Block of Units - 1 loan, or 4?

Hi all,

If you were to purchase a block of units, which are on one title, would it be more beneficial to have 1 loan for all properties, or separate loans for each property?

My preference is to have a separate loan for each property as they are indiviaul properties after all. The tenancies will be different, rental amount may be different, expenses will be etc., so keeping them separate would be easier from an accounting point of view, I would have thought.

Just after some feedback from those who already own such investments to see how they went.

Ta,
Andrew.
 
1 title so no point in a separate loan. However if you were to be living in one of them then it could be beneficial perhaps.

If you do sub divide then it would be beneficial from a tax and asset protection POV to have separate loans.
 
In regards to the accounting comment, one of my props is a pair of duplexes on one title with 1 loan, separate tenant leases.

Just halved the ingoing expenses for each, not too much trouble. Everything else is fairly separate already since there's different rent coming in , separate rates notices, separate water, etc. But even if there wasn't, ya just divvy them up. It's not a big deal.
 
My preference is to have a separate loan for each property as they are indiviaul properties after all. The tenancies will be different, rental amount may be different, expenses will be etc., so keeping them separate would be easier from an accounting point of view, I would have thought.

Technically they're not individual properties. By being on a single title, they're a single property. By the logic above, a landlord who leases a house by the room would have a property per room.

You can have as many loan splits as you like, but this deal has to be done in a single loan application.

Keeping them separate doesn't actually make it easier from an accounting point of view either. All expenses and income will be pooled because it's all across a single title. Having multiple splits will make it more complex by way of extra paperwork.

The only real argument for separate splits is if one of the units is used for non-deductible purposes as Jamie has pointed out, or if you want components of variable and fixed rates. Any other arguments are really just how you perceive it.
 
I would personally have 4 splits in case you strata title the block down the track. Even though its more loan accounts I think its easier to manage.
 
I would personally have 4 splits in case you strata title the block down the track. Even though its more loan accounts I think its easier to manage.

Thanks guys for your feedback. Indeed strata titling them down the track is a possibility as a potential for extra cash upon sale, or to stagger sales as such. I guess if this were to occur you could then create an extra bank account in such a situation, but keep as one until then?

I do see the point that they're effectively one property due to the title. I guess from my own excel spreadsheet point of view its more a case of how I would want to handle it for my own personal viewing, whether to create one spreadsheet that encompasses all four, or have four separate ones. In hindsight, perhaps it would be easier just to call it one property with multiple leases ....

Thanks for your feedback!
 
If you did strata it later you could split the loan at this point in time. Strata will mean rejigging the loan anyway as discharge and new mortgages needed.
 
Dividing up the loans now probably won't do you any favours if you strata the properties. Right now you'll be assigning perhaps 25% to each unit, but that's not necessarily how it will actually play out.

Each unit will possibly have a different value depending on its specific location and layout. When the property is strata titled it would be best to get a quantity surveyors report done, gather all your paperwork and have an in depth discussion with your accountant to figure out what value and tax implications to assign to each unit. At that point you can restructure the loan to each unit as appropriate. It's not a straight forward process.
 
Dividing up the loans now probably won't do you any favours if you strata the properties. Right now you'll be assigning perhaps 25% to each unit, but that's not necessarily how it will actually play out.

Each unit will possibly have a different value depending on its specific location and layout. When the property is strata titled it would be best to get a quantity surveyors report done, gather all your paperwork and have an in depth discussion with your accountant to figure out what value and tax implications to assign to each unit. At that point you can restructure the loan to each unit as appropriate. It's not a straight forward process.

Excellent point Peter!
 
Like the others have said, it's one property.
Keeping them separate doesn't actually make it easier from an accounting point of view either. All expenses and income will be pooled because it's all across a single title. Having multiple splits will make it more complex by way of extra paperwork.
This!!

I have a block on one title. My accountant likes me to use MYOB, which I HATE, but do it anyway.

Anyway....I have job numbers (splits) for each unit, the shed, which is rented separately, and a general one to cover stuff that is not unit specific, kind of like what the bodycorp would pay, if it were a strata block.

Grrrr.........
 
No benefit in having multiple splits as has been mentioned if you strata title the block the loans will be re-written. The loan split could then be calculated depending on the Lot allocation on the Strata Plan or the floor area.

I have just sold a block of 18 units which i owned without mortgage but can you imagine trying to get the Bank to split it into 18 separate sub loans.

Cheers
 
Thanks guys for your responses, and yes, all makes sense!

I'd be curious to know how many people on this forum actually own unit blocks in totality?

Andrew.
 
Will depend i have had one of the blocks for 15 years and the for 13 years.

Both options are under consideration and so is strata titling them and selling of a couple of units by Vendor Finance.

Cheers
 
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