well, if those properties are worth $1,700,000 and say they are growing at 5%, that works out to be $85,000 pa. If they take a small portion of this each year and factor in the added interest they will have to repay, they should be able to keep their properties. They may even be able to retire now.

Steve Mcknight doesn’t like this idea and argues against it in the sample chapter of his new book being sent around.

At least with this idea, they can keep the properties longer, and may be able to supplement the equity with additional income from other areas, hobbies maybe. But you do have to be careful, only borrow a small percentage of the growth, and after it happens.

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Hi Graham

Which state do you operate in?

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I have the exact same problem, and having done anything about it because of the hassle involved. Court order for $1600 in my case.

You need to do all the checks you can think of, including:
– ring references listed on their application for tenancy
– ring last known employer, relatives
– whitepages
– electoral roll
– internet search

Sometimes physically turning up at their work/relatives homes can lead somewhere – as they often lie about them not being there anymore.

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The only problem with paying deposit for the IP with funds from the offset account is that the interest on the PPOR goes up (as the balance of the offset reduces), and this is not claimable.

What some people do is get IO loans with offsets, then save as much as they can in the offset. When they buy something, they take the money from the offset and pay it into the loan, then make a withdrawal, thus reducing non deductible debt and increasing the amount of interest they can claim.

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Many loans are able to do this, or better – capitalise all the interest up to the limit.

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Hi Andrew

I am no expert, but would expect if you did this you would be paying stamp duty on 99% of the value of the property when you switch it over again.

A far better option may be to look at a Hybrid Discretionary Trust to own the property. This will enable you to claim the negative gearing benefits and for your wife to get the capital gains if selling – and the flexibility to change this around and/or distribute to other family members/companies on lower incomes.

Better talk to a good accountant about setting one up.

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Or just keep it, and change the loan to IO, and just wear the extra payments on the new loan for the PPOR. This may end up cheaper than selling the old one.

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Hi CT
Yep, since the unit holder is only borrowing 80%, then LMI won’t (usually) apply.- It may be charged on some low docs loans however.

Banks won’t perceive it as more risky, same rates etc apply.

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Just relooking at your figures, you are pretty highly geared, but just because your properties are cross collateralised doesn’t mean you cannot sell one or two. You will just need to change the security on the remaining loans. But x-coll makes it messy.

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You can depreciate items that are used in producing an income, even items that are owned before the production on income. If he has never heard of a depreciation schedule, then he can’t be very knowledgeable about taxation, so you may be missing out on more deductions. ie his/her ignorance may be costing you money.

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