the voigtstr's battle plan

Sorry, I can't resist........

Take your pick: 1, 2, 3, 10, 100, 1000.

It makes no difference how many neutrally geared properties you have, they make no contribution to your income.

To retire, you need to find an income stream to replace both of your incomes!!!! You buy your IPs with neutral cashflow to survive the present. In the future the rents on these properties will increase enough to generate a cashflow to replace your income and/or generate equity to purchase managed funds to generate income.

I think you need to ask how many IPs do I need to generate an income of $x in y years time. Hopefully, the more IPs you have the sooner you can retire.

Tailcat

 

Retiring in 10 years would be good, with enough income to replace my 55k income and wifes 47.5k income

The properties would hopefully be neutrally geared to start with, but surely capitol growth on more properties can be used to pay off the ppor mortgage, and then either more funds so the portfolio is more positive cashflow, or pay down some of the LOCS. I expect more properties sooner rather than later would be best to take advantage of capitol growth.

 

7 to 10 is the numbers put up by the likes of the investors club as being the magic numbers......

My personal numbers are 2 ip max which I currently have and funds under management of 5 million which I am still working on. Ego would like a flash house and car along the way too

 

Which funds Bundy?

 

I am still pretty much a direct share market investor, but I do hold Tyndal Australian Share Value Fund and AMP Income Fund No. 1. On my shopping list is Navra Aust Retail, Vangaurd High Yield Australian Shares and Platinum Asia. Mac Small Companies fund would interest me too but it is no longer available on margin through BankSA so will look at an alternative that they will do.

Decent day today will get me a start into Navra.

 

Situation:
The wife and I are living in a villa unit bought for 180k with a value of 200k to 210k. We are planning to get a LOC against the equity in the unit and borrow up to 95% the value of the unit.
The purchase costs of the next ppor are expected to be approx 30k.
We hope to have approx 30k invested in funds by the time we are ready to purchase the ppor.
When we are ready to buy our next ppor should we

A) Use the LOC to purchase the ppor. The distributions from the funds will pay the negative gearing and other holding costs on the unit.
B) Redeem the funds to purchase the ppor. Use the LOC to then invest in funds again to fund negative gearing and other holding costs on the unit. In this scenario I wear the costs of redeeming and then buying back into funds, but the LOC interest is tax deductable since its being invested in managed funds.

For the values discussed above is scenario B worth the hassle? How much of a tax deduction do we get if the LOC and the unit are held in both names and we are both on the 30% tax bracket? As for the costs of redeeming and then buying back into managed funds, apart from the buy/sell spread there is also the randomness of what the unit prices will be doing at the time of sale and then purchase.

 

no takers on my wacky option B?

 

Are you keeping the villa and buying a second property as a new PPOR?
If so could you refinance the villa as an IP and start a new loan for the new PPOR?
I reckon selling you units would be worth considering if you could improve your gearing, but you would have to be 100% sure what all the costs were going to be.

 

Keeping the villa and making it a rental, and buying a house as a ppor.

Rather than refinance the villa (as we are on fixed rate loan of 6.75% for another 3 and bit years) a separate LOC would be used to access the equity.

I dont think you _can_ guarantee the costs of moving money into and out of funds, you never know what the market is going to do.

 

Not sure if you understand the rules of deductible interest or maybe I missed your point. Can you rephrase your suggestion please?

Do you understand that you just cannot refinance a property and call it an IP loan if the original loan was to buy a home?

 

Once we move into the new ppor, dont the interest payments on the villa unit become tax deductable?

 

Only the same amount of the existing loan that was used to purchase it. You cannot increase the loan to use funds for the new PPOR and claim the new loan as deductible.

Cheers,

 

Plan b was to use the money sitting in funds at the end of the year for purchase costs for the ppor.

The existing loan on the villa unit would continue but the loan would now be servicing an investment property. The LOC would be used to put money straight back into funds again, so its purpose is now for investment purposes.

So plan A, the loc would be used for purchse cost on ppor and not be deductable, plan b, the loc would be to purchase managed funds which would make the loc interest deductable.

In plan b though, is it worth cashing out of the funds (to use on the ppor purchase) and then rebuy funds (from loc), just for the benefit of having the interest on 30k now tax deductable?

 

I was referring more to the fees etc, not what the 'market value' of the fund is.
High/any fees could take the shine off the benefit.

 

I think I worded that badly.
You explain the point a bit better a couple of posts up.

 

so A or B peoples?

 

Hi Tailcat,
is the above still the way to go, if we wont be moving into the place for a few years? We'll stay where we are and rent the new place out (once we get it) after 2-3 years will move into the new place and rent out our old place.

I assume we can just let the offset account sit there unutilised, untill such time as it becomes our ppor, and then we can use it to start debt recycling (using the recycled money to go into navra to start building up an income stream)

 

Voigtstr,

how your plan going now with interest rates up, house values softening, navra funds staggering, geared share funds tanking.

The future isn't looking so rosy now for me, although I am in a far better position LVR and asset wise.

Perhaps the only real light on the horizon is rents. Blue sky there for the medium term. (As long as unemployment stays low.)

 

Got the main debts out of the way (motorcycle loan and personal loan).
Have 1 store card for a Sony Bravia that interest free, and I''l have that paid before the interest free period stops. Also have a credit card with a 7k limit that has 3k on it.

Asset wise we have the villa unit still which was bought for 180k. We recently had it valued it at 200k. There's now a 20k LOC ready to go towards the purchase of a rental property as soon as we can find one suitable. (We want a 3br unit in the northern burbs of Hobart that we can move into ourselves after 2 or 3 years)

I've got a short term saving goal of about 7.5k as contingency money for if we have a child and my wife needs some months off work. (she also is saving a similar amount)

My share and fund portfolio is only about 7k, with Navra, CFS geared australian share, and Paladin.

I do intend putting more into the funds next year, as hopefully we would have seen the bottom of the market by then.

I don't intend gearing (to 50% only) until I've got over 20k in navra and the market is trending up again.

I'm hoping for house values and rents to do the heavy lifting over the next 5 years.

 

Don't LOC only allow you to have a max LVR of 80%, in which case you'd need $40k equity not $20k on a $200k valued property.

I'm very interested to get other input on this I'm looking to set up a LOC on my PPOR and over time re-cycle it to good debt, but currently have about a $10k difference between my outstanding loan and an LVR of 80%.