Pay off IPs or Invest in Shares

Discussion in 'Share Investing Strategies, Theories & Education' started by BlueShark, 3rd Jul, 2017.

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  1. BlueShark

    BlueShark Member

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    Hi,
    Please let me know if this is covered elsewhere.
    I am after some advice. I am trying to determine where myself & partner should be putting our income for investment purposes.
    We currently do not own a home and rent instead. We have investment properties and a small quantity of shares.
    Our income goes into offset accounts on the IPs so it is easily accessible.
    We dont plan on buying a home to live in any time soon and are happy to rent until we have a family (and know where we want to live etc). The plan was to use equity in the IPs to assist in purchasing the home then to direct the income from the IPs to pay off mortgage on the PPOR.

    I feel like we need a balanced portfolio and am considering investing in shares.

    My question is: do we try and pay down the investment properties or use our available income to invest in shares?

    I have been looking to get some independent financial advise on this however no one seems to be able to look at he big picture.
    Any advise much appreciated.
     
  2. Terry_w

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

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    By not having a main residence you are doing yourselves a disservice. Rentvesting is fine, but a main residence is the main exempt asset you can have. So why not buy a main residence and recycle debt into shares. It will work out cheaper than renting after a few years and you will be building up a large CGT exempt asset which could be sold in the future.
     
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  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    It can be tough finding an adviser who understands all asset classes and can advise on direct property along side shares. That's one of the reasons we started this site! Self education is going to help you judge the quality of the advice people are offering.

    Keep asking questions and learning!

    Where are you located?
     
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  4. Hodor

    Hodor Well-Known Member

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    When you say "pay down" I assume you mean add more money to the offset not actually reduce the principle on the loan with extra repayments. Assuming you are disciplined this is a more flexible solution.

    No one knows the future so no one can tell you if you will be better putting your money in the offset or investing in shares. If you feel you need balance then you need to decide how much you will allocate to each and stick to it.

    Think about what type of shares you want to invest in, direct, ETFs, LICs, managed funds or another.
     
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  5. Rakhi Withanage

    Rakhi Withanage Member

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    Hi, interested99,

    It would depend on your time frame and overall investment objectives. One option would be to keep topping up the offset account so that if you did want to purchase a home down the track you could use those funds and the investment loan would still be tax deductible (as opposed to paying down the investment loan). Hodor is correct that this does gives you flexibility but requires discipline and perhaps an adviser to keep you on track.
     
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  6. BlueShark

    BlueShark Member

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    Sorry I meant pay into the offsets, not 'pay down'.
     
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  7. BlueShark

    BlueShark Member

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    Thanks, Brisbane.
     
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  8. BlueShark

    BlueShark Member

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    Thanks Terry. Is there a post on here about recycling debt into shares / a link to how this is done?
     
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  9. BlueShark

    BlueShark Member

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    Can anyone please help here? When paying off my future PPOR with income from IPs, can the interest on the IPs be added to the IP principle loan and is this interest tax deductable?
     
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  10. Hodor

    Hodor Well-Known Member

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    It can be, however, it won't be deductible debt if you do. So no benefit and will create a nightmare tax wise.
     
  11. Terry_w

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

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