I have an IP that I purchased in 2003 for $280,000. It is now valued at $380,000.. In 2008 I foolishly locked in a loan on this property at 8% for 5 years (which has been a financial struggle). I have been paying principle down in lump sum payments on this loan each year.The loan on the IP is now $210,000. In March 2013 the fixed rate expires.
I have 4 IP's in total, 3 cover themselves pretty much. The 4th... the IP in question has always been negatively geared but once the fixed loan expires it will probably almost cover itself too.
I don't plan to claim any of the IP properties as PPOR, my plan is to hold the IP's until retirement and then sell one off each year when my taxable income would be reduced and CGT would be less of an issue.
I have been renting but I now really feel a need for a place I can call home. I want to buy a PPOR that I can renovate and add value to and would like to fund this using equity from the 4th I.P. Also my income is about to increase so I need to find a tax reduction.
Things I don't want to do:
My question is...If I redraw/ refinance and increase the loan on the 4th IP, what percentage of the new loan can I negatively gear for tax purposes ?
1. Only on the $210K still owing?
2. Up to the original IP loan of $300K?
2. Up to the current valuation of $380K?
I hope my question makes sense? I would really appreciate some advice/ suggestions.
I'm guessing the answer to my question is number 1. but hoping someone knows of a loop hole?
Thanks in Advance.
JASA
I have 4 IP's in total, 3 cover themselves pretty much. The 4th... the IP in question has always been negatively geared but once the fixed loan expires it will probably almost cover itself too.
I don't plan to claim any of the IP properties as PPOR, my plan is to hold the IP's until retirement and then sell one off each year when my taxable income would be reduced and CGT would be less of an issue.
I have been renting but I now really feel a need for a place I can call home. I want to buy a PPOR that I can renovate and add value to and would like to fund this using equity from the 4th I.P. Also my income is about to increase so I need to find a tax reduction.
Things I don't want to do:
- Buy another IP at this point.
- Salary sacrifice a large amt of my income to super. (I like to be in control of my own investing and retirement is too far off.)
- I will only invest in real-estate.. shares are a definite no go zone for me.
- I don't even want to go to SMSF in my head.
My question is...If I redraw/ refinance and increase the loan on the 4th IP, what percentage of the new loan can I negatively gear for tax purposes ?
1. Only on the $210K still owing?
2. Up to the original IP loan of $300K?
2. Up to the current valuation of $380K?
I hope my question makes sense? I would really appreciate some advice/ suggestions.
I'm guessing the answer to my question is number 1. but hoping someone knows of a loop hole?
Thanks in Advance.
JASA