Pimobpi wrote:

Is it correct to say that I pay back the LOC in part or in full, then only extract money from it again (in part or in full) for other investment purposes?

Thanks.

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This sentance is unclear.

If you have a LOC with a limit of $100,000 but a balance of $0 and you go and buy a golden potato peeler for $1000 the balance is ow $1000 and this is a private expense. No interest deductible.

But if you go and deposit $1000 into the LOC you will be paying the loan down to $0 again, so if you borrowed $50,000 for a deposit then the interest would generally be fully deductible as there is no mixing.

But if you borrowed $50,000 before paying pack the $1000 it would be a mixed loan and the deductible interest would be 50000/51000 x100 = aboout 98%

tedstar1 wrote:

The offset will be linked to PPOR deposit/loan as this is not deductible anyway. The funds in the offset account will be used for next IP and a seperate loan will be created for the 2nd IP as this will still be included as the PPOR loan now being lets say 200k against PPOR loan

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My advice is don’t do this.

Best to get a lawyer who can advise on building contracts.

Still not clear.

Sounds like you are borrowing $240 secured against the PPOR and will then place this in an offset account = Not good.

Generally deposits are held in trust for the vendor. This means it is still your money until certain conditions are met – such as completing the contract.

I just reviewed a contract which allowed release of deposit and I quickly struck this clause out as there is a risk the vendor won’t complete and could go bankrupt or someone else could put a charge over their property and it may be impossible to get the money back.

tedstar1 wrote:

How would you set-up the loan for your 1st IP to avoid cross cat?

We owe nothing on our PPOR and were going to use the equity in it for a deposit and have the other 1/2 put in an offset account.

Split loan – one for deposit against PPOR
– One for the IP loan

With an offset account sitting in the middle helping reduce Interest repayments on both loans

Thoughts?

Never borrow to put in an offset account. This is very dangerous as it could ruin the deductibility of interest.

Use a LOC on the PPOR, borrow only to invest.
Set up an IO loan on the investment property and attach a offset account to this. All wages and rents into here.

Take the 23% from the LOC and borrow 80% on the IP = 103%

Basically
1. via loans
2. via ownership

One party can lend to the other and/or the parties can jointly own the property, either directly of indirectly.

Here is a case, from 2014, where the member caused the fund to lend to a relative who them lent the money back to the member – who later went bankrupt!

Deputy Commissioner of Taxation v Lyons [2014] FCA 1353.

An SMSF trustee has been fined $32,500 for lending money to a related party, in a recent Federal Court case,
http://www.solepurposetest.com/news/smsf-trustee-fined-32500-loan-relative/

Yes, one of my tenants died.

But the lease does not stop immediately at death. Notice must still be given and the estate is still liable up to this point.
See the actual law on this
s108 RTA (NSW)
http://www.austlii.edu.au/au/legis/nsw/consol_act/rta2010207/s108.html

You cannot dispose of someone else’s assets. The family will usually come to collect these. You need to be careful about giving access to family too as you don’t want to give access to the wrong person who then removes property without authority.

Depends on the terms of the contract.