Ip guru wanted

From: Whittaker Hamilton


Well here goes.

I have a home i live in with sufficient equity in it to purchase a IP.

Within the next 12 months i Intend to move to New Zealand to live permanently.

I would like to buy a IP here b4 i go back as an Australian Ip is claimable on NZ tax and has better capital growth.

My problem being I would like to sell my own house on leaving OZ so I only have the new IP to deal with.

But if i have used it to buy a Ip how can i do this? LOC?

Ideally i would like to buy a house to live in in NZ within 12 months of moving to NZ.

Would i be better off waiting till after i purchase a place of residence in NZ b4 thinking of getting an IP. That way i could use the larger deposit ( from the equity on sale of home on leaving) to reduce my own mortgage first, then borrow against it for IP'S. This may be 1-2 years away though.

any how i was told that if i got finance here through a australian bank i would be better off refinancing when i moved to NZ. As the tax dept tax 2% of mortgage interest from foreign countries.

Is there anybody that may have knowledge on this subject help and suggest a way i could kick start my IP portfolio and minimise costs.
 
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Reply: 1
From: Mike .


Hi Whittaker,

I see you have reposted your question from the Meeting Point conference. I hope Ctrader and Les will do likewise. If they don't the link to their replies is:

http://bne003w.webcentral.com.au/read?31859,42e#31859

Your question is similar to many that are archived in the Property Investor Archive in the Home Issues category so you may pick up some clues by researching those posts.

A rule of thumb that is normally followed is that the size of the home mortgage should be smaller than the IP mortgage because there is no tax relief on the interest of a home mortgage loan.

To achieve that normally requires you to sell your existing home first, then buy another with a home mortgage, then finance an IP mortgage from available equity in your home. This means the IP will have a larger mortgage and the interest is tax deductible.

However, if you do this in New Zealand, the bank will adopt a more conservative lending policy and lower the LVR or tighten the DSR. I assume you will use an Australian bank or a NZ bank with a Aust branch so you don't have to move your money out of the country which will incur a tax penalty of some kind.

Regards, Mike
 
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Reply: 1.1
From: Les .



G'day Whittaker,

My original reply said:
"Did you know you can Delete your own posts (but no-one else's) - so you might want to copy this to "PIF" then Delete this one.

Second, why not save a motza and simply turn your own home into an IP? Saves a bunch of costs, and time. Just a thought..."

Now, to the present - thanks for reposting in the Property Forum - (you might want to delete the Reply you made in Meeting Point too).
Regards,



Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1.1
From: Ctrader .


Before you go to far down the track I would suggest you try and get a copy of 'Property Investment in New Zealand' by Martin Hawes and have a look at the structure you are going to use to hold your property. In New Zealand there is Loss Attributing Qualifying Company ( LAQC ) that you might want to investigate for holding your assets. There are ways of moving the assets into a Trust further down the track if needed.

As for borrowing, remember that if you borrow funds in one country for use in another country you are exposing yourself to Currency Risk. Also you will find it difficult to to raise a high % for this purpose as the Lender can't access the asset easily if needed too for liquidation. What you can do is get a LOC against your existing property and use that for the deposit and borrow the rest of the funds in the country you are purchasing the property. If you do this with your current ppor you will pay this out when you sell.

The following websites may be of some use.

www.propertyinvestor.co.nz ( Magazine )

www.ird.govt.nz ( Tax Office )

As for the tax on overseas Mortgages, I haven't heard of this but if you find out I would like to know.

Good luck, hope this is of use,

Ctrader
 
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Reply: 2
From: Tony Dixon


Whittaker Hamilton wrote:
>I would like to buy a IP here
>b4 i go back as an Australian
>Ip is claimable on NZ tax and
>has better capital growth.

Pro NZ IP investment...
Parts of Auckland would definitely have strong growth. Other cities can give positive cashflow.
NZ does not have stamp duty on residential property purchases! (and I think commercial property stamp duty disappeared recently too). Also there is no CGT in NZ.
The top marginal tax rate in NZ at the moment is (was?) 39% above $60k.
Jan Somers co-wrote a book with Dolf de Roos on property investment in NZ.

Pro OZ IP investment...
One benefit, you can claim the travel expenses for a single visit to your IP in each tax year. That's a cheap return fare to Australia each year.

cheers, Tony
 
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Reply: 2.1
From: Ctrader .


The book Tony is referring to is:

'The New Zealand Investor's Guide to Making Money in Residential Real Estate' by Jan Somers and Dolf de Roos
 
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