Cash or Equity

[jaja]

I’m facing a dilemma at the moment:

I have $50 000 in an offset account and I have $50 000 equity available. Would you use cash or equity for next IP purchase and why?

Thanks,
Brat

 

[buzzlightyear]

I would use the LOC simply because if there was an emergency or you needed to access funds for non-investing purposes, it would not impact the full deductibility of your LOC by mixing personal use (Assuming of course you have not already done so)

 

[agent007]

I’m facing a dilemma at the moment:

I have $50 000 in an offset account and I have $50 000 equity available. Would you use cash or equity for next IP purchase and why?

Thanks,
Brat

It'd be more efficient to use equity for the next IP purchase. You'd be charged interest for using equity to fund an income producing asset. In doing so, the interest charged on the equity you used would be tax deductable whereas, using funds from the offset account won't have the same advantage assuming they didn't come from previous borrowing.

Cheers,
James.

 

[Rolf Latham]

Equity

Your cash is tax paid.................so should you need or want to do something in the future that wasnt tax deductible youd hav to THEN borrow

Almost always keep your cash,coz at the end of the day the interest cost is the same, as long as you leave the cash in against the new debt to minimise interest repayments

ta
rolf

 

[skater]

I'd also use the equity for all the above reasons.