Greetings all,
I have a question on behalf of the inlaws… They are currently living in PPOR and wanted to sell to downgrade. I said don’t sell!!, rent it out and buy elsewhere with equity.
Anyway I just wanted to clarify with your collective wisdom, that the easiest way for them to do this is get a LOC on PPOR (which then becomes the IP), use that to buy another PPOR and rent out the first house.
Are there any tax issues with using the equity in their PPOR like this??
Thanks in advance..
Elbow,
Unless the outlaws still have a reasonable mortgage on their property and/or they could expect the property to rise in value substantially, they might bebetter off to sell it. Reasoning being that any loan they raise on their property to buy a new o/o property will NOT be tax deductable, so they’ll have a o/o loan (even though it’s secured by their existing, and now an investment property) to pay out of their after tax income, plus additional income (the rent) to pay tax on..
The PURPOSE of the loan is what determines the tax deductable issue, and in their case the purpose is to buy an o/o property..
P.S. If they decide to sell, they should consider selling it themselves, if possible.
theloanarranger
ouch… I suspected it wasn’t as easy as I’d thought, but still doable.
Thanks MA – I just love creative financing.. and btw, last time I checked I was a female! [laughing] Seriously, appreciate your suggestion.
Have a good day all…
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