Structure for second property

Hi all,

I'm looking to purchase a second investment property.

My broker says to refinance my current loan on investment property 1 to access the equity in it to allow for part of it to be used as a deposit for property 2. Lets say plus $100,000.

Then he says he can get a pre-approval for the second property worth $400,000 (which is 80% of the estimated purchase price to avoid LMI).

Would this be the correct structure to follow?

Would this be ok for tax purposes as the $100,000 increase will go into my offset account for the first property. Or should I be geting a Line of credit to separate this equity to be used for a deposit?

Cheers

Yes wouldn't have an issue with the structure recommended.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Be careful about borrowing money and putting it in an offset account before using it to invest. You could be breaking the connection between borrowing and investing.

Terryw
Finance Broker
Solicitor

I agree with Terry.

If I were you I would not unlock the equity until just before settlement of the new property (or at least when the deposit is due). If you place it into an offset account and then do not buy the investment for say 6 months, there may be some uncertainty as to the use of the borrowed funds.

Regards,
YI

"Knowledge is Power"