My dad has a house he's been diligently paying off the last 15 years. He's got around $350k in equity in this house (with $80k left on his mortgage). He was looking to buy a second investment property with the way the markets are right now. He has a HELOC of whch he's only using around $8k.
I was thinking of suggesting the Smith Manoeuvre to him. Specifically, to pay for the investment entirely out of the HELOC. If I understand the Smith Manoeuvre this is the best way for him to go (as opposed to borrowing from HELOC only enough for a downpayment and getting a second mortgage). Is that right?
One or two (or three) more questions:
-How is the income generated from an investment property taxed? At marginal rate?
-Do you need to incorporate or get a business number to be a landlord and write-off expenses?
-You can only write-off the HELOC interest from the income generated from the property.. correct?
I was thinking of suggesting the Smith Manoeuvre to him. Specifically, to pay for the investment entirely out of the HELOC. If I understand the Smith Manoeuvre this is the best way for him to go (as opposed to borrowing from HELOC only enough for a downpayment and getting a second mortgage). Is that right?
One or two (or three) more questions:
-How is the income generated from an investment property taxed? At marginal rate?
-Do you need to incorporate or get a business number to be a landlord and write-off expenses?
-You can only write-off the HELOC interest from the income generated from the property.. correct?