LOC drawdown strategy

W

WebBoard

Guest
From: W W


LOC draw down strategy

The Investors Club, henry Kaye and others promote a strategy whereby you periodically get your investment properties revalued, then extend your line of credit to 80% of the value and then draw down this extra equity to use as tax free money to live on.

The idea is to do one property every year, so if you had 7 properties your get them revalued one property per year for 7 years. ie each property will be valued once every 7 years.

You can then live happily without working using this equity to fund your lifestyle.

What I want to know is would a bank extend your LOC like this if you weren't working? Wouldn't they be worried that your debt was increasing every year? (theoretically your properties would be increasing faster than your debt.) Is anyone using this method?

Thanks

PI
 
Last edited by a moderator:
LOC

Reply: 1
From: Brett Burt


This is a multi-part message in MIME format.

------=_NextPart_000_0029_01C170D3.747F6180
Content-Type: text/plain;
charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable

Doesn't work.

------=_NextPart_000_0029_01C170D3.747F6180
Content-Type: text/html;
charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">






Doesn't work.

------=_NextPart_000_0029_01C170D3.747F6180--
 
Last edited by a moderator:
LOC

Reply: 1.1
From: Michael Croft


Doesn't work because servicability is still an issue to overcome with the lenders. That said, this can be overcome at a cost; have a look at Steve Navra's "cash bond" info and seminars in the archives.

Michael Croft
"The best parachute folders are those who jump themselves."
 
Last edited by a moderator:
LOC

Reply: 1.2.1
From: Sergey Golovin


Yes why not.

If you have 7 properties and trying to suck out as much as possible then yes gets very difficult but if you have 17 and using 7 for your exercise it could be different story all together.

Just a thought.

Serge.
 
Last edited by a moderator:
LOC

Reply: 1.2.1.1
From: Donna Larcos


I didn't think it would work either until I
realised I'd been doing it for years just not
in such a structured format. My husband
has been a student for half our marriage
and as we had our own home we would
borrow against the rising equity to
supplement my income and his meagre
income. The rising debt does gives
serviceability issues but you do have the
rents on the properties and you can have
income from other investments if you
structure yourself appropriately.
 
Last edited by a moderator:
LOC

Reply: 1.2.1.1.1
From: Andrew S


Just one question,

If I had a property revalued as proposed, and then decided I want to take out some money for an overseas holiday for example, this would increase the loan value as we have stated.

I would therefore have to pay more interest, only now some of the loan has gone towards paying my overseas holiday. Am I not paying interest on a non-tax deductible expense?

Is there a way to continue to claim the interest as a tax deduction on this new loan amount? Or would the tax department have something to say on this issue?

Regards

Andrew
 
Last edited by a moderator:
LOC

Reply: 1.2.1.1.1.1
From: Rolf Latham


Hi Andrew

No free lunch, and no tax deductible interest for the holiday Im afraid.

ta
Rolf
 
Last edited by a moderator:
LOC

Reply: 1.2.1.1.1.1.1
From: Donna Larcos


I think the property gurus are intending
that you are living on the money having
"retired". I.e. you don't have a taxable
income from salary. If you draw down
$60000 a year from an LOC to live on, the
interest is currently say 6% which you
have to cover from your $60,000. 6% is a
pretty low "tax rate". As you move into
taxable territory from rising rents etc you
are supposed to buy another property
with tax ded. to offset it. Your equity
exponentially rises each year and the next
year you borrow $75,000 to give
increased cost of living and increased
loan interest repayments.

Hope this helps.

D
 
Last edited by a moderator:
LOC

Reply: 1.2.1.1.1.2
From: Dale Gatherum-Goss


On 11/21/01 8:51:00 PM, Andrew S wrote:
>Just one question,
>
>If I had a property revalued
>as proposed, and then decided
>I want to take out some money
>for an overseas holiday for
>example, this would increase
>the loan value as we have
>stated.
>
>I would therefore have to pay
>more interest, only now some
>of the loan has gone towards
>paying my overseas holiday. Am
>I not paying interest on a
>non-tax deductible expense?
>
>Is there a way to continue to
>claim the interest as a tax
>deduction on this new loan
>amount? Or would the tax
>department have something to
>say on this issue?
>
>Regards
>
>Andrew

Hi

That depends how hard you want to play. If you have your IP's held in a trust or company (I prefer trusts, as many will know) then the trust can send you o/s to investigate further IP possibilities along with seminars and the like. There is an enormous paperwork requirement, but, it is possible and is done all the time.

So, how strong is your resolve, your discipline, and your heart?!

Have fun and keep up the good questions

Dale
 
Last edited by a moderator:
Back
Top