Depreciation is an expense too (non cash expense)

Whats a green book?
What state are you in? or the property?

I would be inclined to say do neither, unless you want to work in the industries.

You would be better off just buying some books/internet and reading in the areas of interest.

Thanks Dan

That is interesting, one trust with 2 separate trustees – which is essentially 2 trusts.

Hi Dan

Whats the diff between splitting and cloning?

Their main worry is clients just saying they will invest, but instead will just blow the money when they get it.

A way around it is to use a different lender, or to think of a genuine investment which can be easily cashed in easily.

99% don';t understand. But the good thing is you will be right for the next one.

Why is it unfair?

If I borrowed $10,000  to use for a holiday it wouldn't be deductible. Its the same thing.

There was a way around it – you could have not paid money into the loan. You could have had an IO loan with a 100% offset and saved the same amount of interest. But you just didn't understand at the time. Most people don't. You will be right for the next one now.

And there is a way around it anyway. You can slowly increase your loan and increase your deductions.

Speed is important. It may be wise to try to have LOCs set up before the client eve starts looking.

eg. You have a $100,000 property with a $20,000 loan
You buy IP 2 for $100,000 and borrow $110,000 using IP 1 and IP 2 as security.
Bank has $200,000 loan to secure a debt of $130,000.

If something goes wrong and repayments are not being met the bank can sell IP 1 or IP 2 or both

If you structured it differently you can still get the same result.
Loan 1 = $20,000
Loan 2 = LOC = $60,000 with IP 1 as security

Take money for deposit from loan 2 and buy IP 2
Loan 2 $80,000. security = IP 2 alone.

If you can't pay loan 2 the bank can start repossessing properties. But since only 1 has been used as security it can only take this one.
If this is not enough to satisfy the debt the bank can take futher legal action and eventually get orders to sell IP 1, but by keeping the properties separate if buys the borrower time and flexibility – eg they could use some of the money from the LOC to keep bank 2 happy or they could chose to sell their house themselves and get a better price.

Not sure I understand your point at 3.

What I was thinking is something like this, which actually happened to someone I know:
PPOR 1 value $100,000 borrows 90%
IP 1 value $100,000 borrows 90%.

He gets into financial difficulty and needs to sell an IP. Finds a buyer, but because the market has dropped he can only sell for $90,000. This is enough to pay out his $90,000 loan.

But the other property has dropped too. It is now $90,000 and his loan is $90,000 so the bank will only release IP 1 if he can keep the PPOR loan at 90% LVR. So he has to come up with $9,000 to reduce this loan or he cannot sell IP1.

This actually happened but the numbers were bigger. My mate had no money and had to come up with $40,000 and he had just had a heart attack. He ended up losing the sale and I think he declared bankruptcy.

If he had the loans stand alone he could have just sold IP1 without worrying about the PPOR loan.