How useful is a portfolio (all in one) loan?

[Jazza]

Hi everyone,

I'm hoping to purchase 2x IP's by the end of 2010 and I'm just wondering what the pros & cons of a 'portfolio' loan is and if I need one or if my current split P&I PPOR / LOC Investment loan for deposits and costs split loan is simpler or more suitable for multiple properties I intend to hold.

I understand what you can do with a portfolio loan i.e. a primary P&I account and multiple extra separate loans for IP's, car, shares etc and the cashflows involved but I'm not sure if having multiple sub-loans like this just makes accounting messier or easier? The $ amounts will be no different just the number of sub loans that I use/don't use.

I can keep my current P&I PPOR split and convert it to a personal LOC and continue to pay it down but redraw for living expenses and a car loan as/when required and use the Investment LOC for IP deposits (as I originally intended)...

• Is this single investment LOC loan too messy from my accountants side?
  
• Or is this easier as all outgoing expenses and deposits are tracked in the one LOC loan statement?
  
• Does this then get messy in the Investment LOC if I use it for purchasing shares as well?
  
• What benefit would I get from going with a portfolio LOC vs PPOR/IP split LOC?

I plan to buy 5+ IP's in the next 5 years using whatever structure I go with this year as my base.

I'd value input from those with multiple properties as to what they find works for them? Likewise for MB's who see this stuff day to day.

Thanks in advance.

Jazza

 

[Ridin-High]

Long story short, Don't use portfolio loan

Regards,

RH

 

[Jazza]

because...





(if I knew I wouldn't ask )

 

[Dazz]

Short story real long like....I've inserted myself into you for ease.

• Is this single investment LOC loan too messy from my accountants side?
  
  Nah, I've checked and she's OK with it. Bit more time involved and will charge you a heap more, but she's cool with that.
  
• Or is this easier as all outgoing expenses and deposits are tracked in the one LOC loan statement?
  
  Better to have them smeared all over the place over several accounts. That's what the first 3 weeks of July is givent o you for.
  
• Does this then get messy in the Investment LOC if I use it for purchasing shares as well?
  
  You're not a clean freak are ya ?? What's this aversion to mess about ?? Purchasing shares is done with a click of a mouse. The mouse will not make a mess.
  
• What benefit would I get from going with a portfolio LOC vs PPOR/IP split LOC?
  
  Less keys involved, and that is a blessing for all concerned. Ask any pizza delivery lady.

 

[Jazza]

Ah... the penny drops.








You can now buy 'forum kudos' with frequent flyer points....

 

[Rooster]

The downside of the 'Portfolio Package' is that it cross collaterises all your loans together.

Not a problem when you are starting out, but can become complicated in the future.

I'm on a Portfolio pack with NAB.

It is very easy to operate and not at all messy for your accountant. Each sub account is it's own entity and as such, you can keep your shares account separate from each of your IP's.

In essence you could have:

Sub Account 1: IP 1
Sub Account 2: IP 2
Sub Account 3 : PPOR
Sub Account 4 : Shares
Sub Account 5: Holiday.

The portfolio pack allows you to keep each loan separate, but secured by all your properties together.

I always wondered about when the time came to 'extract' a loan from the package that it may become messy.

This hasn't proved to be a problem and is obviously a lot easier if the LVR remains at or below 80%.

I've only ever attempted one loan at a time, so some brokers may give advice on different scenarios that may occur if extracting multiple securities.

Going forward now, i wouldn't use the portfolio facility and prefer to shop the loans about now that my base is in place.

Cheers

Rooster

 

[Rolf Latham]

Portfolio style product in our office has one primary use

Debt recycling and thats it

If you dont debt recycle, the slightly increased cost of LOC product, the possible Cross coll, the repayable on demand clause with some of them etc , makes a term loan separately secured to each property more attractive

ta
rolf

 

[Jazza]

Thanks Rooster and Rolf. I appreciate the helpful feedback.


That means the good news is that I don't have to refinance now and I can get started sooner.

Cheers.

 

[travelbug]

The downside of the 'Portfolio Package' is that it cross collaterises all your loans together.
The portfolio pack allows you to keep each loan separate, but secured by all your properties together.

They are not necessarily crossed or secured by all properties.

 

[Rooster]

They are not necessarily crossed or secured by all properties.

The portfolio package is essentially one big line of credit, with the ability to split into sub-accounts, that is secured against your properties.

The limit of that LOC is based on the security that you provide.

How are they not necessarily secured by all your properties?

Cheers

Rooster