I have a client that has purchased land in a similar situation to you.
he signed the contract about a year ago and it has now doubled in value and he is due to settle. Not a bad return.
BTW, He has decided to keep them wanted to borrow more than he paid based on current value. No lender would touch it, so we have found a private funder so he can settle (at about 16% interest), then we will refinance him in with a normal lender-hopefully within a month of settlement.
My company uses “Red Square” for property records and sales data. I think it is only about $60 per month. It is pretty good, with searches possible on people’s names or on addresses or even on postcodes.
What about this:
1) home loan
2) Ip loan
3) LOC sucurred on home
Use 3 to borrow money to pay for all expenses relating to Ip except interest payments on 2. Eg rates, insurance etc. All future deposits can also come out of this account. This method should help in reducing the home loan balance faster than normal and increase your tax deductions.
Don’t beleive anything a bank worker tells you! If they new about investing, they wouldn’t be working in banks. I love it when they recomend you use one of their ‘financial planners’.
My parents were advised by a bank person that they should get a PI loan on their investment property, and that they should have the loan term of 15 years instead of 30 because they were near retirement.
I think the Govt did abolish negative gearing once in 1987 os thereabouts. it caused rents to skyrocket as investors pulled out.
If the were to disallow negative gearing, they would only disallow the loss from a property to be offset against other income. So if you just did positive stuff, it wouldn’t affect you. Maybe they should disallow it!
Sounds like a good plan. You can always refiance the land later on if you decide to keep it.
I have also heard of people buying property using their LOC, waiting a month or so and then getting finance on the property at a value higher than the purchase price by claiming they had made improvements etc. One guy said he got $16,000 extra for just mowing the lawn!
Someone recently had a good suggestion. Your trust could take a second mortgage over your property. That way if anything happened the trust would have the right to call in the mortgage before any other creditors.
If you have a current mortgage, I beleive the first mortgage holder may have to approve of this. ie allow you to give a second mortgage.
Pre-payment of interest is only available on Interest Only loans and is only available if they are fixed for 1 year. This way nothing can change. Next June you will get another opportunity to prepay for the following year, or maybe change back to month by month.
You don’t have to find +ve cashflow properties. You can create them. Any property can be a +ve cashflow property-you can wrap them or lease option them.
You can also do things like rent out each room to students. Add another bedroom cheaply etc. Anything that will increase rent.
They could get a low doc loan whereby they slft declare their income without providing proof. Rates around 7% unless they can prove they are in business and have an ABN.
or
They could get an asset lend whereby they will be lend money purely based on the value of their house. Not many lenders do this these days. The rates are pretty high – around 9%.
or
They could get a seniors loan. This is where a bank lends them money secured on their house and they don’t have to pay anything back. It comes out of their estate when they die. Rates are about 6.5% I think.
The last one may be the best option. Do they have any income?
And watch out about affecting their pension payments (if they get it). There are various rules about income allowable and about gifting etc.
I would buy 4 to 5 (or more? if you can qualify for high lvr loans) positively geared properties each generating $3000 each per year-using a trust of course. keep saving and keep reinvesting the cashflow into more of the same until you get what you what income wise.
yep. most banks offer a discount of around 0.1% to 0.2%. The ATO requires that there be a commercial advantage in pre paying interest – otherwise you would be doing it just for tax advantages.
I was going to say the same thing. I use a real estate agetnt to do all of my wraps from beginning to end. Everything could be posted to you overseas or you could give someone Power of Attorney so they can sign things for you. (Trusted Family member maybe – or i could do it for you )
I thought I already replied to this a couple of days ago, but my post is missing??
You could put the money in the offset account and pull it out to use for further investments. But when the money is withdrawn the interest payable on the home loan would just increase again. This portion would not be deductible.
However if you actually paid it off your home loan and then reborrowed the money again for investment purposes, then the interest on this extra portion would be tax deductible as it is for investment purposes. The net interest would be the same both ways, but the tax deductions would be increased by using the redraw strategy. It could get a bit messy attributing and keeping track of the portions-but worth it. It would be good if a second sub account or split could be set up. Check with your bank.
On $50,000, this could work out to be a bit. eg 6% interest is $3000 extra in tax deductions.