Forum Replies Created
Hi G.J, what's the expected the rent on the property? Also interested to hear anyone's views on the supply / demand dynamics. With what seems substantial amount of land been released in North Shore, Ascot, Ras etc …will there be adequate demand drivers to keep vacancy rates down? Or would the alternative be to buy in established suburbs like Kirwan which is already densified and can't be built out. Thanks for your thoughts.
Mj
Do you mind sharing who the insurance broker’s contacts as I’m facing the same situation . Many thanks.
Mike
hi mike.
I try to explain how I think it could benefit.
Say, LOC is used for investment purposes. For personal purposes you don’t draw down on the LOC as the interest is not tax deductible.
A savings account is maintained on the side of LOC to deposit salary and rent. Advantages are:
1) the savings account can be used to meet non deductible expenses. When the savings balance grows you can elect to use savings to pay down LOC whenever you like. e.g. just maintain $5k in the savings account
2) instead of interest capitalising on the LOC (i.e. paying interest from LOC), interest can be paid directly from the savings account. This would save continually monitoring sublimits breaches to when interest continually gets debited from LOC.Disadvantage is that you are losing the interest spread between savings and LOC. i.e. funds placed in LOC would save you 7% interest, instead you only earn 3% on the savings account.
With a combined LOC and offset account, you can have a savings account on the side of a LOC and have that as 100% offset. In effect you don’t lose out on the interest spread + get all the above benefits.
Just my take on it, welcome any thoughts on better structuring.
cheers mj
Thanks Richard. Do you mind sharing why NAB’s LOC (portfolio facility) is weaker? I will probably need to give it more thought.
Cheers
MJGreat. Thanks for the contacts. Are you aware if any of them also work in NAB branches in Sydney city?
Cheers
MJJames, LOC is short form for line of credit. It is a flexible type of loan that allows you to draw down and repay at anytime.
Jess, I’m also looking for an LOC at the moment. I’ve been looking at similar products by some of the banks. I decided against ANZ because they don’t allow sub limits. I think CBA Viridian LOC and St George portfolio loan are quite similar. Both offer discounts of around 0.7% but I guess they are negotiable.
The most flexible product I came accross was NAB portfolio facility (I think its quite a new product) that allows sublimits and also allows a 100% offset savings account at the same time. Other banks seem to only offer either LOC or offset facilities but not both at the same time. Only thing is the NAB product annual fee is quite high at $550 although there is no further costs (i.e. no transaction, ATM, chaning of sub limit fees)
I’m sure the MBs on this site will give you some more insight into the differences. Good luck!
Cheers
MJThanks Anita, I will give him a buzz.
Hi Anita. Yes, please send me the contacts. Thanks.
Thanks Richard. I will be in touch.
Looking at an office suite in Pymble, Sydney North Shore around $700k with rental yield of high 6%.
Roughly what sort of gearing level (LVR) and rate is possible for something like that. Thanks.
The responses have been very informative, thanks!
Terry, you mentioned that there are a set of rules restricting the corporate beneficiary on lending (distributions) back to the trust which concerned me.
My understanding is that the loan from the corporate beneficiary back to the trust must not then be redistributed to the individual beneficiary. However, the loan may be used for investment purposes at the trust level such as providing property equity or reduction in loan. The loan may be perpetual (i.e. never has to be repaid to the corporate beneficiary).
Please correct me if I’m wrong or if you guys have any other major restrictions in mind.
MJ
