first new IP

Hi,

i am purchasing a new IP for the first time and i ready appreciate some advise on my account setup.

Using my PPOR, i have setup an Line of Credit (LOC)from the CBA.
IP cost 300k. I will be paying 80% from a standard var (SVR)home loan from CBA and the remaining + stamp duty etc from the LOC. paying only interest only. Any thought on this?

I will be making a first payment on the deposit using the LOC

1. the interest that are charging from the LOC and SVR, should these interests be charged into a seperate account or charge straight into the LOC and SVC home loan respectively? my experiences that you can shared? I will be paying these off as the interest are charged.

2. What happens when the interest of the LOC are charged back to the LOC and will it make the tax accountant problematic at the end of the year? it will be interest on interest?

i am trying to get the structure right. thank for reading. cheers.
 
Congrats on your first IP. I'll have a go at answering your questions but your broker should be able to answer these for you. If not, maybe its best to seek advice from, and perhaps use, one of the knowledgeable brokers on this forum.

Hi,

i am purchasing a new IP for the first time and i ready appreciate some advise on my account setup.

Using my PPOR, i have setup an Line of Credit (LOC)from the CBA.
IP cost 300k. I will be paying 80% from a standard var (SVR)home loan from CBA and the remaining + stamp duty etc from the LOC. paying only interest only. Any thought on this?

Sounds fine, it's normal practice to use funds from an LOC towards a deposit for an IP. If it was me I'd only use a 10% deposit and try to spread the LOC over deposits for two IPs.

I will be making a first payment on the deposit using the LOC

1. the interest that are charging from the LOC and SVR, should these interests be charged into a seperate account or charge straight into the LOC and SVC home loan respectively? my experiences that you can shared? I will be paying these off as the interest are charged.

Your LOC and IP Loan will be set up as separate accounts. The interest repayments for the IP Loan will come out of a nominated account. The interest repayments for your LOC will be deducted from the LOC (usually on a monthly basis - depends on what you nominate). You can then transfer money into your LOC (on a monthly basis) to cover the interest repayment. This is how mine is setup, you might set yours up differently.

2. What happens when the interest of the LOC are charged back to the LOC and will it make the tax accountant problematic at the end of the year? it will be interest on interest?

As long as your using your LOC for investment purposes, all interest repayments will be tax deductible and should be easy enough for your accountant to work out.

i am trying to get the structure right. thank for reading. cheers.
 
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That sounds OK.
What I do is have all the interest on loans and all other outgoings (rates, strata etc) taken out of my LOC. All the rents go into my LOC. That way the accountant just needs to look at the one statement for everything.

Don't worry about the interest on interest.
 
thanks mortza and travel bug.

LOC will be use for investment purposes only. i am intending to have all expenses to come out from my LOC. and have the rental income to go into the LOC as well.

my LOC will hold

1. 20% of the value of the IP.
2. all interests payable to the full loan on the IP (LOC interest and IP loan interest)
3. stamp duty
4. LMI if applicable. - i know it is not for this but i will have LMI on my next IP. :)
5. rates, fees, purchases to furnish my IP.
6. i will put rental income in too.

cheers,
Scott
 
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