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A contaminated loan is one which is mixed. If the loan is PI then it will become even more contaminated as each repayment must come off each portion of the mix. e.g $100,000 loan $40,000 for propert A = 40% $60,000 for property B = 60% each repayment of principal must come off A at...

The loan will end up mixed. Some for ip1 and some for ip2. This won't make tax issues as both will be deductible. But if you decide to move into either property in the future it would be an issue. $50 cash flow should be placed into any non deductible loan first. Then once you have no more...

You have it correct, but haven't taken into account other issues. Say you wanted to buy a new house to live in, or an ivory back stratcher for $200,000. Under option 1 you could take $200k from the offset and claim the increased interest on the loan, despite the money being use for a...