Page 66 - Smart Money

Smart Money

only on the loan, so if the rent covered the repayments and you could put
a few thousand dollars away for rent and bits and pieces, that’s how you
could afford to repay the loan. At tax time, if it is negatively geared, you
might actually get money back on your tax as well. Then you have just got
to hope that the market goes up, because the more equity you build, the
better off you are going to be.

There are several ways to increase your cash flow. You could get a higher
paying job, charge more rent on your investment property, and you could
spend less. If you have an investment property and you want to get ahead,
you need to cut down on your spending, and pay more off your owner-
occupied home, as well as pay your mortgage weekly instead of monthly.
All those things will increase your cash flow.
Bridging finance can be arranged for the situation where you have your
house on the market and you find another house that you really like and
want to put in an offer on, but you want to take the other house off the
market. The only way to do this, if you haven’t sold your own house, is
to get what we call bridging finance. This means that you will have six
months to sell your house before the bank requires you to make payments
on either your current house or your new house.

Key Point

Bridging finance allows you to make an off er and take the house that

you love off the market before you sell the property you are currently

living in. I don’t recommend this to clients at all because you could end
up paying interest only on two properties if you can’t sell your property.
The bank only gives you six months where you don’t have to make any
repayments, but you still are paying interest on the loans, so it is actually
getting you further in debt.

My recommendation is not to do bridging loans. If you own your current
house outright, and you are only financing the new one, then that that
would be okay. But if you have a debt on the current property and the
full price of the new property, then I don’t recommend bridging finance.