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Using LOE/Rent Income to start Installment/Savings Gearing

Discussion in 'Investing Strategies' started by Insan3, 18th Apr, 2008.

  1. Insan3

    Insan3 Active Member

    Joined:
    15th Dec, 2007
    Posts:
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    Location:
    Cairns, QLD
    Hi all,

    Just got this thought in my head, wanted to run it by others.

    I have obtained a LOC on my PPOR. This LOC is to pay for all Investment Costs relating to my IP. Debt-Recycling.

    My rental income now goes into an Offset account linked to my PPOR. $650/mth. I don't touch these funds. Just accumulating at the moment.

    I am considering starting a Savings Gearing account, and using this $650/mth to invest in growth-related funds. $1300/mth Investment, plus Neg Gearing benefits. Use any income to pay down LOC.

    Worth it to get into the market, potentially hitting the next boom, or better off trying to pay down PPOR?

    Thanks!
     
  2. Tim

    Tim Well-Known Member

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    111
    Location:
    Lismore NSW
    I think what would make this a resonable idea would be if:

    1) Your timeframe was 7-10 years minumum
    2) You knew you wouldn't need to access this money
    3) Your LoC buffer was enough to weather any storms
    4) You worked out if you would capitalise or pay directly the increasing interest bill
    5) You included some reasonable level of diversification, perhaps across sectors or asset classes, and ensured you had an actual pre-determined strategy with what you were doing

    Tim
     
  3. Billv

    Billv Getting there

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    I think leaving the money in your offset is a better idea for now.
    Cheers
     
  4. crc_error

    crc_error The Rule of 72

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    why? he is dollar cost averaging his entry points, which is a good thing!
     
  5. Billv

    Billv Getting there

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    CRC,

    That's fine as well but I'd do this at a later time when the markets are more predictable.
    None really knows how long this mess will last but it seems possible that we will be lured back into shares by seeing a small recovery and then the worst comes and we lose even more...:eek:
    I think that the safest thing for me would be to leave my money parked into my PPOR's offset account.
    It only makes me 8.7% but it's a guaranteed return and it's tax free.

    Cheers
     
  6. crc_error

    crc_error The Rule of 72

    Joined:
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    true, but if your putting into the market $1300 per month as the op suggested, he shouldl not be worried about price movements in the short term. if you bought after any correction, ie 9/11 etc, then you would have profited nicely in the coming years.

    look at the all ords, they bottomed at 5200, and today they are 5700. a nice 10% growth already. The best time is to get then when everyone else is selling, not when the market is running, the horse has bolted after then.

    if your happy with 8.7%, thats fine.. but that stratergie wont make you rich.