All Topics / Help Needed! / Interest Only Loan Option

Viewing 4 posts - 1 through 4 (of 4 total)
  • Profile photo of islandgirlislandgirl
    Member
    @islandgirl
    Join Date: 2006
    Post Count: 55

    After trolling thru the boards for a while now and exploring options I’ve come to realise how important getting the right structure is. I’ve come up with a senario and would greatly appreciate any advise you can give me.

    Due to the nature of my work I am the sole income earner in our family. I was thinking of buying a particular investment property as an interest only loan over 10 years under my husband’s name. The property is in Brisbane and is approx 179K and would rent out at $190 per week. My calculations estimates that this would give me approx 18K per year with no tax or little tax as it would be my husband’s sole income. After 10 years I would sell the property and get any capital gain less selling costs.

    The pitfalls as I see it are loss of rental income for any period (ok its in a strong rental market and I would not have any problems renting it out), Potential for capital loss instead of gain (its in a strong growth area and I believe the potential for reduction in market is unlikely)

    I would appreciate any advise at all.

    Profile photo of foundationfoundation
    Member
    @foundation
    Join Date: 2005
    Post Count: 1,153
    Originally posted by islandgirl:
    The property is in Brisbane and is approx 179K and would rent out at $190 per week. My calculations estimates that this would give me approx 18K per year

    Are you perhaps adding the interest on $179k to the income of $9880 in rent to get the $18k per year? You need to subtract it.
    $190 * 52 = $9880 in rent
    $179,000 * 0.07 = $12,530 interest
    $9,880
    minus
    $12,530
    equals
    $2650 per year loss. Plus taxes, rates, duties, management fees etc.

    Or did I misunderstand the scenario?
    Cheers, F.[cowboy2]

    Profile photo of islandgirlislandgirl
    Member
    @islandgirl
    Join Date: 2006
    Post Count: 55

    [blush2] Guess I shouldn’t do my calculations before my coffee in the morning!

    Thanks

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi IG,

    Reading your post it appears to suggest that you intend allocating all the rental income to your husband and then at time of sale you intend keeping the gain yourself. Is this correct?

    Under normal circumstance rental income, taxable gains and deductions are apportioned in accordance with ownership ratios.

    From a purely taxation perspective cf+ rental income and gains should be allocated to the lower income earner in order to reduce tax. In saying that there are finance, asset protection, and long term plan considerations that also come into to play when making these decisions.

    Derek
    [email protected]
    http://www.pis.theinvestorsclub.com.au
    0409 882 958
    Skype – derekjones2113

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.