New to it all!

Hi there,

Looking for general advice on how to start out in the IP space.

Have currently got an owner occupied loan with a certain amount still outstanding and have recently inherited almost the same value. I'm undecided as to which of the following ways may be best:

- reduce my current owner occupied loan and request a new investment property loan
- leave my current loan where it is and use the inheritance to purchase the investment property outright
- do a mix of both, by reducing the current loan substantially and using the rest of the inheritance for the deposit on the investment property.

Am based in Brisbane and am looking at an investment property up to $450k.

Thanks!

 

Hi and welcome aboard

Generally best to minimise non deductible (owner occ) debt and maximise investment debt.

With that in mind - it would prob make sense to use the funds to pay off the owner occ debt and borrow for the investment.

Debt recycling could work well here - it basically means paying off your owner occ debt and re-borrowing against it for investment purposes.

It's important to structure your loans correctly to not only maxmise tax benefits but to avoid cross collaterising.

Having said all that - I'm not an accountant, tax adviser, lawyer, barber, rocket scientist etc so please seek pro advice from qualified professionals.

Cheers

Jamie

 

I would pay off your home first, but just leave a few grand on the loan so you can get cash back (if this is available on your loan). But it all depends on your situation. This isn't professional advice, just my 30 years plus of buying property. Some good buys around Brisbane at the moment, negotiate hard and take your time!

 

Hi Cate,
I'm just starting out also, what areas in Brisbane do you suggest?

 

Depends on your budget, if you were looking at $450 to $500K. It does depend a bit on your strategy, mine is buy and hold for the long term (20 to 30 years) with an upside (usually a reno). I look for the worst house in the best street scenario. I target several areas at a time. For example, I paid $455,000 in Albany Creek when most of the street was in the $900,000 and that was 11 years ago. With just a clean-up, this house has done extremely well due to the neighbours Have a house under contract for $310K in the Redlands (an area that wasn't my first pick) but for $310K and a budget of $40K (it is trashed and requires a lot of work), I can bring it into the $500s easily, some of the houses in the street are around the $800K. It really depends what your strategy is. For $450K it would be difficult to get into some of my preferred areas, Chermside, Chermside West, Kedron, Ferny Hills, Ferny Grove, Arana Hills, Mitchelton- which if you could stretch to $500K - low $500, you might be able to get something in these areas in a good location (not a main road etc). Perhaps the above strategy of buying in the best streets would work, if you like renos. I am really liking the top of Redlands, close to Manly- Birkdale/Thorneside (parts where you can walk to water and the rail station). I always buy a house and land. I think there are too many investors targeting Bald Hills, Zillmere, Petrie, Strathpine- there will be too much stock for rent. Look for areas where there isn't much available to rent. I tell my son in his 20s that it takes the right agent (wants a sale), the right seller (needs to sell) and the right house and then negotiate hard. Takes time.

 

Welcome to the forums!

The main goal is to have no non-deductible debt.

BUT, depending on your plans, paying off that owner occupied house may not be the best way to go. You'd really benefit from some specific advice from a broker on this forum - NOT just any rando broker off the street, as most won't know what they're on about in regard to this kind of thing.

 

Thanks wylie,

With regards to the brokers on the forum how do I contact them? (sorry if it's an obvious answer!)

 

Thanks cate, very helpful.

 

And then just search for the name of the broker you want to work with.

 

this is gold cate. I’ve been really grateful for your insights