GDAY FOLKS QUESTION ON STRUCTURING FINANCE. WE OWN A PROPERTY VALUED AT $900K AND WISH TO USE THE EQUITY TO PURCHASE TWO INVESTMENT PROPERTIES. WE AIM TO DO ACHIEVE THIS BY TAKING A LINE OF CREDIT TO FUND A 20% DEPOSIT PLUS COSTS ON BOTH THE INVESTMENT PROPRTIES. WE WOULD ELIMINATE MORTGAGE PROTECTION INSURANCE AND ALSO NOT DIRECTLY LINK OUR HOME TO THE INVESTMENTS. WE WOULD LONG TERM WISH TO BY PAYING OFF EXTRA ON THE INVESTMENT PROPS, USE THE REVOLVING LOC TO FUND OTHER PROPERTIES. IS THIS STRUCTURE WORKABLE, ARE THERE ANY PITFALLS OR BENEFITS AND ARE THERE ANY SPECIFIC PRODUCTS (LOANS ETC) TO WATCH OUT FOR IN ORDER TO ACHIEVE OUR GOALS. REGARDS JEFF
Jeff
That is a very practical solution and easily implemented.
Without knowing more of your situation and goals it is hard to go into any more depth. I would suggest you sit down qwith a reputable mortgage broker and go through it all in more detail.
All the best,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Forget the LOC. They are an expensive waste of time unless you want to be ‘fashionable’. You would be better served with a loan with offset regardless of your personal situation!
TMA
http://www.email4money.info
Essential Links
First Home Buyer WebsiteThanks for your replies, appreciate them. If we did go down the track of the LOC, is it best to have subaccounts for each of the investment properties (for taxation, and to keep them seperate). Did look through a few LOC loans, at 6.7%, with no application or management fees. Thought that sounded pretty good! And if I did go down the track of a loan with an offset facility, i do like the idea of having a pool of money that I only pay interest on the balance, but I have the flexibility to use the money (at short notice)to acquire property. I must preface this by saying that these loans are only for investment purposes, as we have other accounts for living expenses etc. Your advice would be appreciated Thanks JEFF
There would be no need for multiple sub accounts if you are going to use it only for investments. At tax time you just apportion the interest used per property.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
One account is fine for all investment properties in one name. Just keep rental statements, expenses receipts etc. There is no need to complicate investing.
TMA
http://www.email4money.info
Essential Links
First Home Buyer WebsiteJust a point in relation to cross colleralisation and record keeping. ONly have two so far, but after several discussions with accountant, decided to set up separate loan accounts (splits) for each property. easier for working out returns and expenses. Adds slightly to costs but worth it if want to keep accurate records for each property. BAsic accounting software will handle separate accounts.
Cross collateralisation is definately annoying and I would stay away from it wherever possible.
Regarding accounting, the only person all the splits are easier for is the accountant. You can just as easily track everything from your rental statements and expense receipts. What is hard about calculating the cost of a loan that the amount never changes if the loans are at interest only?
TMA
http://www.email4money.info
Essential Links
First Home Buyer WebsiteI agree with TMA. If you are using a loan soley for investments, one account should be OK. The interest may have to be apportioned over a few proeprties, but even if you stuff this up, the overall figure would be the same and this would make no difference to the amount of tax payable.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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