Whats the best strategy for me?

Discussion in 'Investment Strategy' started by noviceInvestor1, 20th Nov, 2018.

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  1. noviceInvestor1

    noviceInvestor1 Well-Known Member

    Joined:
    22nd Oct, 2018
    Posts:
    68
    Location:
    NSW
    Firstly, I'd like to thank this forum and its members for the wealth of info available here, and the fact that complete strangers are willing to offer excellent advice to whoever asks!

    I am jumping back into the Prop Investment game after a gap of exactly 10 years :) and seeking advice on the best strategy for me...

    Here is my current situation:
    • My salary - 175K p.a. excluding Super
    • Partner salary - 115K p.a. excluding Super
    • Savings - approx 250K

    I have 2 existing Investment Props, owned by myself & my partner (50% each), bought in 2005 and 2009:
    1. IP 'A' - InterestOnly Loan $450K (IO expiry 2020), Offset Account contains $450K. Interest Payment=0. Nett Rent - 22K p.a. (minus all expenses)
    2. IP 'B' - InterestOnly Loan $350K (IO expiry 2026), Offset Account contains $350K. Interest Payment=0. Nett Rent - 25K p.a. (minus all expenses)
    My Home (PPOR in Sydney) has no mortgage, we own it outright, 50% is mine, and the other 50% is my sibling. My sibling and I have withdrawn $400K from an Equity Access Loan against our PPOR (part of which was used to pay the deposit etc for IP A and IP B above).

    After all expenses, I have about $10K per month free cash available to invest.

    Unfortunately, there is hardly any equity in IP A and B, and I definitely do not want to borrow anything further against my PPOR.

    My questions are:
    1. I would like to buy an IP in Sydney within the next year, say around 1.5m+, for which I have enough savings for the deposit, and the monthly cash flow for expenses. Is this a good idea?
    2. What is the best way to structure the loan for IP 'C'? To my surprise, my Bank is not willing to lend me as much as I expected, because they consider my existing liabilities to be - IP A IO Loan + IP B IO Loan + PPOR-Equity-Loan, even though I pay less than $1500 interest per month on these 3 combined!
    What's the best strategy for my situation?
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
    You have plenty in the offsets.

    That ppor structure is a problem. What happens if you or your sibling wants to sell? First thing might be just buy out the sibling.
     
  3. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,701
    Location:
    Melbourne
    Most banks are going to treat your PPOR debt as 100% so that’s going to hurt servicing.

    I agree the 50% split seems messy. Are you saying its both your PPOR? Or are you saying it’s your PPOR and sibling investment? If the latter then do you pay rent?
    If not then does she want out?
    If so me personally would be focused on trying to make that happen. Not sure what the value is but you could potentially make that happen with the existing equity.

    Failing that and if it’s not an option then why don’t you want to use PPOR equity again? Structurally it’s going to be the most effective structure given the only alternative (not including getting more Val’s done on your IPs) is paying non deductible cash.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
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    Location:
    Australia wide
    Some contradictory statements there. Sounds like your PPOR is mortgaged.

    Why do you own the PPOR with a sibling? This is a bit of a waste of the main residence exemption.
    If you wanted to improve servicing you could pay off the joint loans secured by the main residence, and use your offset cash for the deposit.