Subdivision, CGT, Reducing PPOR Debt...

[criz2181]

Hi there, I'm new here but loving the site. We have the opportunity to pay off our homeloan (with loan from parents). We currently have one IP (negatively geared) and are looking to purchase another potentially one with an existing house(which we hope to retain) and room to subdivide the rear/front. We hope to sell this new vacant block to repay our parents whilst still maintaining the rental at the front. My questions are:

1) With the loan from parents, would it be best to pay off our homeloan as its non-tax dedutible then convert this homeloan to an investment loan?
2) If we sell of the newly subdivided block as a means to repay our parents' loan, what CGT implications will this have?
3) I guess overall, would this be the best avenue to pursue with the loan from parents?

Any help would be most appreciated!

 

[criz2181]

*bump* anyone out there who can offer some advice? anyone?

 

[Ausprop]

1) With the loan from parents, would it be best to pay off our homeloan as its non-tax dedutible then convert this homeloan to an investment loan?

maybe I am tired but I don't think it's clear... is the loan from the parents and the home loan the same thing?

 

[criz2181]

maybe I am tired but I don't think it's clear... is the loan from the parents and the home loan the same thing?

Hi there...sorry 'bout that. We have a P&I loan on our PPOR, my parents are willing to lend me additional funds. I thought to maximise our situation we ought to pay off our PPOR loan with these additional funds so as to eradicate the non-tax deductible debt.

I thought we could then focus on attaining more investment properties. The part about purchasing an investment property with the potential to subdivide was simply a means to repay the loan from my parents by selling off the vacant block...

Am I making sense?

 

[josko]

Welcome crizetc123 (Couldn't you have picked an easier name to remember?)

Yes.

Getting rid of your non tax-deductable debt is a good idea.

As you mention, a new loan for Investment purposes is ideal. Is there any equity left in your IP to draw more funds from that before touching your PPOR? Do you have any exit fees on your PPOR Loan?

Don't forget to hold the property for more than 12 months before you sell the land to gain the 50% CGT exemption.

Regards JO

 

[criz2181]

Welcome crizetc123 (Couldn't you have picked an easier name to remember?)

Yes.

Getting rid of your non tax-deductable debt is a good idea.

As you mention, a new loan for Investment purposes is ideal. Is there any equity left in your IP to draw more funds from that before touching your PPOR? Do you have any exit fees on your PPOR Loan?

Don't forget to hold the property for more than 12 months before you sell the land to gain the 50% CGT exemption.

Regards JO

How odd I posted a reply to this yesterday. Anyhow, thanks for your reply Jo

I've heard from a Banker friend that technically as we're not discharging our loan, just converting it to an investment loan we should not incur exit fees. I don't think we've built enough equity in our IP (we only bought it earlier this year).

Yes will definately hold for more than 12 months before selling the vacant block. Incidentally, do they count the 12months from when you bought the 'un-subdivided' block or are you are meant to hold onto the new subdivided block on its own new title for 12months?

Cheers