Browse Forums General Discussion Re: My First Investment Property - Help Needed 21Mar 15, 2016 2:09 am Ok so let me assume that you will borrow money to build your home while you are living in the "investment property". Once you move out of the investment property I also assume that you will have two mortgages. Lets also assume that your income streams consist of Rental Income and Earned Income and combined cash in is what you will use to service all debt. Since interest on rental property has a nexus with rental income and is deductible you want to maximise the deduction associated with rental income. Interest on PPOR is not tax deductible so therefore you want to pay as little of that as possible, to do so you need to may pay down your loan or have a mortgage offset account. The second provide liquidity that can be used for other things (the bank may not always allow redraw). Having interest only on the investment loan will maximum your net overall position as you will potentially pay less interest overall. Also borrow all the money you can to make repairs, maintenance and improvements. Use your cash to offset the loan where interest is not deductible. Resist the temptation to fix everything as you will not get deductions for it. Keep all receipts as they will form part of the capital base should you ever go to sell it. I suggest you speak to an accountant to get an understanding of what can and cannot be done with respect to improvements, repairs and deductions. Understand what can be depreciated at accelerated rates (requires a QS to certify) otherwise its over a much longer period (25 years I think). Above all have a strategy, plan and budget of how the investment property will work for you. Make sure you account for the other costs associated with rental properties, i.e. agents fees, letting fees, insurance, rates and taxes, repairs and maintenance etc. Happy to rabble on but best via PM as I will bore others to tears. Cheers mark Re: My First Investment Property - Help Needed 23Mar 15, 2016 7:58 pm You should really see a profressional to understand interest only versus principle and interest, reliance on capital gains if you do go interest only, what you can claim for when it becomes a rental, if you want it negative geared or want to pay it off and actually own an income producing asset later etc . Re: My First Investment Property - Help Needed 24Mar 15, 2016 8:30 pm what do you mean? Narrewarren01 Is that what houses sell down there? Re: My First Investment Property - Help Needed 25Mar 15, 2016 8:42 pm Really appreciate your help mark.. Sounds like you have plenty of experience As you know, the hassle for me is that I will live in it for a year or two before it becomes an investment and rented.. So I'm not sure what j should and shouldn't do in terms of interest only and improvements etc.. I best see an accountant I guess AussieMark Ok so let me assume that you will borrow money to build your home while you are living in the "investment property". Once you move out of the investment property I also assume that you will have two mortgages. Lets also assume that your income streams consist of Rental Income and Earned Income and combined cash in is what you will use to service all debt. Since interest on rental property has a nexus with rental income and is deductible you want to maximise the deduction associated with rental income. Interest on PPOR is not tax deductible so therefore you want to pay as little of that as possible, to do so you need to may pay down your loan or have a mortgage offset account. The second provide liquidity that can be used for other things (the bank may not always allow redraw). Having interest only on the investment loan will maximum your net overall position as you will potentially pay less interest overall. Also borrow all the money you can to make repairs, maintenance and improvements. Use your cash to offset the loan where interest is not deductible. Resist the temptation to fix everything as you will not get deductions for it. Keep all receipts as they will form part of the capital base should you ever go to sell it. I suggest you speak to an accountant to get an understanding of what can and cannot be done with respect to improvements, repairs and deductions. Understand what can be depreciated at accelerated rates (requires a QS to certify) otherwise its over a much longer period (25 years I think). Above all have a strategy, plan and budget of how the investment property will work for you. Make sure you account for the other costs associated with rental properties, i.e. agents fees, letting fees, insurance, rates and taxes, repairs and maintenance etc. Happy to rabble on but best via PM as I will bore others to tears. Cheers mark Re: My First Investment Property - Help Needed 26Mar 15, 2016 8:43 pm Because the rental is so high I don't think I could negative gear it? I would rather pay it off then have the rent as an income Beazley77 You should really see a profressional to understand interest only versus principle and interest, reliance on capital gains if you do go interest only, what you can claim for when it becomes a rental, if you want it negative geared or want to pay it off and actually own an income producing asset later etc . Re: My First Investment Property - Help Needed 27Mar 15, 2016 9:49 pm Yes, you can only negatively gear by making a loss. Nothing wrong with positively gearing, as you are though. Especially if you have capital you want to park somewhere and don't need to reduce your taxable income. Re: My First Investment Property - Help Needed 28Mar 15, 2016 10:59 pm Pay off the house that has non deductible expenses. If you are positive geared you are making money. If you have enough positive geared income so that it replaces your earned income you can retire. Real Estate Investment Funds look to do this and provide fixed income returns. I wish all my properties were cash flow positive or better still produce net taxable income. Why run property investment different to how you would run a business. Re: My First Investment Property - Help Needed 29Mar 16, 2016 10:30 pm Never pay off an investment, use any funds or money gained to pay off place of residence or invest in another property. Re: My First Investment Property - Help Needed 30Mar 17, 2016 2:10 am Narrewarren, that is what I have been saying. go interest only and use the surplus to put in an offset against your PPOR..... All this talk about negative gearing and positive gearing etc. It is better to have positive gearing as you are making a profit. Negative gearing assume you have a loss which is then applied to your other taxable income. If you are investing then positive gearing is better as you are making profits. If you are negative geared and have no income then you are just accumulating carried forward losses. See an accountant to get proper advice. Re: My First Investment Property - Help Needed 31Mar 21, 2016 1:44 am I agree with whats been said regarding accountant. You want to know all the pros and cons earlier, as this may afftect when and how you spend your sprucing up dollars. I think the ideas sound fine. A lick of paint will make a huge difference, and is cheap diy. 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