Structure

[zimby]

Howdy

We're looking at purchasing property number 4.
Property numbers 1,2,3 are all tenanted with IO repayments.
There is enough equity to draw down from property number 2 and property number 1 for property number 4 deposit, serviceability is good as well.
Only Problem is We've reached baby making time and the pressure to settle is increasing daily...
I suspect property number 4 will be a PPOR( this is also a tough one as property number 1 has had massive Capital gains and is currently deemed PPOR)
The Plan is to purchase next year, in the interim i'd like to get back into share trading( as its hard to keep still)
So my question is, whats the best way to structure this?
Current Broker has some idea's but thought it never hurts to get a second opinion.

Thanks Again!

 

[Shahin_Afarin]

Howdy

We're looking at purchasing property number 4.
Property numbers 1,2,3 are all tenanted with IO repayments.
There is enough equity to draw down from property number 2 and property number 1 for property number 4 deposit, serviceability is good as well.
Only Problem is We've reached baby making time and the pressure to settle is increasing daily...
I suspect property number 4 will be a PPOR( this is also a tough one as property number 1 has had massive Capital gains and is currently deemed PPOR)
The Plan is to purchase next year, in the interim i'd like to get back into share trading( as its hard to keep still)
So my question is, whats the best way to structure this?
Current Broker has some idea's but thought it never hurts to get a second opinion.

Thanks Again!

If you are doing the equity releases against the existing properties so use as a deposit for the purchase of either another IP or PPOR then ensure that the equity releases are a separate split and not a top up.

This ensures that there is no potential contamination of tax deductibility.

....and I think you have been on the forum long enough to know not to cross sec.

 

[Paul@PFI]

From a land tax and CGT view at any moment in time only one property can be a your PPOR.. Make sure its clearly recorded and documented for later information when preparing tax returns. Also if a property is acquired and from day one is your PPOR when it becomes a IP you need to value it.

If IP1 was always PPOR then its valued at market when you rent it out and the "massive" gain would be exempt. Thereafter any increase in value would be taxed if sold and eligible for 50% discount after year etc.

All the above should be documented and form part of your tax records. When and if you plan on selling specific advice to identify and exemptions, CGT calcs etc can be made using that information. Aim is to maximise whatever exemption may be available.

 

[Terry_w]

So my question is, whats the best way to structure this?
Current Broker has some idea's but thought it never hurts to get a second opinion.

Thanks Again!

Impossible to answer based on the above. What state?

From a credit point of view you would probably just want a standard set up - IO loan with 100% offset account at 80% LVR. Deposit and costs come from other separate loan splits secured on the other properties. Avoid LMI if you can as it won't be deductible if a PPOR. Live in it from day 1 if you can.

Ownership could be you or spouse or spouse and you - TIC equal shares, TIC uneven shares, JT. In many cases I favour one name over 2, but that will depend on the situation. Not good if you get it in her name and she has children from a previous marriage for example.

 

[Jamie M]

We've reached baby making time and the pressure to settle is increasing daily...

Consider what your income/expenses will look like when baby does arrive. Kids can be expensive - but having a parent not in the work force is a bigger hit on the families finances.

Cheers

Jamie

 

[zimby]

Consider what your income/expenses will look like when baby does arrive. Kids can be expensive - but having a parent not in the work force is a bigger hit on the families finances.

Cheers

Jamie

Thanks Jamie, Currently on Single Income so not hugely concerned.
We live pretty light and IO repayments are quite compatible to current rent for the area's we're looking at.

Shahin_Afarin - Indeed, have done topups in the past, but only for for Investment, so likely be a separate loan to release equity and keep clean for tax.

Paul - Do I need to get an onsite Val done on the property or will a desktop valuation suffice for the taxman when they calculate gains once the property turns IP? This has only happened recently ie 3 months, but have a desktop val from a week ago.

Terry - Cheers, have considered trust structures, but accountant advised that there would be more pain than gain at the moment, Will consider property in 1 name as wife(soon to be) will likely be stuck in the kitchen cooking all day and changing baby nappies

Pretty Excited for number 4, found out that less than 10 000 people in AUS have more than 7 properties so this is definitely short term goal, maybe I should be buying more cheaper properties, Lucky i'm not in NSW/VIC !