Use equity from IPs to fund PPOR

Discussion in 'Investment Strategy' started by Mumbai, 1st Nov, 2019.

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  1. Mumbai

    Mumbai Well-Known Member

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    I am planning to buy a PPOR in Vic and these are the ways I can buy it:

    - Get equity out from my IPs and existing PPOR and use the funds as deposit
    - Sell the existing PPOR and use the funds as deposit

    I do not want to sell the PPOR as it is a good location with a lot of rental demand.
    But, I am also vary of using the equity to fund a non tax deductible purchase.

    Can anyone suggest, any other options?
     
  2. kierank

    kierank Well-Known Member

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    Do you have any loans with Offset accounts?
     
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  3. Archaon

    Archaon Well-Known Member

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    How much equity in existing PPOR?

    HOW much will you need for a deposit?
     
  4. Mumbai

    Mumbai Well-Known Member

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    Yes, I do.
     
  5. Mumbai

    Mumbai Well-Known Member

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    Based on the latest valuations, I have around 200k equity and need less than that for a deposit. You reckon just get the equity of the existing PPOR and use as deposit?
     
  6. Archaon

    Archaon Well-Known Member

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    It will depend how your finances are set up.

    How much do you have in offset?
     
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  7. kierank

    kierank Well-Known Member

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    Any cash in them?
     
  8. Mumbai

    Mumbai Well-Known Member

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    Yes, not enough to cover the deposit. The offset is the everyday account and I keep it for buffer.
     
  9. Archaon

    Archaon Well-Known Member

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    Basically the breakdown is:

    Borrowing to purchase a PPOR will mean the funds are Non-deductible.

    Borrowing on your PPOR to buy an IP will be deductible come tax time.

    Fundamentally, deductibilty of interest is determined by what the money is used for, not what property it is located on whether that be IP or PPOR.

    Has your current PPOR always been your PPOR?
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    See my post called something like 11 strategies for moving out of PPOR and want to keep it
     
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  11. Mumbai

    Mumbai Well-Known Member

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    PPOR has been leased and tenanted for around an year and half now.
    And aware of the tax deductibility criteria on use of funds rather than where it came from. That's why the question in the first place on how do I structure this.
    Torn between wanting to get a new residence versus investing :(
     
  12. Westie

    Westie Well-Known Member

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    Run it past your broker mate? Then see whether you should let your emotions win out v/s investing. I'm in the exact same situation as you.
     
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  13. Archaon

    Archaon Well-Known Member

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    Are you renting currently and have 2 IP's atm?
    It sounded as though you were living in your PPOR and renting out an investment property.

    It's best you talk to a broker to get a more complete picture of your current financial situation to advise you best.
     
    Last edited by a moderator: 2nd Nov, 2019
  14. Morgs

    Morgs Well-Known Member Business Member

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    In the end you're in a good position because you've got options but you really need to break down the numbers and work out what is more effective.

    Take the emotion out of the ownership of the PPOR you previously lived in - would you purchase it today as an IP based on the yield & projected growth?

    Without knowing the history you may also want to evaluate the CGT position and potential advantage of selling that property with minimal CGT due to it being a PPOR (seek advice on that one).
     
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  15. albanga

    albanga Well-Known Member

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    If you believe it’s going to be a good long term investment and you can afford to hold then I would definitely consider keeping it and just leveraging the equity.

    There is a lot written about maximizing deductibility and correct structuring and it’s all very important! Don’t get me wrong!

    But you know what never fails.
    Just keeping it simple and smashing down debt.
    Trying to work out if the cost of selling and re-entering against the benefit of maxamising your deductibility can just become a dogs breakfast IMO.

    Most people I know that own multiple properties bought a PPOR, smashed it down, moved house and kept it with low mortgage but kept smashing that down on P&I, rinse and repeat.

    Again I’m not saying correct structuring is not fantastic and the @Terry_w of the world are experts. Definitely setup correct where you can from the start. All I’m saying is don’t always get absorbed in it because a lot of the time, simple works best.

    Just my 2 cents.
     

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