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Converting IP to PPOR

Discussion in 'Investing Strategies' started by Liverpool St, 22nd Jul, 2007.

  1. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
    Posts:
    96
    Location:
    Sydney
    I read a post on SS that is similiar to my situation in that I have an IP that I eventually want to shift into and make my PPOR. It is set up inside an HDT (IO with an Offset). If I borrow equity against other IP's and put it into the offset link up, together with some redraw from my margin loan into the offset link up, it will shift the debt, then making the IP (future PPOR) unencumbered. If then I redraw from the offset and place it into a Navra fund, can I then shift into the IP and claim the borrowings???

    Thank you

    Liverpool St............
     
  2. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
    Posts:
    520
    Location:
    Newcastle
    I must admit to having some difficulty understanding your scenario.

    Two simple rules which should make it clearer for you.

    1. The purpose of the borrwed funds makes the loan deductible/nondeductible. Not the property it was borrowed against.

    2. Never mix deductible and nondeductible debt. Have seperate loans or at least seperate loan splits to clearly differentiate which funds are deductible.

    If you do mix the loans then you can't unmix them until the whole loan is repaid.

    ie You have a $100K LOC. You buy $90K worth of Navra funds and spend $10K on that Jetski your wife always wanted you to have. Your loan is 90% deductible.

    You inherit $10K and pay it into the LOC. You cannot say that you have paid out the Jetski - you must say that you have paid $9K towards the Navra units and $1K into the Jetski amount ie 90% and 10% as per the original borrowings. Unless the LOC had actual splits ie split 1 - Navra and split 2 Jetski. In this case you can pay out split 2.

    Hope this helps you solve your question.
     
  3. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
    Posts:
    96
    Location:
    Sydney
    IP/PPOR

    I'm a bit slow I think....EOY accountancy coming up, I'll talk to my accountant

    Thanks

    Liverpool St.