Some questions...

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From: John Lewen


Hi.

I have a couple of questions that I'd like to get advice about from you learned people out there...

1. Is it possible to have an interest only loan on a house that I live in for a couple of years or so while renovating it and then use it as an investment property, or does it have to to be a principal-and-interest loan because it is my principal place of residence for those two years? In other words, is it possible (or advantageous) to have an I/O loan on your PPOR?

2. What is the best way to arrange a line of credit or similar financial arrangement to pay for unforeseen expenses such as during renovation, other house expenses, etc? It needs to be made as part of or in association with the house loan. Who is worth talking to about this situation?

3. Does anyone know anything about tenant-in-common arrangements between myself and my own self-managed super fund? Can I live in a house that is partly owned by my super fund (a tenant-in-common arrangement), particularly if I've had to borrow for some of the money for my part of the purchase price? Clarification of this situation by someone would be good. (Yes, I'm aware that the super fund cannot borrow for money in a property purchase).

Cheers

John Lewen
 
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Reply: 1
From: Rolf Latham


Hi John

1. Yes you can have an Interest Only Loan on your Pricnipal Place of Residence. A true Line of Credit by Definition is an Interest Only Facility.Most LOCs require 20 % deposit, some 10 %.

2. I assume you are talking about a Line of Credit secured by the mortgage of the home, rather than the unsecured type where rates are as high as 20 + %. In most cases you would incorporate this woth your home loan, or indeed have it as your core home loan with an extra limit.In regards ti whom to talk to, if you have an established relationship with a lender speak with them to start with.If not, an independent mortgage broker would be able to advise.

3. Not my field of expertise, I suspect a super fund cannot share an asset in that way.
Dale ?

Ta


Rolf
 
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Reply: 2
From: .watto .


Hi John,

Quote "3. Not my field of expertise, I suspect a super fund cannot share an asset in that way."

Rolf meant the super area, as he is a rather good independent mortgage broker.

Check him out here

http://www.asapfinancial.com.au

Also Rolf my tax returns should be ready this week fingers crossed!!!

Cheers
Watto
 
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Reply: 3
From: Dale Gatherum-Goss


Hi John! (Hi Rolf!)

No, your superannuation fund cannot allow it's assets to be used as security for debt and therefore you cannot do this at all.

Sorry.

Dale
 
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Reply: 3.1
From: Anony Mouse


John
An interesting post.
It resonated with me because I was in a similar situation a couple of years ago, although not the same.
I renovated my own home,then moved on to a new PPOR using a loan secured on the first home and the new home.
I wanted to have a big loan on the first home so as to claim interest against the rent.
Boy did I find myself in it!!.
The interest was disallowed by the tax office, as it was considered of a personal nature. So I had hardly any costs to offset
my rent as the house was fully renovated, before tenants moved in.
I hounded everyone to find a way out of this dilemma, but there wasn't any.
In the end I had to sell a house that I had grown attached to, and did not want to sell.
I still look at that place and wonder what might have been, as if has appreciated a lot in recent times.
In regards to the LOC Rolf has answered that very well.
On the DYI super, you are precluded from investing in your family home, and also from borrowing.
However you can invest in your place of business.
I wonder if a property in the process of renovation as an IP can be classified as a place of business?

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
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Sim

Administrator
Reply: 3.1.1
From: Sim' Hampel


On 3/4/02 8:53:00 AM, Anony Mouse wrote:
>
>I wonder if a property in the
>process of renovation as an IP
>can be classified as a place
>of business?

Hmm... interesting point.

We know that if you are running a business of renovating property for profit, this allows you all sorts of extra flexibility, tax wise.

So the argument is, if we are running a business where we are renovating a property, so this is where we spend most of our time... does this allow us to nominate that property as our "place of business" ?

Do tradespeople have a "place of business" ? Is the house they are working on deemed to be their place of business ? I doubt it.

I would suggest that the property is not so much a "place of business", as the "subject" of our current efforts. I would guess that the ATO would like to see some type of permanancy in the actual location of our business, and a property which is currently under renovation, which is assumed to be complete at some stage, is not exactly a permanent address.

Ask the question a different way perhaps... if we have a business (easily identifiable such as a shop/office/work area/etc), and there is an attached residence where we live, is this still allowed for investment by your super fund ?

How can we move the fuzzy grey line so that the ATO is less likely to complain about it ?

sim.gif
 
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Reply: 3.1.1.1
From: Mark Laszczuk


I'm just guessing, but I'd say that the ATO would consider a tradesperson's 'place of business' their home address or whatever address that the business was centrally located at ie: a workshed or something.

Mark
'no hat, some cattle'
 
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