Using Equity in IP to Invest

Discussion in 'Investment Strategy' started by JakeH, 15th Feb, 2020.

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  1. JakeH

    JakeH New Member

    Joined:
    15th Feb, 2020
    Posts:
    2
    Location:
    Sydney
    Hey everyone, found this site through a mate at work.

    Wife and I have a unit in south-west Sydney that we bought six years ago for a bargain and paid it off in full last Christmas of 2018. We moved to the lower north shore 10 months ago to be close to work and we've had tenants in the unit since April last year, so far so good.

    We love the freedom of living light and renting where we are, so close to the city and we don't even use our car any more. Our dream house is still out of reach and we did some forecasting on the rental income, because the property is positively geared, it's not dire but the tax we'll have to pay once all the deductions are factored in is making us think that maybe we shouldn't be saving for another deposit but instead using the capital to invest in another IP and take advantage of negative gearing to reduce our tax bill while we still can!

    We like south west/inner west Sydney, maybe a 2br unit in Campsie or Croydon Park where the stamp duty won't kill us and we can get a modest rental of $300-$350pw.

    We have 50K in cash in the bank, no mortgage (don't hate us!) and we both earn modest incomes $65-$70K each, both late 30s no kids yet.

    Obvs it's something we need to sit down with a mortgage broker and crunch some numbers but I'm interested to hear in what everyone else thinks.

    Thanks, J
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    3,275
    Location:
    Australia
    To be honest you are describing a strategy (using equity to invest) that people here have been using for decades. And rentvesting was a thing way before the word was used in the media. Its like asking people whether its a good idea to eat a sandwich..... take that as a given and discuss what to put in it instead.

    not having a mortgage at your age doesnt attract hatred. If property goes up only you lose out by having no leverage when you are most able to handle it (when you are young). If you had bought two units in Sydney, say, you would be closer to the dream home.

    Your situation looks good, but if you want to buy a ppor soon is very bad taxwise.
     
    Last edited: 15th Feb, 2020
  3. JakeH

    JakeH New Member

    Joined:
    15th Feb, 2020
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    Location:
    Sydney
    Thanks mate, we had an offset account for our first mortgage and poured everything into it.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    18th Jun, 2015
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    24,337
    Location:
    Australia wide
    Keep the cash and borrow against the existing property to invest would be worth considering.