Help needed

Discussion in 'Accounting & Tax' started by Pauly84, 13th Mar, 2018.

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  1. Pauly84

    Pauly84 Member

    3rd Aug, 2016
    Hi everyone , I am looking at buying another property but since I have started reading this forum I see there is so much more to property investing then the old mentality of just buying a place and colleting the rent and paying it off .
    I currently have a unit that is valued at around the $450k-470k mark that I have currently rented out with about 60k left to pay off , it has a variable loan with a 100% off set account attached to it that has 60k sitting in it .

    I am wanting buying a house in Sydney later this year or early next year for around the 750k mark
    that I want to rent out as well for now. The Mrs and I are thinking of moving into the unit next year until we need the extra room of the house , as the house will create more rental return in the mean time than the unit and help service the loan. When we do eventually move into the house we will be renting out the unit again .

    I am looking for advice on how I should set up my loans and any tax advice . Should we use equity for the deposit for the house or savings or a mix of both . Should we be structuring the unit loan different any help would be appreciated .
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    18th Jun, 2015
    The questions relate to credit advice. Perhaps engaging with one of the numerous skilled brokers here may be a benefit. One of your best resources can be having a knowledgeable broker available to address these sorts of issues.

    Issues surrounding your incomes, servicing etc will all impact

    Once thats sorted then tax guidance from an adviser may be needed or it may be quite clear.
  3. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    31st May, 2016
    @Pauly84 - Various other aspects to structuring & details required. Speak to a broker about the borrowing and setting up of the loans.

    You are definitely better off holding on to your savings - gives you control of your funds and use equity for that additional property purchase.
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    18th Jun, 2015
    Canberra, Brisbane and Sunshine Coast

    Without knowing the finer details of your situation I'd probably look to release enough equity in your current property to cover off the 20% deposit and stamp duty/purchase costs on your next $750k purchase. I'd then set up another loan for the remaining 80% against the new property.

    So the basic structure would look like this:

    Current property
    Loan 1: Current loan
    Loan 2: Equity release to cover 20% deposit/costs (around $185 - $190k for a $750k purchase)

    New property
    Loan 3: $600k loan (80% of the purchase price - the remaining 20% will come from loan above)

    If you end up living in one as an owner occ - drop your savings into an offset linked to the owner occ loan.


    Tony66 likes this.
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    14th Jun, 2015
    Gold Coast (Australia Wide)
    because the unit has bugger all debt on it, when you rent it out and move into the new house, the tax efficiency of your set up will go to yuk

    You will be paying tax on a large chunk of the unit rent, and have a reltively huge non deductible debt on the new PPOR .

    Consider an active debt recycle strategy from day one.

    Consider maybe selling the unit to a unit trust, or a spousal sale........often, just doing the logisictis of the cashflow etc, many clients quickly realise that selling the old low debt property is the best way to go so you can then take the cash, flush it through the non ded debt and replace the previous poorly structed asset with a new 105 % lend.

    You dont say how much cash you have, obviously if you have 750 all good : ) plug it into the offsets of the non debt.

    Please Seek specific tax advice after credit modelling these concepts