Hi, I'm starting to confuse myself and would really appreciate some help.
I bought my first apartment 2 years ago in inner Sydney and still live in it. Thanks to initial help from my parents and ever increasing rents I can positively gear this property if I move out.
My plan is to move into a sharehouse, rent out my apartment and start looking for another IP.
Firstly, if I do this, am I correct in thinking I can deduct all the interest payments on my current mortgage plus agent fees, depreciation, strata/council fees, r&m etc?
Secondly, as I have a reasonable amount of equity in this apartment, can I use this somehow to get a second similar property at current low interest rates, rent that out, and use the combination of income from both properties to service both mortgages? If so, I calculate this second IP should effectively be positively geared as well – i mean, because of the low remaining mortgage on my first property, the combined income should service both properties at their minimum repayment levels…
I hope you understand what I mean! Greatly appreciate any advice.
Thanks,
JamesHi James
You can move out and rent the place and claim all expenses associated with it. But if it is positive geared you will probably have to pay tax on the income – but you can also claim on-cash deductions such as depreciation of building and fittings, and borrowing costs. This may make the taxable income from the property negative.
For the new one you can use the equity in the first one. But I would suggest you set up another loan against the first one and use that money for deposit and costs on the second.
eg. IP 1. Val $400,000
Loan $100,000
Get a second loan to 80% of the value. $400,000 x 80% = $320,000. Less $100,000 current loan = $220,000This $220,000 should be used to pay the 20% deposit and stamp duty and all associated costs with the second.
This will keep the 2 properties separate and not cross collateralised. You can even use different banks.
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
Hi Terry, thanks a lot for your reply. Yes, I think I can just about get the first positive geared IP negative with deductions. If not I’ll just pay a bit of tax I suppose.
I have also spoken to my bank now and I think I understand the options better.
Time to start looking for a new IP!
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