Newbie question regarding use of investment loan

Discussion in 'Property Finance' started by MB1, 31st Jan, 2019.

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  1. MB1

    MB1 New Member

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    Hi guys,

    In the process of purchasing our first investment property and wanted understand how best to use the loans/money we have setup.

    We currently have setup a separate investment loan (appox $220k) which we will use to pay for Deposit and Stamp duty (purchase costs approx $75k) and hope to use the remaining funds in the loan to purchase further IPs.

    My questions is in relation to should I be using this Investment loan account to pay for expenses such as Landlord insurance and Rates? Or am I better off paying out of pocket for these expenses as they are not large expenses.

    Thanks,
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    what you are proposing is a debt recycling thing which may need tax advice.

    its one way and one method of a few to capitalise expenses for investments thus allowing increased cashflow to do other things with.

    ta
    rolf
     
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  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    The question appears to indicate that the loan may become blended and need to understand how not to blend. Searching for Tips on blended loans will assist to explain the issues.

    Certainly you can use borrowed funds for paying outgoings as well as acquisition costs but this could affect future deposits etc. And there are some costs NOT to pay using borrowed money.

    Example $220K borrowed and some of this relates to IP 1. And then some may end relating to IP2. And so. Understanding how to correct this and do so correctly will assist.

    After July 2019 use of the borrowed funds for further deposits and acquisition costs may not be deductible UNTIL the new IP becomes available to rent.
     
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  4. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    MB1 likes this.