Structuring first investment
Question from Lynda updated on 17th October 2016:
We are looking at purchasing our first investment property. We are mortgage free on our home but have been told by the bank that we need to put our home up as equity for the rental property. I have also heard that if you do this then you cannot get any tax breaks on the rental.
But we are very green with investment property and not sure how to structure our new purchase. Who should we talk to? What can we do ourselves? We would like to do this before we purchase the property in case we put it in the wrong name.
Our expert Kris Pedersen responded:
Ideally, I would recommend raising the deposit funds against your home through one lender and then utilising a second funder to provide the remaining funds required to complete the purchase. As all of the funds are being used to purchase the rental property there should be no issues here in regards to claiming interest costs.
However, do get a good property accountant on your team to assist in providing advice. If you use the above strategy you would then focus on repaying the debt attached to your property first. So look to have the debt connected to the investment property on an interest only basis.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz