Tuesday, 27 August 2013

Answers from the Professionals Lee Spyda from Investor Loans. I asked him some of the questions I was getting from people lately.

I had a great chat to Lee Spyda from Investor Loans and asked him some of the questions I was getting from people lately. 
he can be contacted on 
lee@investorloansnetwork.com.au


Q1: Can you tell me about how professional investors seem to be able to keep more then two properties and pay them off at a lower payment then a normal investor
A common investment strategy is negative gearing which in my opinion is only a good investment strategy if the market is just about to boom upwards in a big way otherwise costs you money each week. 
Typically on a new property purchase using negative gearing $200 to $300 per week would be required to keep the property afloat 

BUT if this property was positively geared in the same way the additional passive income of $200 to $300per week or even $50per week could be made to the mortgage in additional repayments thus paying the loan off quicker. 
Having the loan on interest only these payments would accumulate & can be re-leant to your next purchase getting you ahead quick purchasing more properties & so on.

Q2: You have 2 loans for example P I and I O.
P I stands for Principle and Interest and I O stands for interest only. As a professional investor I have all my loans on interest only with the ability to pay principle. 
I make extra repayments when I can & once I have built up sufficient funds in my offset/redraw I do a loan rebalance decreasing my personal debt & increasing my investment debt (this is why it is so important to have the correct home loan product) 
then I use the funds for another property purchase. 
Having your loan on interest only also decreases your risk with the bank, each month the bank takes a principle payment they are shifting the risk to you by having more equity to take from you should you get in to trouble.

We had a client that had a property in Main beach here on the Gold Coast and they could not afford to keep it due to it being on P&I. 
The mortgage repayments where more then the rent coming in @ $1,007 a week and the rent was $850 but we refinanced with a better interest rate and put her on interest only. 

This was able to help her keep that property , 

now she pays $688 a week 
and does not have to find the extra $319 which was going towards the principle.

 (Then the negatives of this)  If you’re going to remain living in your home, staying on a P & I loan can be good idea because the interest is not tax-deductible so that’s the debt you want to pay off first with spare cash but you can convert to interest only & make the same payments as P&I. This gives you the flexibility & control over your own finances as above still paying your home of in the same time frame except you have access to the equity you have paid off..
Once you complete some chunk deals the profit from these can be used to pay down your existing non-deductable debt which can then be converted to investment debt ready for your next purchase/deal.



Q3:  what is the six year rule.

In my opinion - If you have a PPR & turn this in to an investment property you have 6 years in which to live in this property again to avoid capital gains. I recommend you speak with your accountant regarding this.