18 Jul 2016

And you lose your tax deductions?

You lose your tax deductions and if you pay any debt off it’s actually on a pro rata basis and it’s a real misery.

Keep your investment debt and your owner occupied debt separate. What you would do here normally is set up a line of credit here depending on your situation, and that you have say an extra amount just constitutes a little bit of a buffer.

If you have to go and buy something personal, for example the fridge breaks, or you have got to go overseas for some reason, that buffer is there for emergency purposes and the rest ($) is there for deposits on investment properties.

This way you keep your home separated completely from all your investment property. See a professional about trusts, that money out of that line of credit could be loaned or gifted to your trust, whichever way you wanted to do it, and then that used by the trust as your contribution into the next home.

This is probably more so applicable for businesses. If you’re using your equity in your house to go out and buy a laundromat for instance, there’s a higher risk profile with a business per se, and therefore you know you may have a higher risk profile overall and you don’t want your home exposed to that business.

SEE A PROFESSIONAL FOR ADVICE