Another IP Structure Thread

[albanga]

Hi All,
Sorry to keep banging on about structures but I do believe it's one of the most important aspects to property and likely the biggest most get wrong.

So this question is regarding the best structure in the instance you own 1 single IP. This means no PPOR and no Split/LOC facility (we can explore those later).

So say I have a single IP, Loan IO, 200k with offset.
Would I be correct in saying all pay and rent goes into offset and all interest payments are deducted from offset along with all IP Expenses?
If so then I am guessing this is not the absolute best structure because you cannot claim the interest amount on the expenses because it's not borrowed money?

 

[Jess Peletier]

It depends.

If you are on the highest tax bracket and your partner earns no income, and the IP is in your name only, having a CC for all IP expenses and (separate) CC for personal expenses and all savings/cash in high interest acct in partners name for the whole month can be more tax effective than using an offset against deductible income.

Depends on the scenario which is why specific advice is a good idea.

 

[Terry_w]

So say I have a single IP, Loan IO, 200k with offset.
Would I be correct in saying all pay and rent goes into offset and all interest payments are deducted from offset along with all IP Expenses?
If so then I am guessing this is not the absolute best structure because you cannot claim the interest amount on the expenses because it's not borrowed money?

Yes.
Yes - best because what is the alternative? (unless you have a related entity you could borrow from and refinance this later).

 

[Paul@PFI]

Hi All,
Sorry to keep banging on about structures but I do believe it's one of the most important aspects to property and likely the biggest most get wrong.

So this question is regarding the best structure in the instance you own 1 single IP. This means no PPOR and no Split/LOC facility (we can explore those later).

So say I have a single IP, Loan IO, 200k with offset.
Would I be correct in saying all pay and rent goes into offset and all interest payments are deducted from offset along with all IP Expenses?
If so then I am guessing this is not the absolute best structure because you cannot claim the interest amount on the expenses because it's not borrowed money?

If you don't have a PPOR loan then the offset may be a trivial issue with limited benefit if its against the IP.

A offset on a IP is a fairly futile exercise for some strategies. It reduces deductible interest.

Owning property personally is sometimes a foolish option and in other instances its a very sensible option.

Claiming increased interest deductions by capitalising expenses can be a mugs game. For every $10K of costs the extra interest would be $450 and a increased refund maybe $165. Many investors prefer to grow equity by maintaining a loan and allowing value to grow. If loan grows with value you are just spending the equity chasing a $165 a year benefit for every $10K....That's a terrible return.