Possible to restructure a loan like this?

[joeygbh]

I currently have three properties fully paid (no. 1, 2, and 3), including my PPOR, total value $1.1Mil.

I will acquire two new properties (no. 4 and 5), total contract value plus stamp duty at about $920,000.

One of the new properties (no. 4) will only be rented out until october next year when I will be moving into it as the PPOR.

Is it possible if all the properties are under the same name to take a loan out on the equity on the three properties already paid out (1, 2, and 3), to pay off the loan on the new PPOR (4), effectively reducing the loan to zero, and causing a loan to occur on the investment properties (1, 2, and 3) thereby being able to use the interest as a tax deduction?

 

[alexlee]

Is it possible if all the properties are under the same name to take a loan out on the equity on the three properties already paid out (1, 2, and 3), to pay off the loan on the new PPOR (4), effectively reducing the loan to zero, and causing a loan to occur on the investment properties (1, 2, and 3) thereby being able to use the interest as a tax deduction?

Short answer, no. The purpose of the loans taken out on 1,2 and 3 will be to pay out the loan of 4, which is PPOR. Therefore not deductible.
Alex

 

[Rolf Latham]

Hiya Joey

Some of the accountants around the place MAY be able to structure something around that to make this more attractive,

Depends on what state u are in and so forth, and what ur taxable income bracket is as to what u might be able to do.

ta
rolf

 

[HeXa]

Short answer, no. The purpose of the loans taken out on 1,2 and 3 will be to pay out the loan of 4, which is PPOR. Therefore not deductible.
Alex

that was what I was going to say.... except I wasn't sure how the IP -> PPOR would affect this.

Would think the interest would be deductible until it becomes a PPOR... provided the loan was clearly stated as being for investment purposes.

 

[joeygbh]

My accountant just advised me of how I may be able to do this but the details are sketchy at this moment so we'll see how this pans out.