Bought an old house, settlement in about 2 months. Now need to decide how to structure the finance. The plan is to move in for 2 years while getting a DA approved by the council for two townhouses. TH1 will be the PPOR, TH2 will be sold or become an IP. To keep things simple, assume TH1 and TH2 have the same land and building costs. The title is in joint names. Is there any way to structure the loans that land holding costs for TH2 (while construction is in progress) are tax deductible? We have large amount of cash on hands from the sale of the other PPOR. Our initial plan was to just pay cash for the house, then borrow for construction. But now I am starting to think it is not the best way. So we can instead put 20% deposit and borrow 80%, and put cash into an offset. But then when we draw it for construction, can we capitalise 100% of the interest up to the value of TH2 or only 50%? For the sake of exercise, purchase price incl.stamp duty 1M, total construction cost for two TH 500K (250K+250K). Do we pay cash for the purchase or do we take 80% loan? Really appreciate your help, guys. Also, if anyone could recommend a mortgage broker in Melbourne, that would be great.