Join our investing community

Equity investment returns - what to do with them

Discussion in 'Investing Strategies' started by nitro-nige, 18th Jul, 2007.

  1. nitro-nige

    nitro-nige Well-Known Member

    Joined:
    8th Mar, 2007
    Posts:
    49
    Location:
    Reservoir, Melb
    My wife and I are looking at buying our first PPOR 'gulp'.
    I'd like to use the equity in the house as we pay it off to fund other investments.
    My question is what's the best tactic for the returns from the investment.
    Should we;
    - reinvest the money directly/take dividends (for example) as extra shares etc
    - put the money into the mortgage to reduce the principle and redraw against it
    - use an option I haven't thought of?
     
  2. Glebe

    Glebe Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    932
    Location:
    Sydney, NSW
    You're probably best off performing the art of debt recycling.

    It's been mentioned here quite often.

    This involves paying off your non-deductible debt as quick as possible, whilst borrowing against your equity to fund other investments, which in turn pay down your PPOR debt. And like a rolling stone, it gathers momentum then before you know it you're non-deductible debt free :)
     
  3. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Yep, worked for me! ;)

    The question then becomes: What to do with your equity when you've got no PPOR mortgage left? But I think I know the answer to that one too...

    Mind you, in the current environment I'm holding it in reserve and just using my surplus cash flow to reduce my LVR. Sometimes the sideline is a nice place to be too.

    Cheers,
    Michael.
     
  4. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
    Posts:
    96
    Location:
    Sydney
    apportioning debt

    How do investors apportion their debt on their PPOR. Do you have sub accounts for the deductible vs non deductible debt?

    thanks
     
  5. DaveA

    DaveA Well-Known Member

    Joined:
    19th Feb, 2007
    Posts:
    617
    Location:
    Sydney, NSW
    theres the products like the st george portfolio around which this is great for, but im interest to hear what others use which i imagine would be quite similar (maybe a bit cheaper...)
     
  6. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
    Posts:
    96
    Location:
    Sydney
    Recycling debt


    Yeah. me too
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Most lenders will allow you to set up multiple loan accounts, mainly when refinancing - they will allow you to set up a new account to access the increased equity (from growth and/or loan principal payments). The idea would be to use this new facility only for investment purposes and have it extended down the track when you have more equity (or have paid off more from the base loan).
     
  8. DaveA

    DaveA Well-Known Member

    Joined:
    19th Feb, 2007
    Posts:
    617
    Location:
    Sydney, NSW
    yeh but someone who will only have one loan for the near future (until capital growth) thats y im so attracted to the portfolio loans...

    one of the only products i know that will allow me to effectively debt recycle until i get an IP...