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Strategy case study - what would you do in this situation?

Discussion in 'General Property Chat' started by Investforlife, 26th Jun, 2016.

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  1. Investforlife

    Investforlife New Member

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    Hi all,

    My current view is set up loans to be ready to pounce when settlement risk starts becoming a problem in the next couple of years.

    Would love your thoughts on this case study:

    Age: 30
    Income: 230k
    PPOR valuation: 1.8mn
    Mortgage: 600k
    Cash in offset: 300k

    No other debt or assets. What would YOU do?
     
  2. Marg4000

    Marg4000 Well-Known Member

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    Qld
    You run the risk of the event you are waiting for never happening.

    How long do you intend to wait?

    Is there a Plan B?
    Marg
     
  3. Investforlife

    Investforlife New Member

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    Beauty of this question - here is one school of thought - refinance the PPOR and use the funds for an IP in the next two years and steadily invest an equal amount in managed funds.

    The goal of this punter is probably the be as tax efficient as possible and focus on capital gains over the next twenty years before going into cash flow at around fifty.

    I think the plan b property wise would be to have the cash ready and keep inspecting and if he finds the right property, buy it - but be patient.
     
  4. Hodor

    Hodor Well-Known Member

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    Make sure you have read Terry's tax tips, especially on debt recycling and not using cash to invest.
     
  5. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Sell ppor cgt free
    Take the 1.5m cash, spend 600k on 4 slums bringing in 52k pa
    Buy an acreage in a regional area for 500k with cash
    Quit my job and ride horses
     
    Erida and hammer like this.
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If that is your view then
    You may want to structure like this:


    Loan $600k (not mortgage!!) – split this into 2.

    $300,000

    $300,000

    Both IO

    Keep saving in offset accounts attached to these.

    LOC on the property to take it to 80% LVR = $840,000


    When you are ready:

    Borrow from your LOC to buy a property, unencumbered – quick settlements.

    Once settled refinance this by mortgaging the property and paying out the LOC

    Keep the LOC open with the balance back to $0

    Repeat.

    If you run out of money then pay off the IO loan with your $300,000 cash and use that to invest.

    By this time you may have another $300,000 saved up so you could do the same with the second $300,000

    By keeping the cash in your offset now you retain flexibility until you need to use it.