Kill Private Debt?

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From: Harry Hunter


Hi All,

I was just reading the post about 'How to Finance?' the IP for the sister to live in.

I was very interested to see the comment by Rolf Latham of 'ASAP Financial' about killing private debt. I am very eager to get into investing and principally through property but I have been in my 1st home for just under 12 months and still have just over 200K left on the mortgage.

If i have about 50-100K equity in my property, what are the ways to 'Kill the debt'?

I am trying to upgrade my VW Kombi investment vehicle to a faster and more stylish vehicle like a Merc. Kompressor or BMW Z3.

I live in South West Sydney.

Thanks,
Harry
 
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Reply: 1
From: Rolf Latham


Hi Harry

The SLK or Z3 will have to wait. Anyway the Kombi has more space :eek:)

Much depends on your income and your focus to get ahead for the future. Strategies succesfully used by people to reduce personal NON tax deductible debt include:

1. Loan Management and Manipulation Systems that "shift" private debt to tax deductible debt.

2. Get onto the property/shares bandwagon and generate equity growth in addition to that generated by your home. Realise that extra equity growth and use the after tax profits to pay down the home loan. This is a common strategy where there is a FIXED end in mind, for example someone is 50 and has a 30 year mortgage to go on their home.

Another version of this is to buy a run down prperty or one you can develop. Spend the time and the money to improve the equity position, refinance and do this again. In the process aquiring more property and thereby increasing (hopefully) your equity position.

3. Use a loan that allows you to pay more and or provides for an offset acct. For an average earning couple the effect of an offset loan can be to pay down a 30 year loan in about 17 to 19 years without any extra repayments. BUT beware actually do the sums whether this type of product is in fact suitable for you. You need the offset balance to be quite high for it to actually work in the way the banks set it up, because these loans tend to have an interest rate premium of between .5 to .7 %.

A little joke about delayed gratification (and no you cant take an oral substitute). A client said to me that he finally realised a dream that he had in 1980. He finally bought his Benz 1979 450 SEL 6.9.

Ta

Rolf
 
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Reply: 1.1
From: Jeremy Laws


BMW Z3's are horrible vehicles. At best boulevarde cruisers for fashion victims. The M Roadster is better, but if you wanted to go fast in a straight line you would be better off catching a train. Mercs similar, but way better built. Be deeply suspicious of anything designed in US.
 
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Reply: 1.2
From: Marina .


On 7/12/02 7:36:00 AM, Rolf Latham wrote:
>>
>Much depends on your income
>and your focus to get ahead
>for the future. Strategies
>successfully used by people to
>reduce personal NON tax
>deductible debt include:
>
>1. Loan Management and
>Manipulation Systems that
>"shift" private debt to tax
>deductible debt.

Hi Rolf,

Would you be able to explain how the manipulation system works?
How do you go about shifting private debt to tax deductible debt.?

Thanks in advance.
Marina.

>
>
>Rolf
 
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Reply: 1.2.1
From: Rolf Latham


Hi Marina

Many of my clients use a variety of systems that their tax advisors are "happy" with. The two more common ones not involving trusts are:


1. Instead of paying the operating costs of your business out of cashflow, you can borrow the operating costs and bank the cashflow.

This means in IP speak, instead of sacrificing your home mortgage when paying rates insuances and body corps on your property, borrow these costs instead. While your overall debt burden does not change the mix of the debt turns to tax deductible more rapidly. Commercial reason ? - cashflow.

2.Pay the interest on your Ips out of another line of credit. As long as you service the interest on the new line of credit there is no capitalisation of interest. Once again this means that the ratio of private to business debt increases over the traditional methods. Commercial reason ? Risk Management by increasing cashflow.

Seek the opinion of your own tax people on these, Opinions as to the "allowability" and indeed the benefits vary markedly.

Ta

Rolf
 
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Reply: 1.1.1
From: Terry Mc


Hi Jeremy.
You mean like Corvette, Viper and
HUMV's? I'm certainly suspicious of
HUMV's :-}
Terry Mc
 
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Reply: 1.2.1.1
From: Andrew D


Any comments on this approach Dale. Love to hear your thoughts on the capitalization issue.
AD
 
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Sim

Administrator
Reply: 1.1.1.1
From: Sim' Hampel


On 7/13/02 11:59:00 PM, Terry Mc wrote:
>
>You mean like Corvette, Viper
>and
>HUMV's? I'm certainly
>suspicious of
>HUMV's :-}

Actually it's HMMWV (High Mobility Multipurpose Wheeled Vehicle), usually abbreviated to Humvee or just Hummer.

Not that I'm trying to be pedantic or anything ;-)

 
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Reply: 1.1.1.1.1
From: Michael G


Sim,

You dont have to try, you just are :)

Michael G
 
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Reply: 1.1.2
From: Rolf Latham


Hi Jeremy

Have you been in or driven a CLK 55 ?? Yes its a Benz but like many of the newer breed it has real teeth.

Ta

Rolf
 
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Reply: 1.2.1.1.1
From: Dale Gatherum-Goss


Hi AD

I am comfortable with the ideas presented and am not particularly frightened of the capitalisation issue - especially after recent court cases.

My only advice is would be:

1. have a commercial reason for doing what you are doing;
2. be consistent; and
3. build your defence now rather than wait for the tax office to ask you why you are doing what you're doing.

Have fun

Dale
 
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Reply: 1.3
From: Harry Hunter


Just a short note to say 'thank you Rolf'.
 
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Reply: 1.3.1
From: Bob Graeme


Hi there

Just out of interest i took a BMW E46 330ci for a thrash the other day. Was very impressed with the Tiptronic gearbox............makes for heaps of fun if you drive it manually!!!

Have fun
Bob
 
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