Strategy for Share investors involving Property Say someone doesn’t believe in property as an investment vehicle. They may wish to solely invest in shares and exclude property. But they have to live somewhere so one way to do this would be to buy a property and then borrow against it to buy the shares. Example Joe wins a $400,000 lotto prize. Choice 1 Joe buys a $400,000 share portfolio. He continues to pay $400 per week for a $400,000 property. Joe's shares grow at 7% pa and pay 3% dividends = $28,000 increase in capital and $12,000 income per year. But Joe still has to pay $400 per week in rent so Joe may have to earn $597 per week (to get an after tax amount of $400) Choice 2 Instead of just going out and buying the shares Joe uses $100,000 deposit and costs to buy a property to live in. He borrows $300,000. But after settlement he uses $300,000 cash to pay down the loan and then borrows $300,000, by using redraw, to buy the same shares he wanted to buy in choice 1. Interest rate is 4% - owner occupied rate. Joe now has 2 different assets growing - approx $21,000 growth in the first year for the shares and $9,000 in dividend income. But he also has a $400,000 property which is also growing – hopefully at 7% = $28,000 per year. He has less shares that he would have in choice 1, but more in capital assets overall. He could even consider taking a margin loan and getting an extra $100,000 in shares. Or He could have started off with a 90% LVR loan to squeeze a bit more - LMI could have been deductible too. He also is saving $400 per week in rent – taking tax into account this is like a $597 saving. Also the property will be able to be sold CGT free at a future date. Joe can still get to invest in his favourite asset class, shares, but do so in a more tax efficient manner. As the interest on the loan is now fully deductible. Where someone already owns shares they may consider selling the shares and borrowing buying back – but they should get some tax and financial advice before doing so.