Hello
Have recently decided to purchase an IO. Have also just discovered this site, and feel like a kid in candy shop with the info on offer. I expect that answers to my questions can be found in many places on this site, but I am still finding my way around, and I have to decide on the first question very soon.
Loan arrangement
An example figure IP is 500k. We could pay a cash deposit of 100k and take loan on IP for 400k, leaving us no spare cash. Instead we thought of doing the following:
Depreciation
The IP is 1970s, therefore I assume the building value cannot be depreciated. However, the current owner did major renovations a year or so ago. Can the value of these renovations be depreciated. For eg, if they installed a $30k kitchen, can this be depreciated. If so, how do you assess the renovation value - do I need their receipts?
Title Insurance Is it worth it?
Thank You
Have recently decided to purchase an IO. Have also just discovered this site, and feel like a kid in candy shop with the info on offer. I expect that answers to my questions can be found in many places on this site, but I am still finding my way around, and I have to decide on the first question very soon.
Loan arrangement
An example figure IP is 500k. We could pay a cash deposit of 100k and take loan on IP for 400k, leaving us no spare cash. Instead we thought of doing the following:
- Use our unencumbered PPOR to borrow $500k as an IP loan. The IP will be unencumbered. I assume we can still claim interest costs because the loan purpose is investment, even though security is PPOR ?
- Immediately pay the $100k as redraw or into an offset account, until we need the cash (or find an investment that pays better than mortgage rate). The bank said either method would work. My concern is, if it is redraw, the ATO would not allow interest on the redrawn amount unless it was for investment. With offset, the investment loan amount remains untouched - it is just the periodic interest amount that changes and we claim for. Is this correct?
Depreciation
The IP is 1970s, therefore I assume the building value cannot be depreciated. However, the current owner did major renovations a year or so ago. Can the value of these renovations be depreciated. For eg, if they installed a $30k kitchen, can this be depreciated. If so, how do you assess the renovation value - do I need their receipts?
Title Insurance Is it worth it?
Thank You