Off-set accounts and setup.

[Comper100]

Hi all

Me and my partner are early into our property investing years and are currently just about to make some changes to our accounts.
At the moment we have 3 properties including our home and various bank accounts with banks different to our loan banks. We currently have a joint account in which we pay all our PPOR payments from like bills and loan repayments. This account is not an offset account. we also have an investment account that our rent payments go into and loan and expenses come out of. We transfer money to these accounts from our separate ones whenever we need to.
When we bought our first 2 properties our mortgage adviser didn't really set us up tax wise correctly as we used equity to buy the first IP, it wasn't separated as a single amount for tax purposes and was a bit of a mess, since then we have a new mortgage adviser who used to be a tax accountant so he has corrected a lot of the problems.

We have just had an application through today for a tenant for our PPOR as we plan on moving in with my partners parents for a year or more to help us along our journey.

No we have done that I think its a good idea to get rid of both our separate accounts, get an offset account in joint names for our PPOR with the same bank as our lender and another account(s) for the investments. Question is do we need an separate account for each IP or just one investment account for all?
I thought if we could reduce our 5 or 6 accounts to just 2 that would make like so much easier.
Also I have read that some people pay rents into there offset account for there homeloan too, but would that make tax time a pain?

The idea is to save like hell (ideally my partners wage) whilst with her parents (aren't I brave ) and use that to pay down the homeloan and to save up for a deposit on something else. We plan to set up a trust fund for any more properties as they are all in our own name at the mo

I know its a common problem but would be interested to hear what people have done...

Thanks

 

[wobbycarly]

*cuts out background info*
No we have done that I think its a good idea to get rid of both our separate accounts, get an offset account in joint names for our PPOR with the same bank as our lender and another account(s) for the investments. Question is do we need an separate account for each IP or just one investment account for all?

Getting an offset is a good idea. Separate accounts for IP is also a good idea as it will provide you flexibility in the case of a re-fi or sale.

I thought if we could reduce our 5 or 6 accounts to just 2 that would make like so much easier.
Also I have read that some people pay rents into there offset account for there homeloan too, but would that make tax time a pain?

No issues at tax time at all with offset. eg. Rents go into offset account at start of month. Interest for IP (and other) loans deducted from offset when due. No problem.

The idea is to save like hell (ideally my partners wage) whilst with her parents (aren't I brave ) and use that to pay down the homeloan and to save up for a deposit on something else. We plan to set up a trust fund for any more properties as they are all in our own name at the mo

I know its a common problem but would be interested to hear what people have done...

Thanks

Some would suggest instead of paying down the home loan, simply keep the money in the offset. Same interest effect, but you get to keep your money, and if you convert the home into an IP, improved deductability.

And saving up for a deposit may not be necessary - you might be comfortable drawing down your equity as a deposit on the next one.

 

[traceyim]

Hi Comper100,

I agree with Rob you don't need a separate offset on each loan and it would be better to pay into the offset account than reduce the loan account. You can run your finances with one or two bank accounts (if you want to keep personal income/spending separate to rental income/loan repayments. It is better if you have an offset against your PPOR loan but if that is now an investment property you can link to any loan if the loan product allows this. Not all loans can be offset.

If you have more than one lender then check to see which one has the best offset accounts as some provide free offset and some have a monthly fee.

Most banks do have a transactional offset account which you would need if you are running all of your transactions through a single account.

Ask you current mortgage broker to help you out. They will be able to tell you which of your lenders has the best account.

Cheers,
Tracey

 

[Comper100]

Thanks for the reply guys, looks like having the 2 accounts with one linked to our PPOR loan is the way to go.

We are all with one back at the moment and there offset account is pretty good.

On that, as we are moving into my partners parents place, are we best off putting as much money aside into the offset as we can as this is the only non tax deductible loan we have (obviously when its not rented in a years time again)?Or should we aim to pay some of the IO loans on the other IP's? This may make them both cashflow neutralish?

Thanks for the information