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Forgetting about whether or not it is suitable, is it even possible to set up a facility in the name of the son (no christian punt intended) with the mothers home as security (rather than mother going guarantor), or does the facility have to be in the name of the title holder?
Is this what you describe (with imaginary figures): Mother borrows 50k at 7%, she lends this to her son at 7.2%. Because the loan was for the purpose of producing income practically all of the income is offset by her interest payments so her situation is not affected much. The son uses the 50k to buy his property, borrowing another 300k in his own name (trusts and things aside). His interest payments to his mum would be tax deductible because they were used for the purpose of producing income.
If this is the case the only slight downfall I can see would be the fact that the no-doc loan may have a higher interest rate, but since this is on a small portion of the total loan it may not affect the bottom line much.
Is my thinking here correct?
Thanks for your input guys. I did a lot of reading on the ATO website this morning and from what I can tell Mike is right, so it’s all good.
By the way, the property was bought long after the 80s, probably around 95-96.
Cheers,
CarlThanks for your response Michael. I’ve read through the PDFs on your website and I’ve decided that I really need to do a bit more research/reading. Might be a good idea to stop by Borders on the way home tonight and pick up some reading material for the weekend..
Thanks again for your response Terry, I will definately look into the board/rent deal. That would make a big difference to where we’re going I think..
Thanks for your input Simon
You’re right, starting at the start would really be to just build one house. However, unless all 3 partners went into the development as a joint venture there wouldn’t be enough capital to get the ball rolling yet. I’ve always been told that when developing as a joint venture it is a top idea to keep separate titles, so building just one house would probably only work if I did it by myself.
Your point is taken though, it would be safer to learn one aspect of property development at the time.
Thanks for your input Terry
If drawing on the homeloan can’t provide tax deductions through interest/rates/repairs etc then it might be a better idea to just pay the homeloan out, then use the house as security and finance an IP 100%. Then there would be no question that the borrowed money was used to produce income. Is that possible?
The problem is then the students and keeping my mums income low for now… Is there a difference as far as taxable income goes if you charge a person living with you some type of board payment, rather than drawing up a rental contract? Would that affect the CGT exemption?
