If they keep arsing you around, just open an account (it should be fee free if you have a loan) and set it up, and hten close it once it ssttles.

And maybe I am missing something obvious, but why don’t you take out a 100% mortgage on your existing acreage and pay off your ppor. This would convert 100k of your non-deductible debt into deductible debt. This would
mean that you only then have $80k of non deductible debt

I didn’t know about a quanity surveyor until i joined this site i will look into it thanks for the advice. I was just leaving it to my accountant (although he is very good.)

While your accountant may be ‘good’ he is not qualified to calculate your building depreciation allowance if the property is post 1987.

As such you may be missing either a 2.5% or 4% building construction cost (per annum) depending upon the age of the building. This can add up to big dollars.

Just a question on paying down a loan on an Ip so you can then get more equity to service more IP loans.

I thought this was the best way……eg.

Unless you are pumping considerable sums of money into the loan then the early years of a loan all repayments are largely the interest component. It is only in the middle/later years when significant inroads are made into the principle.

A well researched property is likely to grow faster in value, this realising equity this way, than you can by paying down the principle.

I borrowed my MAX but it is down to currently 45% debt(am thinking i can borrow more now in a IO loan) The problem with me is I have equity but they say that my income can’t service the debt. Which is why i was putting money into to reducing the principle of my IP so then i could service more debt. is this good?

I was thinking of approching the bank soon and applying for a Interest only loan on another IP I would just pay the interest of the new IP and then continue to put my remaining money in my first IP paying down the loan as much as possible.

I would approach a broker and they will/should be able to match your position with a ‘friendlier’ bank. A broker has access to a number of lenders, each with different serviceability calculators.

What is everyones thoughts on that strategy. I own my own PROR. I would like to eventually have as many IP’s as possible![cap]

There is nothing wrong with the strategy at all – it is a question of what is right for you. We have been leap frogging (as Peter Spann calls it) for a ‘few’ years now with good growth results and only using Interest Only loans.

I agree it is a good long-term investment. It may be, however, that we see no appreciation in the next three years. If this is so, even taking into account all the costs of sale (and purchase of another property), it may make sense to buy and hold cashflow positive property for the next three years, then buy back into a growth asset such as a property in Manly.

Hi Mike,

In an earlier post you indicated you haven’t yet claimed any depreciation on this particular property in order to minimise any future CGT liabilities.

You (and your accountant) may not be aware of the following “If an investment property purchased after May 13, 1997 is sold, depreciation eligible to be claimed on the building must be factored into CGT calculations whether it has been claimed or not.” I suggest that you grab a copy of the ATO’s CGT guide and read section 6 (from memory) as you might as well claim your eligible deductions given the ATO’s position as above. If this ruling changes your position you will still be able to ask the ATO to review our past four tax returns.

This will serve to improve your cashflow. However having said that I still subscribe to the theory that you are better off hanging onto the property as very very good long term growth investment.

Sure you can sell the thing incur your CGT, selling costs and 2.5% vendor duty, purchase some cashflow properties (incurring more stamp duty) and then buying when you believe the growth phase returns and incur more stamp duty, cover agents costs and so on.

These total of these sums will accrue into considerably more (largely non-deductible) outgoings than a $2000/annum ‘loss’ – to me the issue is a no-brainer.

I subscribe to Peter Spann’s three reasons to sell – you get an offer too good to refuse, to sell off a dog, or to put your money to better use.

If you are passionate about buying a cashflow positive property or two consider using your leveraged equity to do this.

May I respectfully ask whether any of you have actually read Steve McKnight’s book?

Yes

I didn’t know about a Cashbond or Annuity. I have just refinanced the Manly property to access the equity. I have an offset account which works like a line of credit, but at home loan rates.

Who is Steve Navra?

Steve Navra is a licensed financial advisor who believes that growth property is the core of an investment portfolio with income from shares, and maximised use of all available dollars, being used to optimise portfolio performance.

Steve is based in Sydney with offices in Brisbane and Melbourne and can be found at http://www.navra.com.au

Don’t mind paying a commission if they’re really that good, but 6.6% is insanely big.

I thought clearing the debt on my PPOR was the way to go and that’s the plan I’m executing right now.