All Topics / Legal & Accounting / Refinancing … The best tax consessions when purchasing my 2nd investment property

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  • Profile photo of adrianvadrianv
    Participant
    @adrianv
    Join Date: 2010
    Post Count: 3
    December 25, 2010 - 9:15 pm

    Hi All,

    I would like to hear your opinions, regarding the best way to buy a 2nd investment property.

    I owe approx $100k on firat inv prop.
    Value $500,000
    redraw $100k
    rent $470 p/w
    Mortgage – Homeside variable

    I want to buy a second inv property… p. price $350k
    Do I refinance existing loan?
    Get a seperate new mortgage

    What is the most tax effective way to move forward…
    Thanks
    Adrian

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    December 25, 2010 - 10:58 pm

    Get a LOC of up to 80% of the value, less existing loan. Make sure it is a separate loan.

    Value $500,000
    80% = $400,000
    Existing loan = $100,000
    So the LOC would be $300,000 max

    Then the deposit and stamp duty etc should come from the LOC with the remaining coming from a new IO loan.

    Talk to your accountant before you begin about using the LOC to fund the payments of the interest on your IO investment loan, and other costs, and then cash freed up can be used to pay down your non-deductible loan first.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    December 25, 2010 - 11:00 pm

    Sorry, just reread and see your first loan is also an investment..

    If you don't have non deductible debt I would still suggest the above set up but have a 100% offset account linked to one of the IO loans and plough all cash in there while still borrowing the money to fund repayments. This will free up cash for future personal use if the need should arise.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    December 26, 2010 - 1:41 am

    I am assuming that you dont own a PPOR as if you do there maybe other considerations.

    Based on the information to hand terry is of course correct..

    Separate loan split to fund 20% + costs and then standalone IP loan secured against the property being purchased.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of adrianvadrianv
    Participant
    @adrianv
    Join Date: 2010
    Post Count: 3
    December 26, 2010 - 8:05 am

    Hi All,
    Thanks for the 2 replies…
    I appreciate your assistance
    AV

    Profile photo of philbambackphilbamback
    Member
    @philbamback
    Join Date: 2007
    Post Count: 18
    December 28, 2010 - 8:21 pm

    I would make sure the loan funds come from separate lenders as well so they cannot claw back from both in the event something goes wrong.

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