Hi what are peoples thoughts on using equity to fund shortfall on negative cashflow for properties, how you get your head around it by going into debt.
Bill Zheng of Investors direct said that it is good to use debt as a cashflow/income tool. If your properties are growing at more than you are borrowing is that a good idea. I am current doing it at the moment but have some thoughts about how to change my mindset to accept that i must use equity to cover the shortfall by drawing down on a line of credit against my growing equity to cover the shortfall. Any ideas from experienced investors how you handle it psychologically?
any thoughts would be a great help. thanks
It is very common and can be very useful, especially if you have a PPOR loan.
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
In my opinion, only a good strategy if you have a low LVR, and the properties are going up in value consistently.
Even though the interest is tax deductible, it is still an increase in the debt.
The idea is to make sure the property values are going up by more than your drawings on the equity.
Keep a close eye on the property values and the LVR.
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