough cash to pay for it already?

If not you will have to borrow.

Therefore it may not be a good idea to pay extra off deductible debt quickly if you could end up with non deductible debt.

 

All my properties are either cashflow positive or neutral (IO). By converting to P&I (which my salary will cover) they will be paid off by the time I retire providing a very good passive income. I know with the job I have the end game will be ok, it is just the next couple of years in building and maximising a deposit for our next PPOR and also paying off enough debt within 5 years to take on the business debt which I need to do some planning for.

 

Yes I will need to borrow. I wish you could get an offset which was like a term deposit in that you could lock up the money for 12 months, but offset against investment debt, so you couldn't spend it on something else!

 

Perhaps you could set up 2 accounts. For for daily expenses with an ATM card, internet banks etc and the other without making it harder to get money out.