Using equity to purchase investment properties

Discussion in 'Accounting & Tax' started by youfoundtheplot, 28th Oct, 2017.

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  1. youfoundtheplot

    youfoundtheplot Active Member

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    When using the equity to put down deposits on two different properties how do we calculate the interest deductibility for each property?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    based on the total interest on the investment borrowings

    typically 25 % on property and 80 % on propert B,

    or

    105 % if crossed security

    obviously need to wok out the specifics : )

    ta
    rolf
     
  3. youfoundtheplot

    youfoundtheplot Active Member

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    So lets say I have 100k equity @ 5% interest

    55k was used as a deposit for investment a

    45was used as a deposit for investment b

    is it right to say that

    IP A - Interest Expense - $2,750
    (55,000*5%)

    IP B - Interest Expense - $2,250
    (45,000*5%)
     
  4. Terry_w

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

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    You don't use equity per se, you borrow to invest. If you have a new loan for this, which you should, it will be clear cut - the interest on the statement.
     
  5. Terry_w

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

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    You are confusing loans with equity. If you had a $100k loan and used it for 2 purposes like this then you would apportion the interest. This would generally be 45%/55% of each months interest except in the first and last months (unless you borrow for both on the exact same day).
     
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  6. youfoundtheplot

    youfoundtheplot Active Member

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    You are right Terry.

    I am confusing loans with equity...

    What you have said confirms what I had suspected....that the borrowed funds need to be apportioned accordingly
     
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