renovating ppor

Hello all. I just registered today and this is my first post. I have so far found this forum to be like a good book, I'm having trouble pulling myself away from the screen! I wish to maybe tap into some of the wealth of knowledge out there to maximise my IP situation.
My situation is this.
Myself and my wife are wanting to renovate our PPOR. To do this we're wanting to refinance. Going by local sales and a real estate agents opinion, we estimate the house, as is, to be valued at around 230 to 250,000 and we currently owe 145,000 on the mortgage. I jointly own an IP with my brother. Neither of us has ever had any idea about how to best control the finances relating to the property (ofcourse in hindsight we should have done something about that fact years ago!:rolleyes: ), but for better or worse we now actually only owe 700 dollars or something rediculas after only 8 years of a 20 year loan term. (The bank sudgested not fully paying it out to leave our options open). We bought the property for 56,000 and it is currently worth around 120,000 and we're getting 120 per week rent (which go's into an account that neither of us touch and has currently around 2000 in it) from an excellent tenant who is extremely happy to stay. Both my brother and I are wanting some money at the moment (him to go towards a badly needed new car and me to kick start the reno's). He tells me the bank will allow us to redraw around 22,000 on the current loan, so we're thinking 10,000 each, but I'm a bit hesidant about whether or not this is a good idea. My thoughts are that because we're not using the money for investment then the interest won't be tax deductable. But bro seems to think that because it is still an investment property loan then the interest must be tax deductable. :confused: .
We're both wanting to do things the best way because we're both interested in buying more IP's seperately. Bro also is paying off his own PPOR.
If anyone out there could push us in the right direction it would be greatly appreciated. Hope I haven't confused anyone.
Thanks in advance and look forward to reading some more of the interesting stories and advice, and hope I can also one day give someone else a shove in the right direction.

P.S. I live in Newcastle NSW and am currently looking for a financial advisor or accountant that specialising in IP's if anyone could recommend one (my current accountant just seems to want me to sell the IP and invest in his Bonds.)
 
My thoughts are that because we're not using the money for investment then the interest won't be tax deductable.

You're right. It's the purpose on the loan which is omportant- NOT what is providing the security. imho.

live in Newcastle NSW and am currently looking for a financial advisor or accountant that specialising in IP's if anyone could recommend one

Not in NSW- but it may be worth while an annual (deductible) trip to Melbourne to visit Dale Gatherum Goss, who is on the forum. I don't go to him (yet!) but it may be worth while for you.

my current accountant just seems to want me to sell the IP and invest in his Bonds.)

Because he gets a commission from bonds. I had a deal on the books two years ago. A block of flats (rural but close to Canberra)- $500,0000. Shocking condition- but structurally sound. Eight out of 20 flats were occupied- but it was returning 12.5%.

I did not have enough resources at the time. I tried to find a partner. I found someone- his accountant advised him it was a good investment. It took a few weeks- but, just as he was ready to go, his accountant then advised him to buy managed funds instead.

The block needed about another $250K to renovate. I found another partner- but it was too late- somebody else bought it.

They renovated and sold. And made $500K profit.

My potential partner, on his managed funds, would have lost money up to now (this was two years ago).

The flats would probably be worth $250K more than what they sold for one year ago.

Sorry for the tirade- but I hope you can see my message about managed funds.

we estimate the house, as is, to be valued at around 230 to 250,000 and we currently owe 145,000 on the mortgage

Great. When you renovate it, get it revalued. And use the equity to buy another IP. But, this time, don't pay it off (as you probably realise). Pay off the house you're living in first. Interest is not deductible.

(careful about the reno and valuation though. You may well end up spending more renovating than you get for it. Make youreslf comfortable- but don't assume you will add more value than you spend_.

Sorry, I haven'y answered you main points. But may have given some ideas.
 
Hi Craig

GW But you have answered some points there :O)

Craig I would strongly suggest that in addition to a "good" accountant you add a good independent mortgage broker.

Your scenario has many postive things to recommend it, but you do want to maximise your opportunities.


ta

Rolf
 
G'day Craig Ros,

And welcome aboard !!! What I think I'm hearing is that both you and your brother are wanting to take Tax deductible income and turn it into Non Tax deductible expenses.

Caution!! It may be worthwhile from YOUR perspective, CR, but NOT from your brother's perspective. Certainly you both need to talk to (at least) a good Accountant, and also (to help you both to advance) a good mortgage broker.

With BOTH of them on your side, you should come out of this with a clear perspective on what you SHOULD do..... Try the resident guru's (Dale and Rolf) and see where it takes you - you could be pleasantly surprised.

And, of course, what SHOULD be done is a very personal thing - so don't let me, or anyone else, push you toward something that goes against what YOU want. We all attack the IP thing as individuals, with different needs, goals, desires, etc. Find someone that you can relate to, and who can relate to you, and go from there.....

Regards,
 
Hi Craig,

I've moved your thread over to the Finance forum because your post is heavily slanted towards the finance side and so are the replies.

Mike
 
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