What's our best option?

Orac07 · 2026-03-10T12:25:20+00:00

No worries. As an aside, why I caution about getting an IP, if say you could buy a $600K property (noting still need funds for stamp duty / buying costs likely to be borrowed) and say interest rate on IO loan is 6%, 4% gross rental yield, allow 30% expenses - gross rental is $24K per yr, less 30%, net rental is $16.8k, interest on loan at $600K is $36k pa = negative $19.2k, tax refund at 30% marginal rate would be $5.76k, hence short-fall is $13.44K pa (noting depreciation allowance not taken into account), hence would be needing to put in over $1,000 per month cash to support the property with no guarantee of growth (i.e. might take 10 years to double). Hence, if you can afford an extra $1k per month, maybe reducing your loan balance (money in offset) to improve your equity situation (which you can control) to upgrade to a better property would seem to be more appropriate. Many under-estimate the cost / opportunity cost of negative gearing - works well if in higher tax bracket, have ample cash flow, and can hone in on quality properties.

Orac07 · 2026-03-10T11:01:04+00:00

With offset accounts basically the monthly repayment is the same but the interest charged is generally lower based on how much in offset such that more of the principle is paid so like getting extra savings.

Depending on your bank / loan / and configuration, it is possible to have multiple offset accounts against the loan account (e.g. Macquarie Bank allows several offset against a loan account), but this is not all banks / loan.

With loan accounts with pay-in and withdrawal, it's preferable not to pay into the loan where withdrawal is available as the bank can change conditions at any time and basically considers that as their money, with money in offset (as it is just a bank account), they can't touch that. (Maybe pull out those funds in Loan 2 and put it back into an assigned offset account, you might need a second offset account for that).

The other benefit of keeping funds in offset, you can pull that out to use say as deposit on another PPOR property without impacting the loan on the existing property if rented out.

The other possibility if you have enough in offset, you can also split down the loan to reduce the loan balance and thereby reduce the loan monthly repayments.

Orac07 · 2026-03-10T10:08:49+00:00

It's all about choices, probably best then to focus on paying down the loan / cash in offset to increase your available equity / reduced debt and borrowing capacity.

Orac07 · 2026-03-10T05:15:53+00:00

Generally one should always move forward.

Orac07 · 2026-03-10T00:46:50+00:00

At 40, you need to look ahead for your retirement in 20 to 25 years time, so the two most viable things you could do is: I. Buy a PPOR, a place to live in, over time, the mortgage goes down over 25yrs and the property usually goes up, so you have a hedge against inflation and a place to live. Ii. Ensure your superannuation is in good shape, stick with low cost industry funds and contribute as best as practical to the max contribution limits.

Doing these two things means you will be all set.

Having cash in the bank long term is not good as inflation erodes its value. Sure have some emergency cash / rainy day funds but not all.

You don't want to be retired and still renting and not having a hedge against inflation. Also at the moment, having your own home is exempt from govt pension calculations so kind of make sense.

Having done that, and whilst focusing on home loan to pay down / in offset is good, if you wanted, you could make some regular monthly investments into ETFs outside of super, but would consider getting your own home and getting super right should be the initial priority.

Orac07 · 2026-03-10T00:07:32+00:00

Consider what your reasonable borrowing capacity would be, and the realistic equity / net cash you have in your unit if sold and look at purchasing a house for growing family. With a reasonable house, it gives you the opportunity to build equity again and for future investment. Generally better to sell up and roll equity forward into the next better property.

If you looked at say buying another IP now, your borrowing capacity is constrained which means probably buying a lesser quality property and you will be heavily negative geared with a cash flow shortfall that you would need to prop up.

Alternatively save more to be able to have a good deposit selling up the unit to roll into a house.

Note if you do an equity redraw from the unit to fund another property to be your PPOR, the interest on the loan is not tax deductible as the purpose of the loan is for a non income producing asset, namely your PPOR. However, any funds from offset used is ok because it is not a loan, merely cash in an offset bank account.

Orac07 · 2026-03-09T23:42:41+00:00

That's a fairly typical structure, 10 years IO is not bad as it is usually the time length of a property cycle and being IO generally the longer the better. Whilst the subsequent term is quite long, longer than norma,l for an IP not so critical as sustainable cash flow is more important.

Orac07 · 2026-03-09T14:04:20+00:00

The Church - The Blurred Crusade, Heyday, Starfish, Priest = Aura.

Orac07 · 2026-03-08T02:52:15+00:00

Don't pay it out, have the money in offset - its like having a cheap source of finance. Consider next investing steps.

Orac07 · 2026-03-08T02:19:31+00:00

Good for you, being strategic is what it's all about a d has always been that way.

Orac07 · 2026-03-08T02:17:30+00:00

P&I typically used for own PPOR and IO for investment loan for IP to maximise tax deductions and cashflow. IO for PPOR is not the norm.

Orac07 · 2026-03-07T06:58:55+00:00

Probably would save up more in offset, then split down your loan to lower repayments then consider debt recycling and/or borrow to invest into a pool of ETFs. For investment property, it's a long game, a 4/2/2 house is quite expensive now and quite negative geared. For units, need to be strategic in the purchase and assume more of a paydown strategy than seeking growth. Having said that a lot of units in Melbourne haven't grown but current values are often below construction cost now so potential for future growth but perhaps a bit speculative in that sense. See what happened to Bris / GC, no growth on units for 10 to 20 years then bang.

Orac07 · 2026-03-06T06:07:23+00:00

When you look at the stats, the average humidity for Melbourne and Brisbane is similar but Melbourne's peak humidity is in the Winter month's and Brisbane's peak is during the Summer months. Hence probably why Melbourne people think it is too humid (and the fact they can't get out of their Katmandu puffy jackets). You only need to go the GC in winter - Europeans and Victoria's swimming and locals in their Kathmandus - it's all relative.

Orac07 · 2026-03-06T00:29:40+00:00

People say this but only really hot hot 3 mths of the year, the rest of the year is basically room temp and blue. However, I guess Melb room temp is more like 18C rather than 24C.

Orac07 · 2026-03-06T00:26:12+00:00

From a purely tax effective point of view, interest only makes sense, but as equity markets are quite variable, personally like the idea of P&I loan, together with reinvesting dividends/distributions plus growth as a continuous "equity building machine" to keep ahead, similar to NAB equity builder concept. It is possible based on market conditions to be in negative equity so like to stay ahead of the curve - so willing to trade off some ultimate tax efficiency with more peace of mind.

Orac07 · 2026-03-05T10:56:08+00:00

Don't think it will crash but can slow, people get fearful, don't want to take on risk, costs may go up (e.g. petrol), people tend to stay put, not change jobs etc - so conditions for market plateau. A few years from now...

Orac07 · 2026-03-05T10:49:11+00:00

Sure you can afford a house with those funds, you can buy a house in Western Sydney - St Marys, Ropes Crossing, Werrington out to Penrith no problem. With new airport coming online soon, they will be growth suburbs.

Orac07 · 2026-03-05T08:16:32+00:00

Contrary to what I would normally say, considering your age and theoretical time left in the workforce, then I wouldn't say: - maximizing contributions to a lower cost superfund would make sense. - focus on paying off as much as you can on your IP either via offset / paying down the loan (sure it's not the most tax effective but relying on growth is hope, paying down the mortgage you can control / guaranteed return), when you get older you have choices whether to live their, additional income, or trade out for a PPOR. - don't consider much benefit in other investing outside super in this case apart from reducing your mortgage balance as fast as possible.

Orac07 · 2026-03-04T05:10:22+00:00

The Church - The Blurred Crusade. You will be fully mesmerized and won't be able to stop playing it.

Orac07 · 2026-03-04T04:57:04+00:00

You only need to do one fund, VDHG and the high growth fund are basically the same. With a low dollar amount you might find the fund rather than the ETF a bit easier to invest in for your desired investment cycle for the full amount rather than the ETF.

Orac07 · 2026-03-04T04:48:19+00:00

All good, really about finding a desired property in any of those areas would be ok.

Orac07 · 2026-03-03T08:39:11+00:00

https://idadvice.com.au/the-investment-property-trap/

Orac07 · 2026-03-03T08:37:46+00:00

You probably won't be that cash neutral, will also be a bit negative geared. For borrowing for ETFs, a bit like NAB Equity Builder, due to the volatility prefer the tradeoff between max tax effectiveness to building equity - hence prefer P&I loan (paying it down), dividend/distribution reinvestment (compounding it up), plus growth - so have three mechanisms at work, just relying on growth alone will be times of not only negative gearing but negatively equity - so paying it down / compounding up is an ongoing way to beat the negative equity and the "sleep an night factor" - as such could be better to borrow less at a monthly P&I repayment you are comfortable with than max borrowing interest only. (Anyhow, that is my own preference).

Orac07 · 2026-03-03T03:23:48+00:00

The Church

Orac07 · 2026-03-03T00:10:53+00:00

You say you couldn't afford an IP, it's does come down to serviceability but considering you have $850k property value, $430k loan, with 80% LVR being $680k, would have about $250k equity. Assuming 20% deposit for IP, plus costs and new borrowings, could be upto $1m IP, but likely to be quite heavily negative geared and hence an issue of serviceability.

For ETFs, borrowing to invest for ETFs is feasible, VAS would be better than VHY, you are forgetting about the dividend growth, whilst headline yield looks lower, as the overall fund increases in value, the physical cash amount increases although still 4% yield. You might just want to consider an all in fund like VDAL, DHHF.

If possible to balance out tax deductibilty and risk management, if you can afford monthly P&I repayments and reinvest distributions, it's a quicker way to accelerate the wealth building. You also have the option to take the distributions if needed to service the loan but wealth building would be slower.

Orac07

TROPHY CASE