IP debt to service other IP debts

[plainjane4eva]

Is this scenerio allowable? DO people currently do this?

If use rental income, and my own moneys to pay for all expenses and costs of IP1.
I use the line of credit on IP1 to pay for all expenses and costs in IP2 that IP2's rental income doesnt cover.
I do the same for IP3 using IP3 rental income to pay interest, and line of credit on IP1 to cover any other IP3 related costs.
Mean while I pay all new interest charges from the increaing loans on IP1 line of credit from my own pocket...

Does the ATO allow this?? Is the increasiong loan on IP1 deductable...

Its very similiar to the debt on debt and interest capitalisation thats been discussed before but but without a PPOR loan...

Alittle confused.. as to whether this is doable.. or even a good way to try to get a few more growth properties. Is there a safe way or method this could be done?

 

[letiha]

Is there any reason for doing this??? As all the interest is decudtible wouldn't it be the same amount you were paying, regardless which loan you were paying it into.

 

[plainjane4eva]

letiha

Reason would be to help with servicabilty ..and possibly buy more.. as I have some equity in IP1...

I would only pay the interest amounts on the increased IP1 loan.. the increased amounts would be use dto pay the interest/IP costs of IP2 and IP3...

Maybe ive confused my self... I'll write it out on paper then come back with some figures...

 

[yo yo ma]

Maybe ive confused my self... I'll write it out on paper then come back with some figures...

And me... some figures would make it easier
Steve

 

[bort]

Is there any reason for doing this??? As all the interest is decudtible wouldn't it be the same amount you were paying, regardless which loan you were paying it into.

wat letiha said ... its all deductible debt since you arent using a ppor so it shouldn't really matter where it comes from, so just pay off whichever debt gives you the most flexibility i'd say (or the highest interest rate)

 

[plainjane4eva]

Here are some figures...
So the LOC on IP1 pays off the interest expenses of IP2, IP3 which isnt covered by rental income.
Attached excel sheet