Wicked plan Ricter!
One question, when you draw down the equity, you cannot then claim that extra amount you have drawn from the property as a tax deduction as it has not been used for investment purposes... is that right?
So from the $250k mortgage, in 10 years when you draw $250k equity, you can still only claim $250k mortgage as an expense.
Great question Melissa, but thats not going to be a problem.
Interest on funds borrowed for income producing purposes is tax deductible.
Interest on funds borrowed for lifestyle funding is not tax deductible.
CGA is a LOE (Living on Equity) strategy and as such you do not pay income tax in the first instance to write deductions off against.
With LOE you are already funding your lifestyle and existence without any need for tax relief which is your worst case scenario from a cash flow perspective anyway.
In other words, the interest on the loans used for living isn't tax deductible, however the growth in your portfolio is far greater.
Some times we as investors can become too focussed with whats tax deductible and whats not , that we lose sight of the forest for the trees.
LOE is a complete paradijm shift in thinking away from the conventional cash flow model most poor & middle class people learn from an early age and are accustomed to all of their lives, over to a capital based model that the rich / wealthy effectively utilise.
Food for thought.
Melissa I hope this helps.
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