Seek advice on 1m cash investment in current economy

Discussion in 'Investment Strategy' started by vooz99, 13th Jun, 2018.

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  1. vooz99

    vooz99 Member

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    The ultimate goal is to generate wealth in future, current situation is
    -1m cash on hand
    -75k income
    -no home, recently moved to Australia
    -no dependent
    -renting at the moment, with minimum cost as secondhand landlord

    I'm a moderate risk taker, looking to set up a base here in Victoria, working in inner east, would like to get something close by to start up, doesn't matter about size, condition, flexible with any suggestions. I have been looking around properties, couldn't make up mind, waste petrol/time/energy/emotion to drive around without a firm strategic plan and don't know what i'm looking for, thinking about buying one property with all i have and all i can borrow to buy two properties after viewing few threads here, changing mind everyday. I think anyone here would have better ideas and more experience than I do, seeking genuine advice from expert here. what would you do if you were in my situation?
     
  2. sumterrence

    sumterrence Well-Known Member

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    Probably first work out what sort of outcome you're trying to achieve first than work backwards to see what you need to achieve this outcome?
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Red or Black :)

    moderate risk is in the eye of the beholder I guess.

    But I think you are on to something about that plan :)

    We work with many that have no plan.......... their plan was to work someone else's plan.

    Then something/someone clicked and they sought some goal setting help for a start. Usually, a definable goal with some numbers timing and emotions attached to it works a treat.

    Once you know the why, the how is simpler.

    ta

    rolf
     
  4. Marg4000

    Marg4000 Well-Known Member

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    What’s a “secondhand landlord”?
    Marg
     
  5. willair

    willair Well-Known Member Premium Member

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    upload_2018-6-14_13-58-0.jpeg
     
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  6. Blueskies

    Blueskies Well-Known Member

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    Easiest thing I can think of:

    1. work with a broker or Bank find out what your borrowing capacity is.
    2. Use maximum leverage to buy PPOR.
    3. Immediately pay off loan from your $1M,
    4. Redraw from the loan and opportunistically load up over a couple of years into a portfolio of LICs and ETFs. Keep the portfolio simple but with some diversification in assets and domestic and international exposure.
    5. Leave it alone.

    At that point you have a paid off PPOR and likely a solidly positively geared $1M share portfolio. By that point you might have a clearer idea of what your end goal looks like..
     
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  7. Runna Kedman

    Runna Kedman Active Member

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    Sorry for my ignorance, but why not bypass the home loan and just buy outright?
     
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  8. Trainee

    Trainee Well-Known Member

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    Cashout can be more difficult than just buying with a mortgage.
     
  9. turk

    turk Well-Known Member

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    I think you will find that in this scenario that the benefit is that the redraw is tax deductible.
     
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  10. Blueskies

    Blueskies Well-Known Member

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    The loan is really for the shares, but doing it this way way allows far more favourable loan terms. Bank will lend up to 95% at rates of under 4% when the security is the PPOR. You won't get loan terms that good if you were to buy the home outright and then try to leverage into the share market.
     
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  11. Trainee

    Trainee Well-Known Member

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    Interest on both redraw and cashout are deductible, as long as it is used for investment.
     
  12. vooz99

    vooz99 Member

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    Thanks, i could borrow about $450k for PPOR, if IP, depend on rental income, will be a lot more.
    i was thinking
    1. buy one house around 1.4m
    2. buy one unit for myself, one IP in outer suburbs
    not sure which works better in long run.
     
  13. vooz99

    vooz99 Member

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    I don't have a clear picture yet, hope to have some passive income and financial freedom
     
  14. vooz99

    vooz99 Member

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    I rent a house but i don't need all rooms, so rent them out, which could cover my rent as well.
     
  15. vooz99

    vooz99 Member

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    I'm new to this, are you saying by having mortgage i could have better loan terms than buy PPOR outright? what type of loan is it? can this only be used for shares or anything else?
     
  16. Blueskies

    Blueskies Well-Known Member

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    I am just talking about structuring the loan the right way to get maximum borrowings with a good rate and deductable interest payments.

    There are lots of ways to approach it, but the end goal would be to maximise your leverage for investments, and keeping the $1M offsetting your PPOR, to avoid incurring non-deductable interest. Best to talk to bank/broker, there are lots of ways to approach it. You're in a great position having the $1m cash. You should be able to set up a debt free residence and still have a decent chunk of borrowed funds to invest.
     
  17. Marg4000

    Marg4000 Well-Known Member

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    Is this allowed in your lease?
    Sub-letting without permission is usually prohibited.
    Marg
     
  18. vooz99

    vooz99 Member

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    yes i need to send agency new tenant details every time.
     
  19. K8F

    K8F Well-Known Member

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    This is really interesting.. why is this?
     
  20. K8F

    K8F Well-Known Member

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    Many people do it from what I hear.. quite smart if it is allowed..