I am not an accountant either, but I have spoken to my tax advisor about something similar. He said there is no requirement to pay cash for anything investment related, including interest, and you can claim interest on money borrowed to pay interest on investments.

This was informal advice off the top of his head, so he may be wrong.

Please speak to someone qualified to answer before doing anything. And let us know the result.

Terryw
Discover Home Loans
North Sydney
[email protected]

You could also buy warrants, which could allow some gearing.

Terryw
Discover Home Loans
North Sydney
[email protected]

Robert

The No Doc loans insured by GE and PMI actually have a maximum exposure level of $500,000 each. This is not much and will be reached quickly. This can be extended with a couple by getting loans in one name only. So a couple could get up to $2mil in No Doc loans fairly easiy – if they had the equity and proper structure.

There are also other No Doc loans and asset lends. Yes the rates are higher.

People also have the option of increasing or obtaining LOCs while they are still working.

So all of this would give a person a good start.

And don’t forget, these people would not be retired. They would usually be classed as self employed. They may even find themselves able to qualify for full docs for a while.

BTW, in another post you asked when stamp duty on mortgages was abolished. Michael was referring to Vic where it was abolished in July last year (I think).

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi

I have just come across this thread. It is great to see someone actually living off equity.

Rob, you say someone big enough for this should be able to live on their rents. But someone going for a high growth strategy will usually have low yielding properties, so they may have a lot of equity, but the rents would not necessarily be enough to live on.

I agree that compounding interest on the money lived off each year will be freightening, but the compoudning growth on a large asset base should be more than enough to cover this.

I still can’t see a problem with living off equity if done sensibly (ie only taking a portion of each year’s growth).

Terryw
Discover Home Loans
North Sydney
[email protected]

It could be possible to add value, but it would depend on local prices in general and the sort of value you could add. It seems there may be a risk of overcapitalising, ie you could spend $20,000 to find it only increases in value by $10,000.

It would be safer to find a run down one to do up.

Terryw
Discover Home Loans
North Sydney
[email protected]

I also noticed that RAMS now have an additional mortgage insurance company on their panel, ie a third one. So this may help people maxing out.

Terryw
Discover Home Loans
North Sydney
[email protected]

Start your own religion! Think of the tax exemptions.

Terryw
Discover Home Loans
North Sydney
[email protected]

The trouble with selling property is the costs and taxed invovled not to mention the loss of any future capital gains.

For anyone wanting to research this further, there is a licenced financial planner, Steve Navra, who could possibly help. see: http://www.navra.com.au

Terryw
Discover Home Loans
North Sydney
[email protected]

Having around $1.6mil in property securing a $300,000 loan is a bit much.

I would look at borrowing against your home as a separate loan and using this as deposit for the investment property. That will give you flexibility if you wish to purchase more property in the future.

It would also be safer, as if you were to default on your investment property, the lender could not automatically take your home – unless with the same bank.

Terryw
Discover Home Loans
North Sydney
[email protected]