Managing ongoing finances for multiple properties

[Singo]

Here is a magic method.

Set up a LOC on your house (if you have the equity).
Using this LOC only for investment purposes you borrow to pay all IP associated expenses such as rates, insurance, repairs etc.
This frees up cash which can go into the offset on your PPOR or to pay off your PPOR.
All investment loans should be IO with no offsets yet.
All rents and other income such as wages, tax returns etc should go into the offset on your PPOR.

Terry, we rent now. So no PPOR loan.

One of our IPs have some equity. And all our IPs need some renovation. I am considering to set up a LOC against that IP and pay expenses of ?ll IPs through that LoC. Will this complicate tax calculations? (All loans and LoC in same ownership structure)

And if we change one of the IPs into PPOR in future, will there be any complications? We won't use LoC to pay for any PPoR related expenses.

 

[Terry_w]

Terry, we rent now. So no PPOR loan.

One of our IPs have some equity. And all our IPs need some renovation. I am considering to set up a LOC against that IP and pay expenses of ?ll IPs through that LoC. Will this complicate tax calculations? (All loans and LoC in same ownership structure)

And if we change one of the IPs into PPOR in future, will there be any complications? We won't use LoC to pay for any PPoR related expenses.

As long as your are no paying interest with LOC I can't see any issues, except this:

If one does become a PPOR any interest on money borrowed for this property would no longer be deductible. This would include money from a LOC. So if you had borrowed from the LOC for several properties you would have a mixed purpose loan and have to resolve that issue at that time - which can be done.

Check this with an unqualfied person over a bbq.

 

[Singo]

As long as your are no paying interest with LOC I can't see any issues, except this:

If one does become a PPOR any interest on money borrowed for this property would no longer be deductible. This would include money from a LOC. So if you had borrowed from the LOC for several properties you would have a mixed purpose loan and have to resolve that issue at that time - which can be done.

Check this with an unqualfied person over a bbq.

No, I won't pay interest through LoC.

So if one become PPOR, any Reno expenses related to that property should be adjusted and resolved, isn't it?

If we pay seasonal expenses only (council and water rates), will we have to adjust as well? I mean expenses incurred specifically for the period while the property was an IP.

 

[Terry_w]

No, I won't pay interest through LoC.

So if one become PPOR, any Reno expenses related to that property should be adjusted and resolved, isn't it?

If we pay seasonal expenses only (council and water rates), will we have to adjust as well? I mean expenses incurred specifically for the period while the property was an IP.

Any interest on money bororwed in relation to that property would no longer be deductible.

 

[Singo]

Thanks Terry.

 

[devank]

Set up a LOC on your house (if you have the equity).

What happens if you sell the house? Aren't you 'forced' to pay off the LOC? Does the deductibility disappear?

 

[Terry_w]

What happens if you sell the house? Aren't you 'forced' to pay off the LOC? Does the deductibility disappear?

Yes you could be forced to pay back the loan. But there are a few strategies to keep things open and retain deductibility. One is substitution of security other is refinancing with related party loans.