Tuesday, January 8, 2013

Should we really pay down our PPOR before our IPs?

I am having a break from my usual KFC feasts these days and while I'm sitting here suffering on this no-sugar diet, I began to ponder our portfolio. Apart from the fact that the two IPs we have on the market are getting less interest than Australian politics these days, the thing that occurred to me is that one day, they will miraculously sell. When this does eventually happen, I will need to make a choice as to either pay off some of my PPOR mortgage, or, make one other IP cash flow positive. Financially, the obvious choice is to pay down the PPOR, but emotionally I'm starting to think it would make sense to do the opposite. The little boost to my ego that would come along with knowing that an investment is actually bringing in money while I sleep is indeed very tempting. The potential flow on affect from this could be further acquisitions, better SANF and possibly a different mindset to move forward with IP as a strategy to accumulate money for an early retirement, a lifetime of KFC, or to help pay for tennis lessons for my little boy.

So what would you do?


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Flemingo said...

How To Legally Cheat On Your Investment Options With A Mortgage Offset Account

Depending on your personal requirements a possible consideration could be to link an offset account to your PPOR loan

This enables the borrower to eventually turn the PPOR into an investment property, yet retain the maximum interest deductions.

More info can be found at www.offset-account.com.au/offset_investment_options.html

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Dean said...

Humorous read.
Offset account on the PPOR..reduce interest plus choice to use it into the future?
The interest on the IP is tax deductible, personally wouldn't pay it down.
Your IP will become positive eventually...time will help. I don't mean to plug...but if you need a different way to deal with the IP's on the market...I have a guy who specialises in transactions, maybe he can advise you...
Website link is 37 Property Group (there's nothing about the transactions yet...soon there will be), feel free to contact us and I can get him in touch.

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Ryan McLean said...

I prefer to pay of PPOR first because the interest on your investment property is tax deductible.

Wouldn't you want to maximise your tax deductions where possible?

Invest My Way said...

A good strategy would be to sell your PPOR and rent in the suburb you want to live but possibly can't afford to buy, then continue to acquire investment properties using equity. Don't pay down any principal, keep them interest only so that you have the cashflow to keep accumulating.

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Brett said...

I think it makes sense to put the cash from the sale of your investment property in to your principal place of residence. If you want to improve your cash flow you could aways refinance your home over a slightly longer term to reduce your payments. By not putting the cash from the sale on to your investment property loan, your are maximising your tax deductions.

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