Forum Replies Created
Geez – less and less choice for the consumer!!
Stumpcam's comments have got me thinking again.
Hypothetically – you secure a loan on a property at 80% lend, time goes on or you add value and get the property revalued at a higher value and open a line of credit for that amount , ideally keeping the first property still at an 80% lend. If #1 is a PPoR you have all your money sitting in an offset reducing amount of non deductible interest you need to pay.
Second property is bought with deposit and closing costs coming from LOC from #1 and a standalone loan of 80% on #2. From Bank's view they still only lending 80% of value and from tax persepctive #2 interest is 100% deductible – Right?Are you up front with the Lender about what you want to do? Assuming you have all your loans with the one lender, I'm guessing that if you are not, they will soon find out. What is there to stop the lender saying they want you to put more of your cash in? I have always gone with the honesty the best policy but have been told I'm often too honest for my own good! What do the savvy peope do?
Hi Stumpcam
WE had a pro package LOC with StG for our previous PPoR and had a subaccount for the investment block costs which was secured by the PPoR. When we sold the PPoR and moved interstate the LOC converted to a Complete freedom account which meant we didn't have to change direct debits of salaries etc. We have been renting at present and sorting out what we wanted to do. We have applied to StG for the new property but they've just come back and said they won't take my income into account as I'm on a temp contract so we are going to look elsewhere anyway. We can afford it but we'd have to put too much of our own cash in. So I'm thinking the Dragon has probably lost us too….
Even tho they have been taken over I think they are keeping it all separate. BankSA is also part of the group for NT & SA residents. Their website is practically a clone of StG.
Cheers
Lisa JThanks for that info guys.
I am aware of not Cross collateralising and was intending on going to a different lender for the next IP if StG wouldn't allow standalone. I'll have a look at Westpac to see what they offer.Regards
Lisa JThanks Richard, Alistair, Stumpcam and Terry for your comments – it has clarified things for me as to how we should structure our next step.
I have gone back to St George's info on their "Advantage" package and they state you can structure it with Standard variable loan with credit card, a "Complete Freedom" transaction account with "Mortgage Equaliser Interest Offset" ( which is 100% offset) – am I missing something here – this description appears to me to be fully transactional? When I spoke to St George they said it is one account.Stumpcam – thanks for your info – we learnt the hard way about apportioning repayments and interest when we used our personal LOC to buy a block of land. It was pre – education phase and we did it without consulting our accountant about the finer details. My accountant showed me how to do the calculation – it was a very useful lesson to see how we did such a great job of paying down our investment block loan while keeping our PPoR at pretty much the status quo!!! We got out of it by creating a subaccount on our LOC for the investment portion but not without losing some $20K of tax deductibility off the investment loan. As someone has already said – you live and learn! I'm a Gen Xer myself and always been good savers & budgetters but have kinda learnt the hard way with investments. We have always learnt far more with the ones that went wrong than the ones that went right but hopefully now we can learn second hand rather than first hand about how not to do it. Hopefully your lessons will sink in with your kids soon and they'll "get" what Dad's been on about all these years.
Cheers
Lisa JThanks Richard
Yeah – all the books say – find a mentor – someone who has done what you want to do – but it seems there are very few who want to help out for purely philanthropic reasons! Apart from those on Propertyinvesting .com, of course!!!
Any recommendations as to lenders to look at that have fully transactional offsets?
regards
Lisa JHi Obie
Thanks very much for those two links – I had picked up Barry Pickering's name from one of the other forums but could not find his contact details. Would you know of where I could get a longer term view of the Darwin market – cap growth rates, rental returns etc for last 10-20 years?
I have to agree with you that there are a lot of opportunities out there… just gotta grab the right ones!
Regards
LJThanks propertunity,
I had forgotten to factor in the stamp duty and agent's fees on purchase and sale of a PPOR so now it seems like our original idea of renting is the better bet.
It just shows how you can get sidetracked by "knowledgable" others when you are wanting to swim against the tide of popular opinion!
Regards
LJHi shanematt,
We are looking into this right now. You really need to crunch the numbers on both scenarios and for the amount of time you will be looking at. I did the numbers on our situation and renting has come out in front for us even though our rent is expensive. Our situation is – 2-5 year time frame then moving away, area we are in is currently at peak of market and so I'm not expecting much in the way of capital growth. The critical factors against buying in this situation is stamp duty and agent's fees on the sale which are not tax deductible for your PPOR.
If you have time on your hands then Terry's suggestion is a good one – move in for 6 months when you buy it then you have 6 years where you can rent it out and still claim your PPOR cap gains exemption.
Hope this helps
LisaHi
You might want to check with your accountant – depends on what you want to claim in deductions – if you charge a substantially lower than market rent to your family member Tax dept may not allow deductions. I think they allow lower if you have a good argument – say 9% lower because you're saving Management fees. A good book to read on subject is Saving Tax on your investment Property.Hi
I understand your frustration when you have finally got the courage up to move forward and take action and then things don't happen fast enough…. I would take up Richard's advice and check the vendor's reasons for needing settlement pre June 30 – if it is a CGT need and they're an investor then he/she's already covered by the contract date and they and you don't need to stress so much… That old saying about " courage to change the things you can, serenity to accept those you can't and wisdom to tell the difference" … has always helped me in the past….
