It probably depends on where and what you are buying.

If you were buying cheap little properties in country areas, these may have not had any growth for many years. Then suddenly investors start buying in there for yields. This pushes up the price but rents hardly increase. This probably is the time to exit this market. it would be no good hanging on to these if there could be long terms with no CG potential.

If you are buying quality properties in good growth areas, then I agree that it is not a good idea to sell – generally.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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No. Not against personal income, just against other income the trust makes. Losses cannot be distributed.

If you had a hybrid discretionary trust, the unit holder could borrow the money and claim the interest against their personal income. In effect this allows negative gearing with a trust.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

What’s wrong with you Rob? Do you just like to argue?

I will put up an example tomorrow. Don’t dismiss it just yet.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Have a look at the book by the Reno Kings. There is a chapter in there about people who specialise in this area.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

No, Please don’t go though it all again!

I would just be very careful when giving advice to clients about borrowing money and parking it in an offset account. Especially in writing on company letter head.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

The Hart’s case is not about capitalising interest in general. It was about a scheme entered into with the dominant purpose of generating tax deductions.
The appeal is at:
http://law.ato.gov.au/atolaw/view.htm?basic=+harts%20v%20+compound&&docid=JUD/50ATR369/00001

Paragraph, 33 “The fact that the taxpayer had even a dominant purpose of obtaining a tax benefit would not, in my mind, preclude a deduction, so long as the combined test was satisfied. On the other hand, a finding that there was no other purpose of incurring a loss or outgoing than obtaining a tax deduction would.”

So, if there were purposes for capitalising interest other than for increasing tax deductions, it would probably be acceptible. Other reasons may include cashflow. I am sure that there would be many others.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

If there is not growth, then you do not borrow any money to live on. You only can increase your loans at a portion of the growth. you would also only do this strategy with high growth property.

If your properties are continuously growing, then you will have equity. If you have enough equity, you can always get loans.

Steve Navra is another who advocates living off equity. His strategy is slightly different to the investors club. There are a few articles on his website http://www.navra.com.au

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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I have to agree, with everybody, the information is out there if you want to look – for free.

But, if you buy a pack which helps you make many thousands of $$$ then it may be worth it.

I wonder how many people who buy these packs actually go out and use them.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

I am not sure this would be correct. I think anyone can advise on property even without qualifications.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

I beleive it is a sound practice if done properly.

One idea promoted by the investors club is to buy seven properties, one per year for seven years. In year 8, the first proeprty would be worth approximately double what you paid for it.

You then take some funds out of this by increasing the loan. The funds can be used to live on or to supplement income. Some of the funds can also be used to be the extra interest incurred.

In year 9, you then access the funds in property 2.
In year 10, property 3, and so on….

at the end of the cycle, you go back to property one, and it has doubled again so you can take out more funds.

Sounds good in theory, and it can work in practice if you are only taking a small amount of any growth. Having at least 7 properties will help in this regard.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]