Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
You set up a loan (LOC and/or loan with offset savings account attached etc) secured against the property. You then draw down on this loan when ever you want ie weekly, fortnightly, monthly etc.
For example if you have a property valued at $800k with an existing loan of $400k the banks will allow you to draw out up to 80% of the value providing you have structured yourself correctly to meet the lender's serviceability criteria.
So $800k x 80% = $640k - $400k = $240k available equity for redraw. If you redraw say $2k per week you use $104k of that $240k with $136k still available.
Because you are drawing out equity via a loan it does not trigger any income tax ruling by the ATO. What would you have to earn gross to net $104k in the hand if you had to get up out of bed each morning to go out and earn it?
Use in conjunction with a LOE investment strategy as per my chosen CGA Property Investment Strategy.
I hope this helps.
Quaser
Remember to allow for the compounding interest charges to be paid on the amount drawn down.
This doesn't necessarily stop this strategy working but needs to be allowed
for in your calculations.
Cheers
Pete
10 years of rental increases across portfolio will do well to offset it too.
Hi Rixter
Quaser would need a substantial portfolio for rental increases to offset to interest on the LOC redraw and has valued his IP at $300,000 with a nett
yield of 1%.
I can't see how this strategy would work for Quaser which is the point of this thread.
Cheers
Pete
Rixter,thanks for your time to post that,it gives me a better understanding..willairYou set up a loan (LOC and/or loan with offset savings account attached etc) secured against the property. You then draw down on this loan when ever you want ie weekly, fortnightly, monthly etc.
For example if you have a property valued at $800k with an existing loan of $400k the banks will allow you to draw out up to 80% of the value providing you have structured yourself correctly to meet the lender's serviceability criteria.
So $800k x 80% = $640k - $400k = $240k available equity for redraw. If you redraw say $2k per week you use $104k of that $240k with $136k still available.
Because you are drawing out equity via a loan it does not trigger any income tax ruling by the ATO. What would you have to earn gross to net $104k in the hand if you had to get up out of bed each morning to go out and earn it?
Use in conjunction with a LOE investment strategy as per my chosen CGA Property Investment Strategy.
I hope this helps.
I'm thinking of selling my first IP because it's increased in value enormously and the rental return is absolutely rubbish at the moment.
Just looking at capital gains tax, and it seems a bit complex. I originally bought the flat to live in in 1998, lived there for 5 years, bought a house with my wife in 2001, but rented it out for 2 years before moving in in 2003. We have since sold that house and upgraded, claiming PPOR exemption for that place last year when we sold it and bought a new one.
If I were to sell the IP, how would I calculate the CGT I'd need to pay? I estimate the value has increased by about 250% since I bought it, but can't see much further growth for quite a while as rents haven't kept pace with prices in the area. Is there anyway to minimise the CGT or is it too late now (it's a one bedroom flat, so moving in there for a family with 2 kids isn't really an option!).
You set up a loan (LOC and/or loan with offset savings account attached etc) secured against the property. You then draw down on this loan when ever you want ie weekly, fortnightly, monthly etc.
For example if you have a property valued at $800k with an existing loan of $400k the banks will allow you to draw out up to 80% of the value providing you have structured yourself correctly to meet the lender's serviceability criteria.
So $800k x 80% = $640k - $400k = $240k available equity for redraw. If you redraw say $2k per week you use $104k of that $240k with $136k still available.
I hope this helps.
This doesn't make any sense. Then you are just left with a bigger debt to pay off.
Yes you are correct. It wouldnt make any sense if one is wanting to pay it off and later sell. So why would you ever want to try? To pay it off is only going to cost you more from after tax dollars plus if/when you sell there's all the selling costs and CGT that you rightfully point out. Why pay more when you dont have to.
Sorry it still doesn't make sense. Why would you want to continually rack up debts all your life? And what bank would continue lending to you? Eventually they want their money back.
Well I've done the sums and I don't think it would be worth it as it looks like I'll be up for around $40,000 CGT and my wife would lose family tax benefits for the year as well. So it looks like I'll be hanging on to it for a while. That CGT sure is a killer.
Thanks everyone for your help.
I know this was posted a while ago , but for people looking the post in the future , we are selling our 1st IP at the momment and centrelink do not count capital gain or lost as income only rental income and lost
Martin
A few years ago we sold an IP. Hubby made a capital gain and we didn't remember to tell Centrelink to stop paying my family allowance. When the tax was done, we got a bill for a couple of thousand which we had to repay due to having received payments that were too high due to the increased income for that financial year.
That sounds the opposite of what you were told Martin. It is probably worth call again and asking someone else to check what you were told the first time.