Found 1st IP, any advice on my idea? :-)

Regardless of how good it looks … I'd say there is one aspect which it falls short on.

Your ability to keep in touch with it.

Unless you have a fabulous property manager (I have a couple) the distances involved will mean you'll have to book things in and schedule them precisely. From 300kms away. And if anything goes wrong (which they do) you'll end up chasing your tail to get things done by phone over a great distance.

Thats what a good property manager CAN do. Pity about that.

FHOG should never sway you from the option of purchasing a good deal. Whether its a good deal or not is really up to your good hard work in investigating its potential. And that wont be influenced by a FHOG decision. If you've done your homework you'll get more than a 7k deal back into your pocket.

If you are genuinely earning over 150k you should be looking at a much greater offset for your taxable income. It doesnt have to be negatively geared .. but with that sort of income .. why not? The less you pay in tax is the more you get in your pocket. How much tax will you pay? LOTS. How much could you offset? With a quick calc you could offset at least 40k in tax with a decent invest. That doesnt mean go out and MAX that to the hilt. But it does mean you could allocate 15k into improving something with a 25k IO loan expense borrowing roughly 300k (or a similar plan). Necessary improvements .. rates .. water bills .. almost anything connected with the upkeep of a property can be offset against your taxable income for the year. So why not pursue that?

First couple of years you pay that. After 3 to 5 years it should already be paying for itself .. should you have purchased well.

With the way you are working things now .. Richard Taylor's number 4 above me is what you need to pursue. A discretionary Family Trust with a Corporate Trustee will satisfy your long term requirements.

The other thing I should mention is that you are breaking my expense rule on investing. A property can be allocated 4% of its total property price per year for investing in improvements. Sure its a guideline, but thats a years realistic increase (in any market condition). Despite all the hype you hear about rapid movements .. budgetting for 4% expense per year usually is a good guide to prevent you from overdoing a renovation. So, on a 200k property valuation you could budget 8k for a single years renovation. Its really just designed to stop you pumping too much into a reno and not getting it back when you take it to sale.

Make sure you are 100% with the state rules you purchase in. The hidden difference between what you are used to and what you get exposed to in a new state can sometimes bring unwelcome surprises.

Yes you could certainly purchase the property with a 99/1% share on the Title as Tenants in Common and your wife would receive 99% of the deductions / income.

Some lenders insist it is a minimum 90/10% but not the end of the world.

Deductions are based on Title ownership and not who is on the loan.

Cheers

Yours in Finance

All depends if you think the property is going to be positive / negatively geared (and whether you want or need to claim any deductions) whether there is much Depreciation / Capital Allowance to claim and whether you think you will ever sell the property for a profit in the future.

Hate to say not a quick matter of throw a dart in a dartboard needs some careful calculations depending on your answers and furture requirements.

Thats why I would have suggested a DFT. A lot of these issues can be worked out later.

Cheers

Yours in Finance

Refinancing wont get the property to neutrally geared as you cannot claim the interest on the additional borrowing.

You cannot just increase the loan and expect the ATO to dish out a Tax deduction.

This is what Terry and I have been saying you need to think carefully about what you want out of the property (are you going to keep it long term etc) what will be the position post financing etc etc and then work backwards to see what entity / structure you should buy it in.

It is an expensive mistake to rush in and assume.

Cheers

Yours in Finance

Sorry i think you are still failing to grasp the concept of investment property purchasing and financing.

When you start off and purchase the IP you will incur LMI if the loan to valuation is greater than 80% (85% with 1 lender).
You wont get a refund of the LMi just because the property has increased in value and the lvr fallen.

You might find a lender offer a partial refund if you refinance away to another lender and their valuer agrees with your valuation (unlikely in the current climate as most lenders are not refunding LMI).

The interest rate you are working on is probably a little high for a good loan so work off 6.5%.

The refinance funds are Tax deductible full stop unless they are used to purchase another income producting asset so work off the orginal balance of $144K. (There are ways of getting the interest on the renovation funds deductible but that is a separate issue).

In regards to your Capital Allowance / Depreciation claim this is a non cash deduction so doesnt effect you cash flow but will reduce your Taxable income. 

Remember you mentioned you want to buy the property as TIC with your wife receiving 99% of the income / deductions.
If she is not working earning an income then there is not much to deduct and if you really need the NG claims then you shouldnt be buying largely in her name.

Go forward 12 months and if interest rates have fallen further and rents have increased it is likely the property will be positively geared so whose name do you want the income to go to ?

A DFT gives you the flexibility to decide each year depending on your circumstances at the time.

Of course as has been pointed out there are certain costs associated with setting up the correct structure but over time and depending if this is the only IP you are likely to purchase they can be insignificant compared to the long term Tax savings.

Cheers

Yours in Finance

No you would merely pay top up LMI (difference between what the new premium would be and the amount already paid when you purchased the property) so not going to be very much all all.

Terry has used some general numbers for you to get an indication of the concept.

You reduce the interest rate by 1% (and in fact with a couple of lenders you could reduce it down to high 5's if you are happy to go fixed) and the figures look a wee bit different.

Cheers

Yours in Finance