Deposit using Equity in Private Property to Purchase IP

[Annett]

Hello and happy new year to you all.

Case:
(1) Deposit coming from equity in own home using Line of Credit at BNZ
(2) Remainder of borrowing coming from the National bank which holds security over IP which will go under the name of the LAQC
(3) LAQC exists for IP and tax reporting/recording

Questions:
If you are using the equity in your own home (via Line Of Credit) for a deposit on an investment property, how do you seperate this amount and the interest related to it for tax deductiblilty purposes?

Do I need to set up a bank account with either BNZ or National Bank in the name of the LAQC where the deposit from LOC gets redirected before paying out deposit?


Your comments would be appreciated.

regards
Annett

[drelly]

Iit's what the borrowing is for rather than what the borrowing is from that determines deductibility. However, don't go and use a LOC for both an IP and personal use. Your accountant would strangle you. It's one or the other.

[Simon999]

Another thought is to get the LOC split into two - use one portion for personal use and the other for Property investing.
Another thought is to use the equity in your own home as security over the investment property and borrow the total purchase price of the rental property in one laon.

[lissie]

Dont borrow 100% with NB because they will want cross-collat. Split your existing flexi into 2 separate accounts - one for IP deposits one for your personal use. It should take just a phone call as you are not asking for anymore credit. Then you just right a check to your lawyers trust a/c prior to settlement

[toby]

I'd avoid using an R/C on your own home which you put your own house payments etc into.
It gets very,very ugly at tax time and is mighty difficult to follow over time.
Best to take a fixed loan unless you are putting the money back in your R/C inside of ninety days.
Lend the cash to your company never cross collateralise.
One method is borrow 100% of Purch P put 20% cash in a 90 day interest account use that as security then get removed after revaluation and title is through. Ofcourse need to buy at 80%+ of reg val.
Depends on the lender and your rapport

[Roger_2004]

What's R/C?

[Josko]

RC is Revolving Credit, correct me if i am wrong.

[AustinWong]

Talking about deposits using the home's equity.

Would I be safer then to perhaps draw the money down against my existing loan for teh deposit and then take out a seperate mortgage altogether?

This way I will have still the same amount to pay but will not have my own house at risk?

Or will it make no real difference at the day?

Lawrence

[drelly]

*smacks Austin upside the head*

Just get out there and look for something good to buy!

[Marcus]

*smacks Austin upside the head*

Just get out there and look for something good to buy!

[toby]

Yep. I would reccommend that you do not use your own home as security.
Borrow the money from your own home then lend it to your LAQC.
The cleaner things are the safer and simpler it is to.
Never underestimate the lenders ability to take you round the back of the sheds and give you one.
CYA all the way.

[Josko]

Yep. I would reccommend that you do not use your own home as security.
Borrow the money from your own home then lend it to your LAQC.
The cleaner things are the safer and simpler it is to.
Never underestimate the lenders ability to take you round the back of the sheds and give you one.
CYA all the way.

Please forgive this question, lend me your brains.

If you lend the money for a deposit to the LAQC, it then owes the money to you. Any implications on tax, depreciation clawbacks, there must be an added benefit there somehow?

[Annett]

Thank you for your contributions and knowledge, they have been very useful to me over the last few days when dealing with the bank and its all become alot clearer to me now, I think! the next question will tell or not.

Toby??? When you say

Borrow the money from your own home then lend it to your LAQC.

Is this another way of saying "placing a capital injection into the IP company"

Does this make sense then?.

Assume the 80% is being mortgaged with bank no.2

For the deposit towards the IP at bank no.1 take a seperate mortgage out in the name of the IP company (however this will be secured against my private home) so this ain't so great

or do I just write a cheque out of my personal LOC and deposit
it into a bank account in the name of the IP company at either bank no.1 or bank no.2. Then draw a cheque for the deposit amount out of the IP company bank account to the vendors solicitor before settlement date.

I can then seperate this amount forwarded to the IP company bank account by taking out a seperate loan in my own name which is secured against private home. This then seperates the amount of the deposit, repayments and interest charged. As far as accounting records are concerned would this then be the loan to the IP company or the capital injection??

Sound close or in range

thanks again

[AustinWong]

Hi Ivi,

Would lend you some brains but Drelly smacked em all out....

I am looking looking look but still no house.


May have a couple of leads though.
:P

[Josko]

Would lend you some brains but Drelly smacked em all out....

I am looking looking look but still no house.

No worries AustinWong, its there and youll find it, just dont stop looking.

Im getting a bit smacked out my self, (by the apartment negative talk) ....luckily there is only three apartment blocks in the area I am looking and no great chance for any more.