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  • Profile photo of mixedupmixedup
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    @mixedup
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    March 23, 2008 - 11:28 am

    PS.  Add to the previous post I just did………….just thinking through the logistics of arranging the in's/out's if one was to go for one sub account per property:

    * Cheque Book – I assume you could get the bank to give one cheque book per sub-account to use? If yes then this would be ok.

    * VISA card – The St George Portfolio loan gives you one VISA card (no fees) I think, however this would be a separate account. So you may have to then card expenses for several IP's into this VISA card, and then I guess ideally you would be off the card from the appropriate sub-account at the per transaction level? This would seem too much overhead. How do people normally handle VISA card based payments for expenses across the sub-account per property setup?

    * Rents – I assume you could get the bank to provide separate deposit cards / BSB-Account numbers per sub-account?

    * General costs – umm, I'm trying to think if there are general expense costs that would be generic (i.e. and not charged per property), and in which case how to cater for this.

    Profile photo of mixedupmixedup
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    March 23, 2008 - 10:23 am

    thanks Terry – this is all making sense :)

    What have you/others found is better to do re the question of whether you have:
    (a) one sub-account for all of your IPs (i.e. all rents, all expenses come to/from this one sub-account) versus
    (b) one sub-account per property (i.e. for rent and expenses)
    (c) some other arrangement: perhaps all rent into one sub-account, all expenses into another for all properties?

    Any advice from those who have experience?

    Seems to me like option (b) may be nice, however from a tax perspective item (a) should be fine no? i.e. in one's tax return everything gets bundled up into one overall loss/profit for all your IPs?    Or is there something I'm missing for which a tax agent would really benefit if you used a sub-account per property?

    Thanks again

    Profile photo of mixedupmixedup
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    March 23, 2008 - 5:01 am
    Thanks Terry,

    All – I'm looking at a St George Portolio Loan (LOC) / Advantage Package arrangement. What would you recommend as a good way to set up the accounts? I have no PPOR debt.

    Questions still outstanding for me are:
    * Can you get an offset account against a LOC, or does it have to be a normal loan? (i.e. in which case if my main buffer/deposit loan is going to be a LOC then I guess I would need to use the first IP loan for the offset arrangement). Would be nicer if I could get an offset account against my buffer/deposit LOC loan.
    * Can the Offset Account be used as a personal savings account, or do I need a separate personal savings account

    For example, but what accounts I mean something like:


    * IP Loan 2 (Property 2) – normal interest only loan

    * IP Loan 1 (Property 1)- normal interest only loan
    * Offset Account [incomes come in here, offset's interest from IP Loan 1]

    * IP LOC (Buffer / Deposits, against PPOR)
    – credit card against LOC [for investment expenses] – possible?
    – cheque book against LOC – possible?
    – rent comes in here, IP expenses are paid from here

    * Personal LOC (for personal emergency) – normally not used (as no interest if this is +ve)

    * Personal savings account (keep very low, as most personal money is in the Offset Account above)
    – not sure whether I could just use the Offset Account instead of this?

    * Personal VISA account [personal bills]

    * Personal Cheque account (not sure if these needs to be a separate account?, or just have a cheque book against the personal savings account, years ago they were separate to minimise fees)

    Thanks heaps

    Profile photo of mixedupmixedup
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    March 6, 2008 - 5:24 am

    can a LOC give you the same 100% offset (against investment loans) type benefit?   In particular if you're using the LOC for personal and investment usage how can you ensure that if you put your pay into the account that offset benefit goes 100% to your investment properties?

    Profile photo of mixedupmixedup
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    March 6, 2008 - 4:26 am

    Richard – I'd be interested in your comment re whether one is better off saving the extra 0.1% for a LOC (well this is what it seems to be in the St George bank products) and run with a standard packaged arrangement with variable rate loan, and then use the draw-down and 100% offset appropriately.  Apart of ease of use is there a case to prove that the LOC approach saves more than the 0.1% extra in other words?

    Profile photo of mixedupmixedup
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    February 23, 2008 - 6:53 am

    thanks pjreno,

    I just posted a question re how to identify land to build at https://www.propertyinvesting.com/forums/property-investing/help-needed/4323843?#comment-169349 . It'd be great if you could reply with an tips / your approach if you have a few moments.

    From your perspective have you found Building can give you additional equity by the time your finished with high probability?  That is at this point in time (I'm in Brisbane myself) the way the market is, is building definitely viable as a way of adding value, as opposed to just purchasing and waiting for capital growth? 

    Profile photo of mixedupmixedup
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    February 23, 2008 - 6:44 am

    Thanks – I picked up "Australian Residential Property Development – A Step-by-step guide for investors" today and have been going through it. Also have been reviewing the online Brisbane Council Planning material too.

    What's missing so far is some concrete suggestions re identifying an appropriate piece of land. Can anyone provide some tips on this front please (for finding land to build a couple of units in a Low-medium Density Residential area in Brisbane/Ipswich)? For example am I close to the mark re my ideas listed below?

    (a) look for advertised land that satisfies the zoning criteria – I'm not sure (and I'll start trying) to what extent such land is usually snapped up by investors in this situation – is it unusual to find appropriate land via this approach?

    (b) look for land close to train stations / transport for which there may not yet be many units yet, then approach the council to determine likelyhood of them approach construction on units – i.e. takes more effort

    (c) look for cheap houses in an appropriate area that could be removed (but then whether this would typically turn out to be viable?)

    (d) is there a property investment company / advisor who would assist here who wouldn't charge an arm and a leg? Or to maintain the best profit is it best to take the searching on-board oneself? (assuming you the time / inclination to have to ramp up)

    Profile photo of mixedupmixedup
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    February 22, 2008 - 9:51 pm
    JONCHU wrote:
    I have built in the past at around $1000 x sqm (mythical in some areas).

    Tks.  BTW – This is square metres regarding the floor space of the building?  So if it's two stories you effectively you would have 2 x FootprintOnLand x $1000/sqm?  

    Profile photo of mixedupmixedup
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    February 22, 2008 - 9:21 am

    excellent – thanks

    BTW – I'm assuming texts like this wouldn't actually give indicative building costs.  Any suggestions re how to get a rough handle on the cost of building units?  Or is it a matter of contacting builders?  At this stage I'm interesting in just having a look at how the numbers pan out if one were to consider building, understand potential gains, potential risks if there are building delays (e.g. increasing interest costs as payments are made to the builder whilst still not getting in rent etc). 

    Profile photo of mixedupmixedup
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    February 22, 2008 - 5:13 am

    Kylie – I'd be interested in you had and advice for my question I posted at https://www.propertyinvesting.com/forums/property-investing/help-needed/4323843

    Profile photo of mixedupmixedup
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    February 21, 2008 - 6:47 am

    in this case the redraw is for the deposit on the IP loan so that should be ok then no

    sorry, put in the wrong link (copy/paste error) – try this:

     http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~interest~basic~exact:::AND~on~basic~exact:::AND~loan~basic~exact&target=JA&style=java&sdocid=AID/AID2002817/00001&recStart=21&PiT=99991231235958&recnum=37&tot=5225&pn=ALL:::ALL

    Profile photo of mixedupmixedup
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    February 20, 2008 - 10:48 pm

    I did find this ruling…

    https://www.propertyinvesting.com/forums/getting-technical/finance/4323792#comment-169207

    Profile photo of mixedupmixedup
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    February 20, 2008 - 9:13 pm

    Hey Richard – well that would be bad news :)     But really considering a lady from the ATO gave me the advice how do I really know.   Any suggestions on what I would need to do to confirm the situation for myself?  (look up tax laws if you think its clear / get a ruling / ask & trust one's account?)

    Profile photo of mixedupmixedup
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    February 20, 2008 - 11:49 am

    Called my PPOR lender.  Turns out better for me to switch to their basic variable rate loan for a better interest rate & less fees.  I've already fully paid off my PPOR itself (i.e. the loan is really zero now, just have some re-draw capability on it) so I'm hoping this should be ok/clear for ATO.

    Profile photo of mixedupmixedup
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    February 19, 2008 - 4:27 am

    ok – so in this case however I guess you need to decide whether you (a) create this new LOC (against PPOR) from your existing PPOR lender, or (b) just use your new IP lender to create such a PPOR LOC.   Perhaps the latter option (a) has less fees (?) as you're already establishing a new package potentially, but the former option (b) keeps the PPOR lender separate from the IP lender.  Sounds like it doesn't really mater too much either way…

    Profile photo of mixedupmixedup
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    February 19, 2008 - 3:54 am
    Qlds007 wrote:
    Just make sure you dont redraw on your PPOR loan

    sorry – you threw me here Richard.  Given I need to borrow a little (against my PPOR) to get the 20% for my new IP investment, then why wouldn't I just use my existing re-draw facility on my PPOR home loan?  Following this approach this would satisfy the suggestions of making sure the IP loan does not use my PPOR as collateral.  I checked with the ATO and as long as the interest is used for investment (which it would in this case) I still get the negative gearing tax benefit from the redraw against my PPOR (at least this was my understanding)…

    Profile photo of mixedupmixedup
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    February 19, 2008 - 1:33 am

    this make sense to me Richard – so if I wanted I could use the same lender for my IP as my PPOR, however I should make sure that I don't have my PPOR referenced in the loan as collateral, is this right?  Instead I could use Full-Doc to prove income and only borrow 80% then.

    The only other question would be in my case I need to redraw on my fully paid PPOR loan to get some of the 20% for the IP.  Would the same lender see this as NOT adhering to myself funding 20% (i.e. would they try to hit me up for mortgage insurance)?

    Profile photo of mixedupmixedup
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    February 19, 2008 - 12:05 am
    Terryw wrote:
    mixedup wrote:
    Terryw wrote:
    put the extra in the offset and it will save the same interest

    (sound of penny dropping)

    Got it!  What threw me was I was assuming an "offset" account was like the one I had years back on my house whereby it was just that interest you made on the offset account could be moved to the home loan and didn't get taxed. 

    Question: What about Line of Credit versus Standard Variable Rate (with redraw, offset etc)?   It seems LOC would be great but is about 0.1% more, so I guess after tax this is really only 0.1 * (1 – 40%) = 0.06%, so about $180 a year for a $300,000 loan.  What advantage would you really get for this extra relatively small amount for a LOC?   Ability to use same LOC for a 2nd IP purchase perhaps?   Is LOC the way to go these days?

    Profile photo of mixedupmixedup
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    February 18, 2008 - 12:46 pm
    Terryw wrote:
    I'd look at a IO loan with a 100% offset.

    Can I pay extra however on such a loan to reduce it quicker, and hence lower interest quicker? 

    Profile photo of mixedupmixedup
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    February 18, 2008 - 4:29 am

    I can go Fulldoc.  I'm looking at property value at around $300k and putting down a 20% depositor via about 1/3 savings + 2/3 re-draw of my existing PPOR (which is fully paid off).  Hope that helps people understand my situation..let me know otherwise.

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