Paying IP expenses from LOC
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Hi
First time poster, have been reading/researching threads on SS for a couple months now and am hoping to purchase IP #1 in a couple months. Glad i came across this thread/stategy before i commited to NG a property out of my income/savings!
Apologies in advance for any noobish questions ill be asking
Question - do you have all your other investment related expenses (such as accountants fees, inspections, rp data reports' costs and the like) drawn out of this LOC? or is it just IP portfolio related costs (interest/holding)?
Also just want to thank all you and all the other wizards for your input/advice that you post, it has been an invaluable resource for my investment education
Regards
KJB
Most our individual IP expenses (bar loan interest) is paid by our property managers month to month from rental income collected, with the balance of rent deposited into our investment LOC.
Other portfolio building / holding / investment costs such as accountancy fees, data reports, investment related educational costs etc etc you maybe able to pay from an investment dedicated LOC depending upon your individual investment situation.
I strongly suggest you gain advice from your tax accountant professional beforehand to decide which path is the way for you to proceed.
I hope this helps.
Wouldn't that much negative gearing effect your ability to borrow?
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How much negative gearing?
You still have to meet the banks/lenders required LVR & DSR modules in order to borrow funds from them.
I'm also looking into this kind of setup.
Is there any advantage of using a LOC over an IO loan with offset?
It depends upon your individual circumstances & plans. For us, the LOC is IO anyway and it's a simpler loan structure to use without the need to incorporate an offset account.
I would only recommendd using a LOC for accessing equity. the main reason to use a LOC over an IO loan is to avoid contamination issues which often result from moving cash from an IO loans to other accounts.
Rixter has a different approach to they way I generally do it.
If Rixter says:
Then why
Then why
Why not paying loan interest and strata fees with LOC? Wouldn't it increase the deductible? isn't it still investment expenses?
IP loan interest & IP strata fee's are deductible. They are just not paid directly from rental income collected by PM on my behalf. They're automatic direct debits for cash flow management, due to the amounts.
I hope this helps.
Just out of curiosity... is it just the one LOC you have to take care of all of your IP's interest/holding costs? if not (and if its not too nosey), how many IP's to each LOC do you have?
other ways
What other options are there if not using a LOC to pay for IP expenses?
A CC that covers all IP expenses - prob not as u need to pay this off with funds from somewhere
A seperate account just for IP expenses that rent will go into if positive, otherwise once again using savings...
Am i correct or is there a way around the LOC for expenses?
thanks
What other options are there if not using a LOC to pay for IP expenses?
A CC that covers all IP expenses - prob not as u need to pay this off with funds from somewhere
A seperate account just for IP expenses that rent will go into if positive, otherwise once again using savings...
Am i correct or is there a way around the LOC for expenses?
thanks
Offset account is an option depending upon how you structure its usage.
I thought I had my head around this, but i just had a chat with an accountant whos thrown me right off.
Could someone please confirm this for me? i dont know if he misunderstood me, or is wrong, something has chagned or if im just very very thick
Im looking to buy an investment property very soon, opening an LOC to access my equity.
LOC $86,000
Deposit for IP#1 $45,000
Purchase price (as per pre approval) $420,000 (97%LVR)
Remaing LOC 'buffer' $41,000
Plan is to have all rents (minus rates, pm fees) paid into the LOC and all loan payments payed out of it. all strictly investment transaction
The LOC will be drawing on itself for its interest repayments, so the balnce will be creeping slowly higher as it will be covering the $500 or so shortfall every month on payments to IP#1 and its own interest.
This will be offset in about 10 months when i rent my current PPOR out (having those payments in/out of said LOC) as it will bring my 2 strong portfolio to neutral geared territory.
What i was just told is that the only part that would be tax deductable is the interest of the purchase price and deposit, that money borrowed (and the interest on the interest) to pay for holding costs isnt.
Sorry to woffle on, but my understanding was that all of the above would be tax deductible as it all relates to purchasing and holding investment properties.
I realise this subject has posted on heaps but some advice on my situation to set me straight would be much appricaited
Thanks
KJB
Could someone please confirm this for me? i dont know if he misunderstood me, or is wrong, something has chagned or if im just very very thick
Im looking to buy an investment property very soon, opening an LOC to access my equity.
LOC $86,000
Deposit for IP#1 $45,000
Purchase price (as per pre approval) $420,000 (97%LVR)
Remaing LOC 'buffer' $41,000
Plan is to have all rents (minus rates, pm fees) paid into the LOC and all loan payments payed out of it. all strictly investment transaction
The LOC will be drawing on itself for its interest repayments, so the balnce will be creeping slowly higher as it will be covering the $500 or so shortfall every month on payments to IP#1 and its own interest.
This will be offset in about 10 months when i rent my current PPOR out (having those payments in/out of said LOC) as it will bring my 2 strong portfolio to neutral geared territory.
What i was just told is that the only part that would be tax deductable is the interest of the purchase price and deposit, that money borrowed (and the interest on the interest) to pay for holding costs isnt.
Sorry to woffle on, but my understanding was that all of the above would be tax deductible as it all relates to purchasing and holding investment properties.
I realise this subject has posted on heaps but some advice on my situation to set me straight would be much appricaited
Thanks
KJB
I thought I had my head around this, but i just had a chat with an accountant whos thrown me right off.
Could someone please confirm this for me? i dont know if he misunderstood me, or is wrong, something has chagned or if im just very very thick
Im looking to buy an investment property very soon, opening an LOC to access my equity.
LOC $86,000
Deposit for IP#1 $45,000
Purchase price (as per pre approval) $420,000 (97%LVR)
Remaing LOC 'buffer' $41,000
Plan is to have all rents (minus rates, pm fees) paid into the LOC and all loan payments payed out of it. all strictly investment transaction
The LOC will be drawing on itself for its interest repayments, so the balnce will be creeping slowly higher as it will be covering the $500 or so shortfall every month on payments to IP#1 and its own interest.
This will be offset in about 10 months when i rent my current PPOR out (having those payments in/out of said LOC) as it will bring my 2 strong portfolio to neutral geared territory.
What i was just told is that the only part that would be tax deductable is the interest of the purchase price and deposit, that money borrowed (and the interest on the interest) to pay for holding costs isnt.
Sorry to woffle on, but my understanding was that all of the above would be tax deductible as it all relates to purchasing and holding investment properties.
I realise this subject has posted on heaps but some advice on my situation to set me straight would be much appricaited
Thanks
KJB
s 8-1 ITAA97
TD 2012/1
I don't know one in Perth, but Michael @ House of Wealth in Melbourne is really helpful. I'm in Perth and I send everything to him. That said, I'm sure there are some great Perth based ones too, at the time I was in the sticks so Perth/Melbourne made no difference as I had to send everything anyways.
