If he has a job he may qualify for a loan on his own. There is only a need to show genuine savings if borrowing over a certain LVR – about 85% wit some banks.

If you could lend him the entire amount he could purchase the property in his own name. You should take a registered first mortgage to protect yourself (and him, from spouses, bankruptcy etc). Once he has it rented and when he gets a job he could refinance your loan with a mainstream lender and you will get your money back. This way there is no extra stamp duty or CGT to worry about.

The downside is that he may not be able to refinance – but but it wouldn’t be too hard to qualify for a small loan like that with the property rented and a small income.

Changing title = stamp duty and CGT at market values. New loans too.

Can you lend him the full purchase price?

I recall reading that there are several SMSF with funds of over $100mil that are in pension phase and earning tax free income.

Not really, unless 2 properties are securing one loan. But it is not entirely as safe as going to a separate lender.

Pimobpi wrote:

Is it correct to say that I pay back the LOC in part or in full, then only extract money from it again (in part or in full) for other investment purposes?

Thanks.

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This sentance is unclear.

If you have a LOC with a limit of $100,000 but a balance of $0 and you go and buy a golden potato peeler for $1000 the balance is ow $1000 and this is a private expense. No interest deductible.

But if you go and deposit $1000 into the LOC you will be paying the loan down to $0 again, so if you borrowed $50,000 for a deposit then the interest would generally be fully deductible as there is no mixing.

But if you borrowed $50,000 before paying pack the $1000 it would be a mixed loan and the deductible interest would be 50000/51000 x100 = aboout 98%

tedstar1 wrote:

The offset will be linked to PPOR deposit/loan as this is not deductible anyway. The funds in the offset account will be used for next IP and a seperate loan will be created for the 2nd IP as this will still be included as the PPOR loan now being lets say 200k against PPOR loan

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My advice is don’t do this.

Best to get a lawyer who can advise on building contracts.

Still not clear.

Sounds like you are borrowing $240 secured against the PPOR and will then place this in an offset account = Not good.

Generally deposits are held in trust for the vendor. This means it is still your money until certain conditions are met – such as completing the contract.

I just reviewed a contract which allowed release of deposit and I quickly struck this clause out as there is a risk the vendor won’t complete and could go bankrupt or someone else could put a charge over their property and it may be impossible to get the money back.