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From: Anonymous


Please advice
From: PA
Date: 9/6/99
Time: 4:06:09 PM

I have finished reading ‘Building Wealth through investment property’, which I thought was fantastic and too easy to be true. After reading the book, this is where my problem lies and would greatly appreciate some advice.

I have purchased (for $190K) a double front weather board in Oakleigh, Melbourne. There is enough land to make it a dual occupancy. I have nearly finished renovating the existing house and the plans for the back unit are being submitted to council as we speak. I plan to live in the front house and rent the back (after reading your book). The original intention was to sell both.

In order to do this, my parents are guarantors. They have their existing house and a beach house as collateral. There was a debt on the beach house of approx $70K, which has been paid off with the new loan. All in all I have borrowed $300K and I will borrow a further $100K to build the back unit. I have taken out an ‘interest only’ loan at 5.39% for 1 year.

Here is my concern (problem). I still want to live in the front house. When I build the back unit should I rent it, or sell it to reduce my debt? I still also wish to acquire additional rental properties as per the book and I have no intention of paying of the principal on the loan.

What would you do in my situation? What are the positives and negatives?

Your help would be greatly appreciated.

Regards Paul Email: paul.apos@advatel.com.au
 
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chris h

Reply: 1
From: Anonymous


Re: Please advice
From: chris h
Date: 9/6/99
Time: 7:50:54 PM

Hello from Perth, I am only a relatively new property investor but I think with your proposal to live in the front house would disallow all of the interest payments to be claimed as a tax deduction. Only the portion of the loan that is used to produce assessable income would be allowable (100k). That is if you intended claiming this anyway.
 
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EAB

Reply: 1.1
From: Anonymous


Re: Please advice
From: EAB
Date: 9/10/99
Time: 5:59:59 PM

NEVER NEVER use some other poor sole as a guarantor! You can never tell if something will come up and you cannot make payments.

Dual Occupancy can pay you dividends but suggest you look out for aggressive neighbours and the tall poppy syndrome. Council can be hard on you with lots of delays although I think Jeff Kennet has made it a bit easier than NSW.

One hassle in NSW is locking a builder into a fixed price, they will quote low and build it up with variations later so keep DAILY RECORDS of hours and the number of men on site and what they do.

Good Luck EAB
 
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