1. once it is available for rent
2. depends. You will only be able to claim one of the houses as the main residence and get the exemption. So you would generally reassess things in a few years and see which one has grown the most.

1, no
2. s118-145 yes, s118-140 only applies if selling
3. live in one

You need tax and legal advice as well as credit advice.

Using cash to invest has tax issues. can you borrow the lot without using cash?

If the cash is in the offset account on your main residence then when you withdraw it the interest payable will increase but this interest won’t be deductible.

Putting your money in someone else’s bank account involves many issues legal advice is needed here.

Jon wrote:

Richard Taylor wrote:

by doing what you suggest you are cross collateralising the securities.

Yes, correct. However, given that I’m working for a bank and not multiple (brokering) I guess it doesn’t matter too much considering the bank will hold both securities anyway. Still some disadvantages but very minor.
Thanks,JD

It would be in the lenders best interest to take as much security as possible from the client and to also tie them up making it more difficult to refinance and leave the bank.

For the client though it would be in their best interest to avoid giving too much security and to being tied up.

There are tax issues.

There is no issue with gifting money, but if you are not charging rent then you will not be able to claim any deductions on that property at all. If you charge peppercorn rent your deductions would be limited to the amount or rent charged.

A way around all this may be to gift your friend money and have him pay market rent. Watch out that he doesn’t spend the money and also watch out for bankruptcy issues – seek legal advice.

But if you don’t claim interest etc now, you will be able to claim against CGT when you sell.

Best not to use a LOC for the construction, but a standard loan, interest only. With a LOC you run the risk of money going in and out of the loan. The rate will also be higher and it will be at call.

Thanks TheNewGuy

I cannot find any records of that unit.

Most recent sale in the building, from what I can find, is unit 41 for $55k in Oct 15.
Unit 114 for $44,240 in Sept 15
Unit 111 for $34,000 in Sept 15.
Unit 103 for $23,000 in Apr 15.

It can be a good idea, but the interest on the loan will not be deductible because you are not borrowing to purchase the property.

However the interest could be deductible by starting out with a related party loan and then refinancing this, and/or if you use the borrowed funds for further investments. Speak to your tax agent or tax lawyer first.

It might be worth asking the lender for the fee to break the loan? Just to find out and then work out if you think it is worth breaking.

If you invest the money elsewhere you will be earning money which will then be taxed. Whereas if you deposit it into the home loan you are saving interest which is tax free. If your rate is 5% then you would be earning a tax free 5% which may equal a 9% return invested elsewhere.

Also when you pay down the loan you can reborrow, setting up a new split, and then invest these borrowed funds. The interest on this loan will be deductible and then you can use the return on investment to pay down the home loan faster