Hi everyone. I am really hoping to get a little direction from the experts here. My wife and I are in a position now to start our property investment stage. We have been working at saving deposits and paying down our debt on our PPOR. Very rough numbers are as follows. PPOR value 800k Loan 450k Savings 100k. I am on the tax bracket and she is on essentially minimum wage with her own business. This creates an interesting tax situation as we are married and both have our names on the title of our home. We want to build up a property portfolio sensibly. We want to structure the loans correctly from day one to make sure that we have the best possible setup for future purchases. We would like to purchase each property on P&I, 80LVR and have them as close to cash flow neutral or positive as possible after tax so that we can buy more. Would I be correct in saying that when it comes to tax, the losses would be divided out evenly between us to claim at our respective tax rates just like the income would be if they were positive? I called our bank and they started talking cross collateral straight away. I know that has many downsides for those wanting to build a larger portfolio with the options of buying and selling down the track. I guess I wanted some opinions on the best way to approach this and who is best to speak with about the strategy. Mortgage broker, accountant, both etc? Any opinions would be great. Thank you.
You need to consider loan structuring, but also ownership structuring. Income is generally defined by the ownership structure, not the loan structure. At this stage I suggest you keep on reading and then go and get so professional advice before the next purchase. Terryw’s Ideal Loan Structure Terryw’s Ideal Loan Structure
Hey @TUF250, It'd be interesting to nut everything out with you - sometimes what seems to be the obvious way to go can actually hold you back, especially while you have a home loan in place still. Yup. Definitely a quality mortgage broker, but you will need an accountant and also possibly property lawyer if you want advice regarding ownership.
Your direct questions have already been answered... If the bank's first thought is to talk about cross collateralisation you need to speak with myself or one of the other brokers here. Crossing securities is absolutely the wrong way to go about achieving your goals. I suspect one of the challenges you're going to face is borrowing capacity. If you're wife's business is structured to the point where negligible tax is being paid, then there's not much income coming from the business. Income is one of the major factors in how much you can borrow.
450 000 non ded debt. My first port of call would a IP focussed structure that ALSO pays that off more quickly, and allows both IP portfolio build, asset diversity and good tax management Ahn active debt recycle strategy can work towards that for many on a middling to high tax bracket, using mainly optimised structures and tax savings ta rolf
on cross collateral, here is a mouldy oldie, most still applies and half a dozen more now ! To cross or not ta rolf
