Portfolio structure question

I have asked my MB to get a valuation done on one of my IP's, as there is sales evidence to suggest that there is definately some equity ready to be recycled. I want to use the extra funds to top up my LOC (which is used purely for investment purposes).

She has suggested that the best way for me to go at the moment is to use the equity to increase the actual IP loan, then transfer the extra funds over to my LOC ready for use on all my IP's.

This seems a bit messy to me.....or is that strategy fairly normal? I'm just thinking from an accounting point of view!!

I know it would be neater to just increase my current LOC, but I don't have enough of an increase in equity in the properties securitizing the LOC as I only just increased it in April this year.

Any comments/suggestions would be most welcome.

ta

sq
 
Hiya Suzie

u have in part answered ur own question.

If the properties securing the LOC dont have enough equity you can either

1. Cross them all so that u can draw the equity from where u like or ,

2. do what ur mb has suggested.

It sounds to me lke she has a logical reason for going this way, and not knowing the ins and outs of your situation it sounds like either a LMI issue or a max number of loans per package issue ( as one often encounters with ANZ)

ta
rolf
 
Thanks for your reply Rolf,

I suppose I just wanted clarification as to what she was suggesting and to make sure that there wasn't something I was missing.

Appreciate your input.

cheers

sq:)
 
problem will be if you sell one, then you have to figure out how much you drew for that property and return it to the LOC. but you will need to know that anyway I guess becuase in your annual tax return you will be allocating the interest expense against each property.
 
Hi Ausprop,

Yes I use MYOB to track all expenses coming from the LOC for each IP. I actually have the LOC set up like a business on MYOB (for accounting purposes only). It seems to be working well at the moment. Perhaps in the future I will be in a position to shuffle things around.

I am open to suggestions however, on what structures others are using and the pros and cons.

thanks

sq
 
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