Guys I have 2 townhouses side by side and about 30k equity or 25% in ea one. I dont want to use my cash doing them up so im thinking about paying the refinancing fees and getting 7k out ea one for improvements.
-For the interest on this 7k to be deductible it needs to be spent on investment purposes but can i spend it on rates and B.corp fees aswell as aircon?
-no probs with rent and tenants, my concerns are with taxman and bank?
+ should i use my cash and Interest fee periods to do the improvements first, then get the valuation and loan extension done.
P.S Townsville is even hotter than brisbane.
Happy New Years EveryoneCeliviaParticipant@celiviaJoin Date: 2003Post Count: 886
I am certainly no expert (as everybody knows by now) but I thought may be, since you only need 7K for each townhouse’s improvement, could you not just take the equity out of just one of the townhouses instead of touching both of them (saving you establishment fees etc)?
And then, after the improvements, your value probably will have gone up so you’ll have more equity.
Next you could also take this equity out of the other townhouse if you need it.
I hope this makes sense ?
Celivia’s idea is very approcable and is addressed in the best manner, for accessing more cash, but also increase your equity and property value further more.
Heres another good example.
Property Purchased Price: $175,000
Rental: $400 pw
One year later……
Property Re-valued – New Value: $200,000
In this senario, i would redraw the new equity of $25,000…. As this money is tax free…. and then further reinvest, spend it, or improve your property, with depreciable items, (were again you can claim more tax deductions, but also increase your property value even futher and the odd possilbity of extra rent).
Best part too is…. presuming your property, stills stays +ve cashflow on the new mortgage. You’ve just acquired some “Tax Free Dollars for you own Pleasure or Leisure”
Though i better mention,
You mention, you are going to improve your properites, an improvement, which gives your property more capital… in turn more equity.
Though if you do improve your property capital value, remember you cant claim this as a tax deduction, as this is a capital cost.
What you would have to do is take the improvement expenses(cost) and deduct it from your selling price (of your property, when you decide to sell) to get a net capital gain, which will then be taxed.
Just remember, theres a difference between “Improvement(capital cost)” and “Repairing and Fixing”
s.i.smelbearMember@melbearJoin Date: 2003Post Count: 2,429
SIS’s point is valid when claiming the cost of the repair/improvement, but as far as my knowledge extends, the interest on your loan is still tax deductible. Always check with your accountant
Thanks Celivea, s.i.s & mel.
I should be asking a tax prof. but can i spend part of the 7k on rates and B.corp fees aswell with the interest still being tax deductible.
And what if i buy the aircon’s before the loan extension gets approved either with my own cash or 12months interest free.melbearMember@melbearJoin Date: 2003Post Count: 2,429
Adrian, I believe that paying rates etc. is still a ‘cost of doing business’ of owning IPs (as long as they’re not your PPOR rates), so yes in this case the interest is claimable.
If you get 12 mo int free, I’m not sure if you can then borrow it to pay yourself back and claim it. Best get advice on that. I’m thinking the answer is no
And what if i buy the aircon’s before the loan extension gets approved either with my own cash or 12months interest free.
If you do purchase it for yourself, you cannot claim it, unless you have a good accoutant that can fix it up and say it was purchased for your IP.
Though you can claim it, if it is for your investment property, as long as you can show proof of this and you can also claim the interest being charged on the item, if you were subject to pay interest due to installment payments(either they were subject to weekly or monthly interest charges.)
Thanks for the Advice[^]. It is much appreciated. sorry for not replying on the topic but as Iam new to this site i have been having trouble following topics. I just found the “Subscribe to” button 2 minutes ago[xx(]. i thought there was a button just couldnt find it. Thanks again