Prioritising your next big move..
Question from john updated on 19th February 2007:
Our expert responded:
So many questions, where do I start? You are in a very interesting situation where accountants can do some 'cool' stuff. I love your dream! The first thing I would ask is if you are keeping the 35k for any special reason. If not, I would look at using that to make a lump sum repayment on your personal mortgage. Let's say you are paying 8% on your mortgage, and you are earning 3% on your savings. In order to be better off saving money, you'd really need to be earning about 12% before tax. I doubt that's the case and so making a lump sum repayment on your mortgage will give you a far better return.
If you are planning on keeping the shares long term, and perhaps adding to them, I would also consider putting those into your trust, rather than owning them personally. As your income is over $60,000, should you receive any dividends on your shares, you will have a 6c tax problem.
In relation to your LAQC, I would look at seeing how much more you can raise as a mortgage, and then pay out the funds as a loan repayment, assuming the LAQC borrowed funds from you for the purchase of the investment property plus anything else since then. I would then use this to again make a lump sum repayment on your personal mortgage, thereby transferring some of your personal mortgage to your LAQC.
aving done that, and spent the money catching up on the deferred maintenance of your rental property, I would look at buying more investment property. Just make sure you do your research on the market to get the best deal you can. The more bites you can get at capital growth, the easier it will be in the long run to achieve your dreams. If you do have to borrow against the equity in your home to do this, at least the interest on that loan will be tax deductible.
And last, but not least, seeing as you have been recently married (I do not know how long you have been together and what your individual financial situations were), I would suggest you consider entering into a Section 21 Contracting Out Agreement (the new name for a pre-, or in your case, post-nuptial) between you and your wife. While this may be a contentious issue, it's a fact that 40% of marriages end in divorce, and this is just to protect what each of you bought into the relationship.
Above all, in all areas, get professional advice pertinent to your situation. When people have good professional advisers on board (accountant, lawyer, mortgage broker, real estate agent, etc), they are absolutely invaluable in helping you get to where you want to be much quicker than if you tried to go it alone.
Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.