Lance!

Mate – I was thinking of you just the other day… I thought you had dropped off the planet!

I’m pleased to hear of your continued success.

Thanks for your feedback.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

quote:

---

Now am I correct, we pay interest only on the amount drawn from the LOC. Plus the IP mortgage of course.

---

Some LOC facilities also have an access or facility fee that’s payable regardless of the drawdown.

quote:

---

Also, is the interest paid on the LOC tax deductablt or (this is were I am really unsure) is it part of my PPOR and not deductable?

---

As I outlined in the last newsletter. providedyou apply the LOC funds for investment purposes then the interest should be deductible.

quote:

---

One last question, the LOC has our PPOR as collateral (right?), are we taking any ‘big’ risks with our PPOR or is this the safest way to borrow against the PPOR. Appart from setting up a trust.

---

Higher debt generally means more risk. What’s important is to be sure to invest in an asset that has a cash-on-cash return in excess of the interest rate you are paying on your LOC. This won’t eliminate the risk, but it will reduce it.

Have a great day,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Be sure to check out:

https://www.propertyinvesting.com/strategies/creativefinancing

There are many things you can do…

1. You could try to buy a cheapish property on a long settlement (6+ months) and then do some renovations in the meantime.

2. Wrap / lease-option a property.

3. Buy something, particularly a commercial property, and ask for vendor’s terms []

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi Mannie,

Thanks for your post.

Most insightful!

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

There are usually trust grouping provisions for land tax that means splitting entities offers little benefit.

Still, as the system is not self-assessed, it’s a little bit of ‘catch me if you can’. I’d only set up another entity if the asset protection made it necessary.

Michael – thanks for your excellent posts.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi Novice,

Thanks for your post and welcome to the forum.

First off, let me say that while you have purchased a property that I probably wouldn’t have, at least you are in the market and will now benefit from practical experience.

So, to that extent, congratulations on making a decision. Now it will be important to maximise your investment rather than just letting it drift along. I’d be looking to answer the question -“how can I add maximum value for minimum cost?”

Now, to answer your questions:

quote:

---

1) what will be the tax implications or cashflow effects of having a negatively and positively geared IP?

---

You will be able to use your property loss to offset your assessable income and reduce the income tax payable on your salary income.

A quick crunch of the numbers:

Rent: $16,952
Interest: ($20,895)
Rates: ?
Insurance: ?
Property management: ?
Repairs: ?

It looks like you will need to pay $100+ per week for the property. A portio of this will come back to you as a tax benefit, but the majority (that is 1 – your marginal tax rate) will be lost and will need to be recouped through capital gains.

quote:

---

2) will the loan interest on stamp duty be tax deductible?

---

The loan interest will be providing the property is used for investment purposes. As I understand it, the stamp duty is a capital cost and must be accumluated into your purchase price.

A good post on the topic is:

https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=1174

Thanks again for your post and have a wonderful day.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Break Free Events are promoting him.

I’ll be going along to the afternoon session as I am busy that night.

Should be interesting. I’ll report back with my opinion after the event.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

There has been plenty of press lately about the windfall gain that the Victorian government has pocketed from Stamp Duty in recent years.

The boon has arisen by a circumstance that is very similar to salary ‘bracket creep’ in that while the rates have not increased as such, the rise in the value of properties has meant that more is collected.

I often wonder how the present Vic. government would function but for the massive revenues collected from gambling and stamp duty.

However from an investing perspective, the higher stamp duty just becomes an increased cost to business (the business of property investing).

It’s swings and round-abouts as I see it – in Qld you have to pay the stamp duty within XX days of the contract being signed, in Vic. it is due on settlement. In NSW, property is generally more expensive, so while you pay less in stamp duty, finding a cheap property can be more difficult.

At the end of the day you just need to factor the charge into your number analysis and so long as you’re making headway towards your investing goals – keep your eye on the big picture.

Regards,

Steve McKnight

P.S. Silkwood – thanks for your post and welcome to the community.

**********
Remember that success comes from doing things differently.
**********

Hi,

It does not matter when you bought the property (unless it was pre-CGT).

It’s very unlikely that you will be eligible to claim an outright deduction for capital improvements.

However, you may be able to either write them down or alternatively depreciate them. Whether or not this is applicable must be discussed with your accountant as the rules are a little tricky.

If the capital costs cannot be depreciated or written off then they may still form part of the property cost base. That is, if you have a property you bought for $80k and you spend $50k renovating it (which is non deductible), then the cost for CGT purposes will be $130k when you sell.

The cost base is then recued to the extent that the expenses are deductible or written off.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi Leigh,

We did just what you mention here on the basis of telling our financier what we were planning to do and them agreeing before the project commenced.

We received 80% of the purchase price + 80% of our renovation costs.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********