Hi everyone,
I am trying to understand what the basic setup for paying IP expenses should look like. At the minute, I have 3 accounts with my bank:
1. Personal Savings account (offset for PPOR loan)
2. PPOR loan account
3. IP loan account
So for the people that don't use a LOC to pay the IP expenses, do you just pay for everything, including the IP interest and other expenses, out of the Personal Savings account? As in:
1. Salary goes in to Personal Savings account.
2. Rent from IP goes in to Personal Savings account.
3. P&I payment for PPOR comes out of Personal Savings account and goes into PPOR loan account.
4. Interest-only payment for IP comes out of Personal savings account and goes into IP loan account.
5. Any other IP-related expenses such as PM fees, rates etc get paid out of the Personal Savings account.
Now this doesn't appear to align with what I keep reading about ensuring that your personal funds are kept separate from your investment funds so that you don't lose any tax deductibility as far as the ATO is concerned.
But for the IP expenses, such as paying the PM fees, or the council rates, how else can I pay for them given that there is a shortfall between the IP rental income and the total IP expenses each month?
Even if I put the IP rental income into a different account to my Personal Savings account, it wouldn't be enough to cover the loan interest, the PM fees, the council rates etc, so how do I avoid mixing personal and investment funds altogether? Also, isn't the aim to have the IP rental income going into my PPOR offset account to be reducing my non-deductible debt as quickly as possible? If it's sitting in an account and not offsetting the PPOR interest, isn't it less efficient?
I am also following the "Paying IP expenses from LOC" thread, but to be honest I am not understanding it and think it's too advanced for me at this stage, and there seems to be a number of people that don't have a LOC for their IP, so I'm wondering what the basic/vanilla set-up for most people is?
Thanks in advance for any clarification!
I am trying to understand what the basic setup for paying IP expenses should look like. At the minute, I have 3 accounts with my bank:
1. Personal Savings account (offset for PPOR loan)
2. PPOR loan account
3. IP loan account
So for the people that don't use a LOC to pay the IP expenses, do you just pay for everything, including the IP interest and other expenses, out of the Personal Savings account? As in:
1. Salary goes in to Personal Savings account.
2. Rent from IP goes in to Personal Savings account.
3. P&I payment for PPOR comes out of Personal Savings account and goes into PPOR loan account.
4. Interest-only payment for IP comes out of Personal savings account and goes into IP loan account.
5. Any other IP-related expenses such as PM fees, rates etc get paid out of the Personal Savings account.
Now this doesn't appear to align with what I keep reading about ensuring that your personal funds are kept separate from your investment funds so that you don't lose any tax deductibility as far as the ATO is concerned.
But for the IP expenses, such as paying the PM fees, or the council rates, how else can I pay for them given that there is a shortfall between the IP rental income and the total IP expenses each month?
Even if I put the IP rental income into a different account to my Personal Savings account, it wouldn't be enough to cover the loan interest, the PM fees, the council rates etc, so how do I avoid mixing personal and investment funds altogether? Also, isn't the aim to have the IP rental income going into my PPOR offset account to be reducing my non-deductible debt as quickly as possible? If it's sitting in an account and not offsetting the PPOR interest, isn't it less efficient?
I am also following the "Paying IP expenses from LOC" thread, but to be honest I am not understanding it and think it's too advanced for me at this stage, and there seems to be a number of people that don't have a LOC for their IP, so I'm wondering what the basic/vanilla set-up for most people is?
Thanks in advance for any clarification!