Advice needed from investing pro's

Hello everyone, i am new here and can see that there are many knowledgable folk here that can ofer advice on investing srategies.

I would like some advice on my current postion as I am getting married soon and would like to set myself up nicely.

Own 1 x IP bought at 240k (3yrs ago) have P&I loan currently at 175k 7.82% interest which I can draw down on if need be. i make minimum repayments of $1392 per month ($380 me , $1012 Tenant) I claim all my expenses e.g. Interest, water rates council rates and depreceation, leaving me an after tax return of around 5k a year (the property is negative geared) Based on a conservative sell price of 370k for the property, my current equity is 195k.

I have also purchased a home for me and the wife to live in at 395k. I borrowed 265k from NAB in another loan at 7.82%. The other 135k came from a family member and is not required to be repayed ever, so can be considered instant equity in this property. Me and my partner make as much repayments as we can on this loan, in line with reducing our non-deductable debt as quickly as possible. I earn 65k P.a. and she makes 33k per year. We make $2172 in repayments per month in advance on this loan. The loan currently sits at about 259k. We also have a i saver account that does NOT offset our home loan. We put around $1500 per month in this account and it returns around 6.5% interest p.a. There is currently 4k in this savings account but it will go to zero by the time of the wedding because of expenses we must pay.

I currently believe that our situation is o.k. without really having a hard look to see If we could squeeze a little more out of this portfolio, maybe take on a little more risk and go into shares or something like that. I have heard a lot about offset accounts and believe that I should have one possibly?

I would like to get into shares at some stage and margin lending sounds good any ideas?

Any ideas or thoughts would be greatlky appreciated thanks.

I would draw down the equity and invest into some quality managed funds.. use the dividends to assist with loan repayments... spread the managed funds into australian and international assets like property, resources, infrustrure, shares.

thanks crc, which equity would i draw down on? IP or PPOR? Should I still concentrate on reducing my PPOR debt as quickly as possible as I have seen some methods promoting the witdrawal of PPOR equity into LOC's? If this was done wouldn't the interest repayments be non-deductable?

Hunting_dollars,

You can draw down equity from IP &/or PPOR if desired via LOC's and both will be fully tax deductable debt, if used for investment purposes. Tax deductability is determined by the purpose of the borrowings, not by the type of security used.

What is your aim and timeframe for further investing? If you need to raise funds for your upcoming wedding, in the short-term, perhaps shares/managed funds are not appropriate, as you may actually lose capital in the short term. Probably best to build up your isaver, or keep paying down the PPOR.

If you can afford the additional interest repayments on the LOC's, and still save whatever you need for the wedding, and have an investment timeframe of 3-5 years or longer, shares/managed funds are definitely a viable option to diversify your portfolio.

Also, if your interest rates aren't fixed, you may have the option to switch the IP loan to interest only, to maximise your cashflow.

JustB

Thanks Justb, I am going to park the money in the isaver untill the wedding money pit passes, then I would look to have a long term investing strategy. I would like to try and implement the LOE strategies that Steve Navra talks about, i wonder if anyone could provide a spreadsheet tool or something that i could test this strategy with my financial details? GREAT FORUM!

Might be something here: http://www.invested.com.au/83/

am I doing something wrong here? when I download the spreadsheets i just get a blank workbook with some scribbles about a gif? dunno whats happening? if somebody has the latest LOE spreadsheet and share spreadsheet from the previous links could they email to me please?

If you want to tighten the screws
change your IP loan to interest only

You will get a little bit extra cashflow to save

Secondly - make ur current everyday bank account an offset
assuming its with the same bank

Put funds in the offset rather than a 6.5% savings account - which is taxed

You offset non deductable debt- giving you a high effective rate of return

Thanks DKMC, so I draw down the equity in the PPOR and cap the PPOR loan at 259k. Keeping it P&I (if its affordable) use the drawn down funds to invest in a margin lending portfolio. Draw down the equity on the IP and use those funds to perhaps fund another IP? Also, revert IP 1 back to IO loan and cap at 175k. Am I on the right track here? Also scrap the isaver and talk to NAB about a 100% offset against my PPOR to reduce non-deductable debt. Now all I got to worry about is whether I can afford all the repayments on the new loans.

just another thing, what is the definition of capitalising interest? and when should it be used? (I dunno what it is)