Answer on this scenario

i have a friend who is asking advice

He has a unit in Western Sydney

Quakers Hill unit - worth approx $400,000 (owes $20,000) .... Has a redraw of $280,000

He has $400,000 cash left by a inhertance

He wants to buy another property a bit closer to Parramatta in the region of $500,000 to 600k to live in and rent out the Quakers Hill unit
He will take out over 100k from the redraw and rent the QH property out paying back the redraw with the rent

The questions is ... Wouldnt it have been better to get a loan ...?

Also wouldnt it be better if he withdraws the whole 280k from the redraw and goes into negative gearing?

 

1. Yes 20% plus costs from exisiting redraw, 80% loan secured against new property
2. If he doesn't have any other debts or PPR debt then no point pulling all the redraw out. The old "spend a dollar to save 32c" saying.
He should concentrate on filling up the offset bucket of one in full, then move onto the new property.

 

Bloody oath it would be better.

Your mate is proposing to pay cash for an investment property. What happens when he needs some money for person expense in the future - such as living expenses retiring early? He may have to borrow and the interest would not be deductible.

He should consider borrowing the maximum amount and putting the cash in an offset account.

 

@Darlinghurst Boy - are you allowed to vist people in Parramatta or the hills?

 

Yes thankyiu all but if he redraws the maximum from his Ppor which is at Quakers Hill then buys the Parramatta unit and moves into that one... That way he can rent the quakers hill one out and can he claim tax deductions on his redraw?

Terry i may get him to come see you but your in the City abd he is out West

I need to come see you Terry as i am only a 10 minute walk away basically i have the same question if i redraw 500,000 from my ppor buy something else with it to go live in then rent my redrawed old ppor out can i claom tax dedctions ?

Terry ,can i pay you a discount for my first appointment ?

 

I charge $660 for the first consultation.

 

You're $6 cheaper than me.

 

You have to consider the porpoise of the loin. If the monkey being borrowed is for a ppor then it won’t become a deduction until he rents out that new property. I'll take my half now thanks.

 

Quakers Hill @ $400,000 is not right. Nothing sells there under $450k anymore.

 

@twobobsworth - studio?

 

u little devil.....

 

I'm trying....very trying (just ask Mrs No Mates).

 

Hey Darlo, there are a few good criminal lawyers ot Mt Druitt way. That's out west. Only problem your friend might get mugged at the station lol.......by me lol.

 

@datto - what should @Darlinghurst Boy do if he drops his wallet at Mt Druitt Station? - 1st world problem?

 

Kick it along the ground till you have a wall behind you.

For heaven's sake don't just bend over anywhere you like.

Odds are someone would have just got out after a long stint in a correctional facility and see it as an irresistible opportunity.

 

Just like Pelican Lane