Hi

Sorry for the late reply, I am in Thailand atm.

I had a plan which I ran by an account who was high up in the ATO for many years. He said it should be ok. It went something like this:

You have two loans, one on your house and one on your investment. You have some equity in one or both, so you set up a LOC on either. Everymonth you borrow to pay the expenses on the property. this money comes from the LOC and the money that you would have used goes into the 100% offset account attached to your home loan.

Then, you can borrow from the LOC to pay for the shortfall as the rent may not cover the interest.

I asked about borrowing the whole amount to pay the interest on the investment. He seemed to think it would be ok. Businesses borrow to pay interest all the time.

He said to strenghten your position, it would be better to have the IP loan and home loan with different banks. Set up a 100% offset account on the home loan so you are not actually paying down this loan. And pay the interest on the LOC each month.

The end effect is that you are paying the same interest overall, but you are slowly increasing your tax deductions.

Terryw
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What about a 2nd mortgage carryback? You could sell for $450,000 and lend them the 10% deposit and you would still get some cash out of it.

Terryw
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Whats it worth?

Generally wrappers add 20% to the value, and then 2-3% on the nterest rate too.

Terryw
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I beleive a Partnership is not really a separate legal entity. Like a trust is not. So the title will have to be in the name of a company or an individual – or combinations.

Terryw
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Hi Eden

LOC is a Line of credit. doesn’t have to be a LOC, you can use any sort of loan,

Capitalising interest is justting the interest build up, not paying it everymonth. – This may be wise in some cases as you could possibly use your money elsewhere.

Terryw
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You had better use an accountant if you are not sure.

Stamp duty on the land is not deductible. It can be used to reduce the capital gain when you sell, but not claimable while you have the property. But I beleive the situation is different in Canberra with leasehold properties.

Similar with solicitor fees.

Some other costs are considered borrowing expenses. These can be claimed, but only over 5 years (ie 20% per year) or the term of the loan – whichever is shorter.

Other costs can be claimed in full – if related to an investment property.

Terryw
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V8ghia, Although hard to find, they are still out there.

Terryw
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I have heard about them, never financed one tho. From memory, LVRs are about 70% and the lenders do not like them

I think there are problems with selling the unit too, as the new purchaser may have to be approved by the other owners as well. this will limit the price. But as tools suggested, if you can change it to strata, then could makes some quick gains.

Terryw
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Maybe you could get him to sign a longer lease in return for you paying – with a small increase maybe?

Or maybe he could just get wirelss broadband.

Terryw
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