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Which ruling is this? Do you have a link to it by any chance? My only what if scenario, is if I decide to move into IP2 at some stage and make it a PPOR. Then technically the interest on interest I created at some point helped fund a PPOR which makes it non deductible.
Backstory is I bought IP1 about 12months prior to refinancing. When I refinanced to get a better rate, the better rate was only for borrowings of at least 200k. So the lender at the time put down 186k to pay off the old loan and 14k for "renovations". I set up an offset to attach to the loan to reduce interest payable. Currently I have no other debt (living with parents). At the moment I am buying IP2 and the money I have in my offset is providing the deposit. So to free up cash I just let the interest of IP1 eat up the 14k. Though by capitalising the interest, I'm not sure whether I'm digging myself a hole because I would be creating interest of interest?
As a slight variation to the above, I refinanced and ended up with approx $14k undrawn in the new IO loan. Each month the interest is reducing the $14k available ie I'm not putting money in to paying off the loan, but it's coming out of the amount undrawn. So if I'm capitalising the interest, I take it I can't claim tax deductions on the interest while I'm not paying anything into the loan. But once I start paying the loan again, I can start claiming tax deductions? Not sure if it makes a difference but currently there is an offset attached to this loan where all my savings is currently sitting.
Terryw wrote:There will be two tax issues (at least):1) By using redraw you are mixing one loan – business and personal. When you claim interest it must be apportioned, which is relatively straight forward. But if you are making loan repayments you cannot chose to repay the personal debt first. Both must be repaid in proportion to the loan.
But the homeloan was for an investment property so the loan itself shouldn't be mixed. It's the drawing it out and working out where to put it while in the process of investing somewhere else which is the mixing. At least that's how I understand it. Happy to be proved wrong, but I think on that point you may have misunderstood my train of thought.
morpheusbushy wrote:that $2000 would have to MAKE at least 7% just to break even. That's the correct assumption isn't it?Hoping for at least 9%. In research mode at the moment. One line of thinking is that if, say 1-2 years down the track, I need to I can sell the shares/funds and use that money for personal reasons after CGT of course. Whereas if I redraw that money out, I can't claim back tax on the interest.
Catalyst wrote:Hi you don't say where you are buying. In NSW you pay the the .25% and exchange contracts. You can put subject to finance etc. You do your searches ate in the cooling off period. Then you pay the 10%. As it stands you have nothing. The vendor can change his mind at anytime because you have not exchanged contracts. Do that ASAP and still ask for a cooling off period if you haven't got strata, finance etc. The RE agent sounds like a noob.
Yep, NSW it is. I thought the exchange of contracts occured at the 10% deposit. Yeah I understand I have nothing as yet but wanted to check stuff out before signing anything. I already have preapproval for the finance. The strata report is on its way according to the solicitor.
Catalyst wrote:No probs with the tenant and FHOG. As long as you move in before 12 months is up and stay for 6 months. You can ask for another inspection anytime, they are usually accomodating. You are entitled to a pre settlement inspection. Do this the day before settlement. But be aware if you do find big holes in the walls you can't do anything about it once you've exchanged. If you have concerns look at it ASAP and then sign ASAP. I'd hate to see someone come in and take it under your nose (it happens).
Nothing is in concrete until you and the vendor have signed.
good luck.So at the final inspection before settlement, what happens if I do find faults that weren't there at previous inspections? Do I have the right to get the vendor to fix them (depending on how serious) and delay settlement? Or can the vendor potentially complicate things by blaming it on the tenant?
And a hypothetical scenario: I move in after the lease is up and find for example damaged carpet. If the tenant claims it was like that when he moved in would it be my word against his since I wasn't present when he first moved in? Can I deduct money from the bond to fix it?
Sorry if none of that makes sense. At the moment I'm just trying to think through the worst things that can happen and make sure I can prepare for them.
