Best use of equity?

Discussion in 'Investment Strategy' started by curioussimon, 13th Oct, 2018.

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  1. curioussimon

    curioussimon New Member

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    Hi all

    Newbie here so please be nice :)

    Just looking for some advice on the best way to structure tapping into equity for investment.

    Here’s my situation:
    - 65k in offset for PPOR
    - 40k in equity from PPOR
    - Another property where I have 200k in equity

    Both are loaned through the same bank. I enquired about setting up a LOC however the bank’s advice was to get split loans which they will deposit into my offset account for my PPOR and then use the funds as deposit when I find a property.

    I feel that this will make accounting for these incredibly difficult and don’t think I will be able to deduct interest expenses to its full extent?

    How should I go about this?
    1. Go with bank’s suggestion and get split loans and keep them in offset until I find a property.
    2. Get two LOC’s on both properties
    3. Get split loans but pay into a new savings (or a transaction) account (which is better?) which will be set up specifically for keeping the money there until I find a property to deposit for.
    4. A better way than I couldn’t think of?
     
    curioussimon, 13th Oct, 2018
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Perhaps speak with your accountant.

    We have clients with more than 100 loans/ splits... Simple spreadsheet keeps the books.

    Ta

    Rolf
     
    Rolf Latham, 13th Oct, 2018
    #2
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You will destroy the deductibility of interest if you do this and be throwing money away.
     
    Terry_w, 13th Oct, 2018
    #3
  4. jazzsidana

    jazzsidana Well-Known Member

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    Why not keep it super simple..

    Have offset for each property (PPOR and IP)?

    Bank can merge your existing PPOR offset when they refinance to only have one offset against PPOR with balance of $105k

    Similar with IP, have another offset account against investment property with balance of $200k when refinanced..

    Good luck with refinancing!!.

    Cheers,
     
    jazzsidana, 14th Oct, 2018
    #4
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This would be a terrible idea from a tax perspective!
     
    Terry_w, 14th Oct, 2018
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  6. jazzsidana

    jazzsidana Well-Known Member

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    May be read it again.

    Not sure how it will affect tax picture when accounts are kept completely seperate for both IP and PPOR?

    Cheers,
     
    jazzsidana, 14th Oct, 2018
    #6
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The op is talking about 'equity' of $40k from PPOR. Presumably, this is will be borrowed money if you are talking about an offset account containing $65k plus $40k = $105k?
     
    Terry_w, 14th Oct, 2018
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  8. jazzsidana

    jazzsidana Well-Known Member

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    Aah, my bad.. assumption I made was 65k in offset a/c is equity that was previously released from same property .. off-track
     
    jazzsidana, 3rd Nov, 2018
    #8
  9. Eric Wu

    Eric Wu Well-Known Member

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    Welcome to the forum Simon @curioussimon

    If it is not a big trouble (from admin, paperwork point of view), better to keep the equity release/cash out/loan top up separate, not only for clear cut of loan/funds origine, also for change of mind in the future (ie, planned for oo use, end up for investment)
     
    Eric Wu, 4th Nov, 2018
    #9