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We sold our home and have used the funds to buy another land on which we plan to build on soon. We still have approx $125K cash left in hand. We would like to invest in some property. if we use the current funds to put towards our house, it will be a while before we are able to build equity to use towards an investment property. our combined income is over $150k. Is there a way we can achieve both.
02 September 2015 |
Dear confused thank you for your question. When considering investment it is important that you consider diversifying your portfolio in order to not have all your eggs in one basket. Property is one form of investment, however it also has a large buy in price. When looking at debt you have what is considered ‘good’ debt and ‘bad’ debt. Good debt is tax deductible debt as it is investment loans established to purchase investments including property, shares and managed funds. There is also ‘bad’ debt which is for personally held assets such as residential mortgages, car loans, credit cards etc. It is recommended that you clear as much of your personal ‘bad’ debt as possible. If you are planning on building on the purchased land in order to reduce the level of ‘bad’ debt that you hold you should consider using the available funds for this. You do have reasonable combined incomes, however the repayments on your residential house will depend on how much the property costs to build. As you mentioned you will build equity in the house, it just depends on how much. It is a starting point and may allow you to get into the investment property market. I would suggest that you speak with a mortgage broker to get an indication of your borrowing limits and pre approval should you choose to go down the path of purchasing an investment property. When considering a large investment such as property completing as much research as possible is always the best strategy.