Opinion on simple medium term strategy

Could I get some opinion from the brain trust here on my medium term plan ?

Background – lived abroad a few years am now currently living at home. Have 3 IPs, LVR about 80%, single income (130k) and no dependents

Outside of property I have share portfolio of about $150k (no debt on these) and savings. Have about $100k left in equity release offset account and have fixed IR for next 2 years on loans.

Aim in medium term is to live in my own place asap and restructure finances to make better use of money (tax deductibility). I considered renting but with end goal to have my own place, plus - moving is a pain, renting as a single is not value for money and can’t save as aggressively, I want to leapfrog that. My parents are happy for me to stay (cultural) and I’m happy to pay board and help around the house for now.


Plan:

• Next 2 years stay at home whilst saving as much as possible. Aside from keeping savings buffer, invest everything else in shares/LIC/ETF
• After the 2 years I will move into one of the IPs, that currently have loan of $580k. I have 2 options

1. Sell whole share portfolio and refinance loans – put all proceeds into reducing the PPOR loan. There would be about $150k-200k left as non-deductible (depending on how share portfolio performs in this time). Reborrow on PPOR equity and debt recycle (split, LOC, invest etc) to reduce this asap. Get to keep all IPs – would like to get to IP4
2. Same as above but sell one of the IPs. Means I will have paid off all PPOR loan and in addition have $100k. Get equity from PPOR and reinvest (purchase IP or shares). If picking this option, will need to plan timing of selling shares and IP (ie. Sell share portfolio in one financial year, sell IP in the next)

Picking either 1 or 2 will depend on market conditions in 2 years (can IP sell for decent price, IR in more normal market) and if personal circumstances changes by then.

The 2 years timeframe is just a guide, not too long to be depressing and not too short to be unrealistic of what compromises needs to be made (suck it up and not have own place).


On an aside, are there benefits for a single person to look into buying property through trusts or setting up SMSFs ? Most of the info is around families and couples, tax planning and such but I don’t see too much on strategies for an individual.


Any thoughts or opinions is appreciated, thanks !

 

1. Sounds good but what do you mean by refinancing all loans and putting proceeds into reducing PPOR loans?

 

^ say after selling shares and plus savings I have about $300k. Then when I refinance the loan for the now PPOR, I need $280k rather then the $580k.
Then I will reborrow what I on the PPOR as a LOC and invest, debt recycle to reduce the non deductable 280k.

 

No need to refinance, just pay it down and borrow against it to invest

 

It is currently on P&I, fixed rate for 2 years. So without needing to refinance - does that mean after this period do I just tell the bank I want to pay it down and change loan to remaining amount ? After reading the threads about danger of mixing offset funds uses, I don't want it as an offset account.
Was also thinking I may need to change bank (NAB) to one with more flexibility in debt recycling (eg. AMP)

 

There is no danger with mixing offset funds - unless you are borrowing and placing the borrowed money in there. You should probably want an offset account to store cash.

What you would do is to split the loan first, and then pay down the splits before reborrowing again and investing.

It is important to do it like this so you will get owner occupied rates for your investment use of the funds.

 

Oh I see. I didn't know you could have an offset and a LOC.
For simplicity, does that mean I can have $300k in offset account and ask for a $300k LOC ?

Thanks Terry, really appreciate the practical advice

 

You can't have an offset attached to a LOC generally but you can have different splits and have both.