Hi Guys!!
Can I just say that before last Saturday I had never heard of Steve McKnight until I literally “stumbled” on his newly released book. I have read it already, and talk about innovative!!I would like to get some thoughts from forum members about an investment method we are fairly advanced about getting into.
We will be using our equity to purchase our first investment property. The idea of this method is that we use our own income, rental income and some of our PAYG tax (up to $109 per week)to pay off the first Mortgage our own home.
The concept is to not pay anything off the investment property and channel all funds into the first property. Thus paying off “our home” very quickly at a faster rate than the interest on the investment property.
The thought is that this is continually replicated until you have a port folio to retire or obtain the lifestyle you want.
Any thoughts??
Many ThanksHi fizman
you did well to get the book, all the shops i tried had sold out, just got it today in the post.
Your strategy is good because interest on your own home is not tax deductable.
if you wanted to be a bit more aggressive you could draw down the equity you have saved to purchase a 2nd IP, and third IP etc (i’m not encouraging to be aggressive in this market but there are still some good buys about)
westanGood strategy, but capitalsing interest on the IP and claiming it is possibly not allowable. The ATO is fighting this in the courts at the moment. Is that what you meant? If you are just paying interest only it should be ok.
Terryw
[email protected]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
Thanks for your thoughts.Terry, to be honest I am not sure. I will ask about that and see what the response is. When I find out, I will advise you of the outcome.
Hey I just bought the book yesterday – Dymocks Perth has lots of copies!
It’s really eye-opening. I think the best thing about Steve’s book is that it shows you that it can be done – it’s not just a nice theory.
That said, I think Steve also acknowledges that there are other aims which you may have when investing in property, which are different from his – he simply isn’t as interested (if at all) in those other objectives, since his main aim is to get cashflow positive properties.
But to answer your question Fizman – I think you have to pay the interest in a tax year in order to claim the deduction in the same tax year (ie I agree with Terry). Accrual accounting doesn’t apply to natural persons.
However, I think your idea is a good one – you are essentially “transferring” the interest deductibility from the IP to the PPOR. So it sounds good in theory. You’ll probably have to sit down and crunch out the numbers to ensure that it works in practice, since there are a lot of other variables that come into play (eg IP price, interest rate, term of loan, rent income, etc).
Cheers
M
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