Debt Recycling Investment Property

Hi,
I've been researching about debt recycling but I only see people apply it into PPOR. I was wondering if it was possible to apply debt recycling if I were to purchase an investment property regardless of cash flow or capital gains?

Many thanks!

 

What do you think debt recycling actually does?

 

Why would one do it?

Can you list the benefits (as you see them) of taking such action?

 

Yes its possible.
But debt recycling is the conversion of non-deductible debt into deductible. Generally investment debt would already be deductible.
However, I have seen a number of clients with contaminated loans on investment property so the interest was not 100% deductible. This could be debt recycled by splitting the loan and then paying down the non-deductible portion and debt recycling that.

 

Hi @Terry_w

If I buy PPOR, pay it off then take loan against it to buy investment property would you call it debt recycling?

 

Is it just borrowing to invest?

Tax Tip 219: Debt Recycling v Borrowing Extra to Invest Tax Tip 219: Debt Recycling v Borrowing Extra to Invest

 

Seems like I am right. I am talking about the Lisa scenario.

Edited: looking at Lisa scenario do you mean if you reduce your non-deductible debt before taking on deductible debt its debt recycling? Because that is what Lisa did.

 

does it really matter what you call it? What counts is whether it works.

 

Depends on the mechanics but the outcome is the same.

 

Different outcome as borrowing more means taking on more debt overall, whereas debt recycling doesn't. Borrowing more also doesn't involve reducing non-deductible debt.

 

Not in the OP's case. He's not borrowing more - his debt (and non-deductible debt) would be the same as the current PPOR loan is fully paid off.

You can't debt recycle a PPOR that has no debt.

 

In the ops case the outcome might be the same initially. But there will be differences where there are different ownership structures or different plans for either property.

You can certainly still debt recycle without any non-deductible debt.

 

But not if it has NO debt.

But agree re ownership structures, future plans etc...

 

Sorry if I haven't been active in this thread, I've been busy. Can you provide an example on how I would debt recycle without any non-deductible debt? I was under the assumption it only works with PPOR due to its nature turning non-deductible debt to deductible debt.

My current situation:
- 22 years old - living with parents.
- Currently investing $2000 a month into the stock market.
- Thinking of purchasing an investment property and debt recycle to supercharge my stock portfolio.
-Property will be under my name and my dad's name.

Am I approaching this the wrong way?

 

I have a client intending to move into one of his investment properties in 2 to 5 years. He is debt recycling in advance.

Another client is debt recycling a property loan that was used to pay for a property in the wife's name. Shift the tax payable from the high income earner to the lower.

Where there are properties held in trusts it might be wise to borrow to onlend to the trustee to shift debt as well.

 

I don't know - but what are you trying to achieve?

 

I'm trying to create another passive income stream apart from my dividend portfolio. At most I'd want to own 1-2 properties for cash flow. I'm well aware of the annoyance of maintaining property but it's something I don't mind.

Edit: Typo

 

I mean what are you trying to achieve with the debt recycling?

 

Sorry if that wasn't clear. I was going to use debt recycling to supercharge my shares portfolio. Therefore, while I'm building a mini property portfolio, I'm also working on my shares portfolio.