Lines Of Credit

[WASP]

If, as your IP values increase, you access equity and establish Lines Of Credit, and use your first Line Of Credit to assist with paying any shortfall, renovations, as well as top up that Line Of Credit with rental income etc etc

Should you put any additional Lines Of Credit into the first one?

Or keep a new Line of Credit separate for each property?

 

[D.T.]

If security is going to be the same property and purpose of funds is going to remain the same and said property has increased in value, may as well increase/extend the existing facility.

Each property can have one though as it increases in value, get a loan or loc against that increased value and use it to renovate existing property or deposit on additional properties.

 

[Terry_w]

If, as your IP values increase, you access equity and establish Lines Of Credit, and use your first Line Of Credit to assist with paying any shortfall, renovations, as well as top up that Line Of Credit with rental income etc etc

Should you put any additional Lines Of Credit into the first one?

Or keep a new Line of Credit separate for each property?

Do you mean open an additional LOC?
No real need to keep things separate if same borrower and owner for all property and all used for investment purposes.

 

[Rolf Latham]

some accountants have paper envelope mentality when it comes to aopportioning deductibility.

That means for any separate tax deductible purpose, they will demand a separate loan split.

Using xcel for apportionment isntin man a tax agents /accountants vocab.

Thats neither good nor bad, more like find out what your tax adviser wants,and provide it

ta
rolf

 

[WASP]

Do you mean open an additional LOC?
No real need to keep things separate if same borrower and owner for all property and all used for investment purposes.

Different lenders and properties, but Lines of Credit on each

Your first Investment Property and Line of Credit is where all your loan repayments come from and rental income go to

Should new Lines of Credit top up that account, stay against the Investment Property it what established against, or it really doesn't matter?

 

[Rolf Latham]

Should new Lines of Credit top up that account, stay against the Investment Property it what established against, or it really doesn't matter?

Security generally doesnt determine tax deductability.

Some clients and accts like everything neatly wrapped.

Thats fine if you have 2 or 3 ips, but becomes problematic whenyour numbers of IPs grow unless you have everything crossed.

Ohhh look, another benefit of xcoll

ta
rolf

 

[Terry_w]

Your first Investment Property and Line of Credit is where all your loan repayments come from and rental income go to

You should seek tax advice about this. Potentially dangerous.

 

[redwing]

You should seek tax advice about this. Potentially dangerous.

What a better process Terry for those with multiple IP's, LOC's that are topped up to access equity etc?

 

[Terry_w]

My concern was with the paying of the loan by borrowing from a LOC. ie capitalising interest. Generally ok, but there could be problems.

If you have multiple properties with equity then ideally you would have a LOC on each property to access the equity. Muliple LOCs. If you had one big LOC you would need to cross collateralise.

 

[WASP]

Thanks DT, Terry and Rolf

We have several properties but all interest payments come from one Line Of Credit

Rents are paid to either a Trust or Property Account and then transferred to the primary Line Of Credit that all interest payment come out of

We recently established 2 x Lines Of Credit against 2 properties that have increased in value and have yet to draw down on them, to be honest as they are with RAMS I'm not even sure how to draw down on them (no credit or debit card came with it)

The Lines of Credit were established as Safety Buffers (Thanks Skater), though we may need to do a renovation on a Sydney property that is looking very tired.

 

[Terry_w]

Thanks DT, Terry and Rolf

We have several properties but all interest payments come from one Line Of Credit

Rents are paid to either a Trust or Property Account and then transferred to the primary Line Of Credit that all interest payment come out of

We recently established 2 x Lines Of Credit against 2 properties that have increased in value and have yet to draw down on them, to be honest as they are with RAMS I'm not even sure how to draw down on them (no credit or debit card came with it)

The Lines of Credit were established as Safety Buffers (Thanks Skater), though we may need to do a renovation on a Sydney property that is looking very tired.

Hope you keep trust property separate from your personal property.

 

[Marty McDonald]

I would not lump all together like that in one LOC as your payments in and the payments out surely muddy the waters on which property gets what proportion of the interest charged to the LOC for each month. A transaction account or offset account would be better to manage this as opposed to a loan account itself.

 

[WASP]

Hope you keep trust property separate from your personal property.

HDTrust property income goes into the pty ltd companies account, this then can go to the line of credit where expenses are paid from?

 

[Terry_w]

HDTrust property income goes into the pty ltd companies account, this then can go to the line of credit where expenses are paid from?

Hope you mean the account of the trust. Whose name is the LOC in? Trustee shouldn't be transfer money to personal accounts unless a distribution is made or a loan is made and the deed allows for this. If it is a Hybrid Discretionary trust then you will have other issues as the income must go to the unit holder to get a deduction in most cases. If the LOC is in the name of the unit holder then the above may be ok and it can all be accounted for at the end of the year.

 

[WASP]

Yes,sorry pty ltd is trustee

 

[onion33]

Question: Is it best to pay the LOC interest or let it accumulate in the LOC?
I think I?d prefer to pay the interest as I go, otherwise I imagine the LOC will keep growing out of control.

Thoughts?

 

[Terry_w]

Question: Is it best to pay the LOC interest or let it accumulate in the LOC?
I think I?d prefer to pay the interest as I go, otherwise I imagine the LOC will keep growing out of control.

Thoughts?

from a tax POV it depends on why you are capitalising the LOC. Best not to do so without specific advice.

 

[onion33]

I've paid off my PPOR so I don't have 'immediate' need for the money. I think I will pay it each month and not let it accumulate.