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From: Bydntsel .


At last some great information on IP.
I have been to some seminars where it has been hinted that the query below is possible.
Dose anyone have some suggestions?
How to get the equity out of the IP in cash that's not taxable and still stay positively geared?
Hope some one can put together some numbers to demonstrate.
 
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Reply: 1
From: Samantha Lind


Hi Pete,
As I understand it you can do the following to provide yourself with cashflow or equity, whatever turns you on.
Just say you buy a prop. for 300K and the bank gave you 80% finance of 240K on an IOL. You always have a tenant that is going to keep you positively geared, which is usually not a problem with the right prop. Say in 5yrs time you revalue the prop. at say 380K ( which is conservative if you bought the right prop) you can refinance your loan at 80% of valuation which means the bank will give you 304K. So you pay out the 240K, leaving you 64K to do what you like with ( equity or cash) and the good thing is that seeing it is a loan the tax man can't touch it.
Remember you never really own the prop. you just control what you do with it.
Hope this is helpful.
Sam
 
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Creating Cash Wait for a Audit

Reply: 1.1
From: Gee Cee Cee


Basically the $64k cannot be used for you to just lay on Great Kepall or Sth Mole Island all year.

If it is not put back into a investment of some sort then the interest cannot be claimed as part of your properties expense.

However if it was used as a deposit for another property then it is a different matter.

I am not a accountant so check this out!

Gee Cee

Basically it gets down to personal
(FUN) expenses. Holidays / BMW.

or Business. (GROWTH /RENTALS /INVESTMENT)
Expenses.
 
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Creating Cash Wait for a Audit

Reply: 1.2
From: Gee Cee Cee


My view is that the $64k cannot be used for you to just lay on Great Kepall or Sth Mole Island all year.

If it is not put back into a investment of some sort then the interest cannot be claimed as part of your properties expense.

However if it was used as a deposit for another property then it is a different matter.

I am not a accountant so check this out!

Gee Cee

Basically it gets down to personal
(FUN) expenses. Holidays / BMW.

or Business. (GROWTH /RENTALS /INVESTMENT)
Expenses.
 
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Creating Cash Wait for a Audit

Reply: 1.2.1
From: Ric1 .


Gee Cee,

While happy to defer to your greater knowledge on these things, I would have thought you could use the borrowings for anything you wanted. However, if you wanted to use it to finance a life sitting on a beach, you couldn't claim the interest on it as a tax deduction.

Any further thoughts?

Ric
 
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Creating Cash Wait for a Audit

Reply: 1.2.1.1
From: Gee Cee Cee


Of course you can use the borrowings for whatever you like.

My comment related to the fact that the extra borrowings if used for PERSONAL EXPENSES & not investment would NOT be able to be claimed as a expense against the properties income.

At the end of the day you draw that money and use it for Do Dads / lifestyle / self.

However what are you going to do to eventually pay back the constantly growing loan ?

Sell the property I imagine.

Gee Cee
 
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Creating Cash Wait for a Audit

Reply: 1.2.1.1.1
From: Cameron James


GeeCee>However what are you going to
do to eventually pay back the constantly
growing loan ?

Sell the property I imagine.<

I don't think you would ever have to pay
the loan off if you can always service the
payments.
If you had enough properties, say 8 or 9,
perhaps the aggregate rental income
from these properties (p+ geared) would
cover the payments on the increased
loan. Then you could use the equity for
anything you like and a few years later
repeat the process. I have heard of a
strategy like this somewhere, I don't know
the details though. It would be worth
crunching some numbers to see how it
might work.

CJ
 
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Creating Cash Wait for a Audit

Reply: 1.2.1.1.1.1
From: Gee Cee Cee


Great on a rising market.

However I feel that when the market corrects and values stagnate for 8 to 10 yrs you will be able to pull little $ out of it.

Also whatever you take out for personal expenses / do dads cannot have the interest claimed as a tax deduction.

If you are prepared to hold all them properties for 8 yrs + and cover costs etc before a gain then OK.

But from my experience ALL the gain is in 2-3yrs max. The rest of the time you are just in the market.

Read a few of Pauls comments.

He has also been there done that.


Just my opinion

Gee Cee
 
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Creating Cash Wait for a Audit

Reply: 1.2.1.1.1.1.1
From: Paul Zagoridis


A key point in your post is

>But from my experience ALL the
>gain is in 2-3yrs max. The
>rest of the time you are just
>in the market.

That matches my experience (and many stats) perfectly. With my buy & hold I find out that prices jumped up last year/quarter/month/week/weekend and now that I've noticed it's probably all over. (And yes I've seen property go up 10% over a weekend).

I'd love to find a nice area where the prices go up the average amount every year. Hmmm... Nah... I'd get bored and sell to play roulette.

Dreamspinner
Homeless 21 September with cat and toddler.
 
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