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  • Profile photo of timbo.timbo.
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    @timbo.
    Join Date: 2007
    Post Count: 18

    Guess I can't have my cake and eat it too…

    Thanks for the patient advice, it is much appreciated!

    Profile photo of timbo.timbo.
    Member
    @timbo.
    Join Date: 2007
    Post Count: 18

    Thanks Guys, for talking through this with me.
    Darn, this is not what I was hoping for…

    Funny thing is I read about this stuff all the time, but I guess because it is not the outcome I had hoped for it is hard to accept.

    To Summarise:

    If Prop 2 was purchased as an IP, the full amount of 400K from Prop 1 would be deductible as long as Prop 2 is considered an IP. If I then move into Prop 2 after a period of time (say 12 months), at that point in time the deductible amount is reduced to 300K.

    Conclusion:

    What I am trying to do is use capital growth of an investment for non investment purposes and still claim deductions on the interest. Essentially, this is the same concept (and consequently – flaw) as Living Off Equity.

    Alternative?

    The only way I can use that money is to sell Prop 1 and pay any CGT and then I can do whatever with the balance. Which brings me to another question:

    If I purchased Prop 1 as an IP in 1999 and have lived in it for the past 2 years (it is currently my PPOR), do I still have to pay CGT?

    Profile photo of timbo.timbo.
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    @timbo.
    Join Date: 2007
    Post Count: 18

    Thanks Dan42…

    I guess my question is, how much of the interest for Prop 1 will be deductible?

    eg

    Current PPOR (Prop 1 – Previously IP but have been living there for 12 months+):

    Prop 1

    value = 500K
    loan = 300K
    LVR = 60%
    offset = 250K
    balance = 50K
    80% LVR = 400K
    new loan amount = 400K

    Say I revalue the property to gain access to equity at 80% LVR and use this equity to puchase another property Prop 2, which becomes my new PPOR and keep Prop 1 as an IP:

    Prop 2

    Value = 800K
    Deposit using funds from Prop 1 = 350K
    Loan = 550K

    so….

    If Prop 2 becomes PPOR and Prop 1 turns into IP, how much of the interest paid on the 400K loan on Prop 1 is deductible?

    Profile photo of timbo.timbo.
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    @timbo.
    Join Date: 2007
    Post Count: 18

    Committted the cardinal forum sin – asked without looking first!
    I have done a bit of looking around, and have found recommendations for:

    http://www.guardianpartners.com.au
    http://www.strategicwealth.com.au

    Thanks, and I will be more proactive in the future!

    Profile photo of timbo.timbo.
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    @timbo.
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    Post Count: 18

    I put bamboo flooring in my PPOR less than one year ago.
    It looks fantastic and I love the fact that it is as hard wearing if not more so than hardwood, but because bamboo is a grass is quick to grow and sustainable.

    However, I WOULD NOT recommend you use this for an IP as it would be hard to maintain.
    Already we are noticing scratches (little ones) on the surface and we are more careful than renters would be.

    Profile photo of timbo.timbo.
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    @timbo.
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    Post Count: 18

    Initial thoughts are: if it is such a strong area, why do they need to offer these incentives?

    Profile photo of timbo.timbo.
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    @timbo.
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    DWolfe,

    This is the other side of my dilema.
    We want to wait until we have an idea of what we ACTUALLY need instead of what we THINK we need now.

    But then will we get overtaken by property prices?

    Profile photo of timbo.timbo.
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    @timbo.
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    Dragon72, Thanks for your response, and advice.

    Yes, definitely agree with you – we want to keep both current properties when we eventually decide to buy the family abode.

    The current investment property we settled early last year and it has been surprisingly pretty much CF neutral (before depreciation and other deductions etc…) since day one.

    The current PPOR was rented out before and positively geared, we moved in after coming back from OS last year and have done some minor renos – they look great and we reckon it will add 30/40 per week in rent when we move out.

    This will mean re-financing both current properties probably to as much as the banks will let us without paying extra for mortgage insurance and working out how much we can sensibly afford after that.

    However, the concern is that if we wait 2/3 years, property prices will continue to increase, and we are no better off than if we were to buy now…

    Profile photo of timbo.timbo.
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    @timbo.
    Join Date: 2007
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    Tysonboss1 wrote:
    I would not move your existing house into the trust,…. But I would set up a structure inwhich to buy future investments in,

    Do you own your own home,…. If not when you finally want to settle into your own home I would sell your investment that is in your own name to buy your home (since you said it was almost paid off) that way you will not have much debt against your home which is not tax deductible,…. you can then use the equity in your family home to finance buying another investment property in your trust that way you end up with a family home almost debt free and another investment with with debt against it which is now tax deductible,…

    another thing is that you mentioned that you are paying off your investments,… you should never pay a single $ off your invesment loans if you have any other non tax deductable debt(car, boat, credit card).

    Hi Tysonboss,

    Thanks for the reply.

    I don't have any other debt, apart from the existing IP.  I should have done something with the equity in that earlier, but I WAS sort of a "hands off" type investor.  That HAS changed, and I am looking to get that equity working for me!

    I do not own my own home, so your suggestion is a consideration when the time comes to purchase.

    Do you see any advantages (or disadvantages) of having your PPOR in the trust structure?
    ie, If you decide to change your PPOR, you have the option of adding the current one to your portfolio within a the trust structure.

    Are there any tax implications to this (CGT/Fringe benefits etc…)?

    I will be consulting with an accountant regarding this, but want to get as much background information as possible.
    Also will be looking to research trusts, I have done some searches of this forum and there have been some commonly recommended books (except they cost more to ship over here to the UK than they cost!)

    Profile photo of timbo.timbo.
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    @timbo.
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    Post Count: 18

    Hi hoping,

    I've just joined this forum recently too – posted 2 questions.
    My girlfriend and I have been shopping around for a mortgage recently as well.

    We are both in the UK working as IT contractors, so it is not the easiest to prove income to lenders.
    After several enquiries through various mortgage brokers we have decided to go with a low doc loan with ANZ (we both have existing mortgages with them) with and offset feature and break-free package.  The breakfree package costs about $300 a year and gets you 0.7% or 0.8% off the standard variable rate (depending on how much you want to borrow), as well as waiving some loan fees.  This will bring your rate down from 8.47 to 7.77%. 

    If this sounds like I'm pushing ANZ, I'm not. 
    I'm just sharing my experience.

    Good luck!

    Profile photo of timbo.timbo.
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    @timbo.
    Join Date: 2007
    Post Count: 18

    Cheers, thanks for the info all – much appreciated!

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