Hi there,
I have a property I nearly own outright (<$20000_ mortgage and am looking to buy an investment property I will eventually move into, my brother reckons I can do this, basically..
1. Move back into my property and buy an investment property and rent it out and pay mortgage on it offset with rent on investment property.
2. Once my property is paid off completely move into my investment property, move the mortgage from the investment property back to my owned property as 'collateral', then use the rent earned on the owned property to offset the outstand mortgage, or redefined the owned property as an investment property, but still have a massive mortgage to offset on.
Does this work?
Hey there,
Lots of our Clients do this. For tax reasons this is one of the better ways of property Investing, depending on your job status, you normally can claim your “rent” as your workspace, which again a lot of our clients do. Depending on your loan status also, you may be able to work out that your outgoings will be cheaper than living in your property you purchased too.
Legendtofski wrote:Hi there,I have a property I nearly own outright (<$20000_ mortgage and am looking to buy an investment property I will eventually move into, my brother reckons I can do this, basically..
1. Move back into my property and buy an investment property and rent it out and pay mortgage on it offset with rent on investment property.
2. Once my property is paid off completely move into my investment property, move the mortgage from the investment property back to my owned property as 'collateral', then use the rent earned on the owned property to offset the outstand mortgage, or redefined the owned property as an investment property, but still have a massive mortgage to offset on.
Does this work?
I don't get what you are saying, but it seems like you want t reborrow money on the old house and apply it to the new house. If you do this you won't improve your deductibility because the purpose of the loan will be private.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Legend like Terry i am slightly confused.
If you already occupy or intend to move back into the property you mention and use this as security for the new investment property then no problems at all.
If you then intend to move into this new investment property then the rent you receive on the current property with minimal mortgage will be added to your income and Tax paid on this. The only interest you will then be able to claim is the interest on the $20K loan.
Loan needs to be structured correctly to cater for your requirements now as well as into the future.
You are unable to redraw the available funds on your current property, move out and claim the interest as a deduction.
If i am totally off the mark please let me know and we can revisit the question.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Legend like Terry i am slightly confused.If you then intend to move into this new investment property then the rent you receive on the current property with minimal mortgage will be added to your income and Tax paid on this. The only interest you will then be able to claim is the interest on the $20K loan.
Loan needs to be structured correctly to cater for your requirements now as well as into the future.
You are unable to redraw the available funds on your current property, move out and claim the interest as a deduction.
If i am totally off the mark please let me know and we can revisit the question.
Cheers
Yours in Finance
Yeah well he said I basically live in my current property and pay it off, but buy an investment property while living there…Then use the money from renting out the fully owned property to pay off a combined new mortgage that was used to leverage the investment property, so technically you have a double mortgage, but already own one property. Apparently that how heap of people that only earn $60K are able to build portfolios and wealth, buy jetskis and SUVs and 55inch plasma TVs.
Legendtofski wrote:Qlds007 wrote:Legend like Terry i am slightly confused.If you then intend to move into this new investment property then the rent you receive on the current property with minimal mortgage will be added to your income and Tax paid on this. The only interest you will then be able to claim is the interest on the $20K loan.
Loan needs to be structured correctly to cater for your requirements now as well as into the future.
You are unable to redraw the available funds on your current property, move out and claim the interest as a deduction.
If i am totally off the mark please let me know and we can revisit the question.
Cheers
Yours in Finance
Yeah well he said I basically live in my current property and pay it off, but buy an investment property while living there…Then use the money from renting out the fully owned property to pay off a combined new mortgage that was used to leverage the investment property, so technically you have a double mortgage, but already own one property. Apparently that how heap of people that only earn $60K are able to build portfolios and wealth, buy jetskis and SUVs and 55inch plasma TVs.
Doesn't make sense. Can you please give some numbers as an example??
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What numbers? Ok..
current mortgage ~ $18,000 left, will be paid off within 2 years
value of current property ~$480KBorrow ~$520000 to buy a $500000 property on say a 25 year loan…for an investment property getting $1600 pm rent..
After 2 years move into the investment property and rent out the owned property at around ~$1800 pm.
The mortgage is combined using the rent on the owned property to pay interest or mortgaged property or something like that?
The $1800 per month rent would be income which is taxable – less the deductions. There will be no loan associated with the purchase of this property so there would be little to deduct. maybe $1500 in income after deductions.
You will then have a $520,000 loan of which you will not be able to claim any interest because it is a personal expense.
Doesn't work out very well because you will be taxed on the $1800 per month (or $1500 after deductions) and then have nothing to claim on the new purchase.
You may want to consider selling the original house and then buying another as it would allow you to pay down a non deductible loan and then regear resulting in big tax savings.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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