Managing Portfolio behind scenes cont…

Hi
This is an idea I have been tossing around for a while, at the moment I only have 1 IP but I think it should work for multiple properties.
I assume you have separate loan accts for each IP. Each month, put a proportion of your rent(say 5%) into a savings acct (or better still an offset acct of some sort)by automatic transfer. That way you don’t have to think about it too often. Get a computer program like Quicken (or similar) and set it all up as per your bank/loan accts. That way the program mimics the actual fiscal movements. When you have a repair to pay for, take it out of the savings/offset (pay the invoice (keeping the receipt)), then not the transaction on the computer as a transfer from savings to IP”A”. This will credit the loan acct for that IP (on paper) then just make the payment from that acct(again on paper).
This way you can keep monies saved for unplanned repairs separate, removing the temptation to re-invest it (you may want to set a cap for the acct so any excess can be re-invested). Quicken allows you to print off tax reports etc, so come tax time you can take the reports & receipts to your accountant.
It may sound complex because I’m not good at describing it in print. If you’re still interested, feel free to PM me & we can talk further.

Regards

Patrick

The dumbest question is the one you don’t ask.

Marky,

I know nothing about technicalities and setups etc. What I was gonna contribute is that I pay extra into my IP’s each week, as set up by my Bank. I don’t have an LOC, but I have redraw facility. I guess I can use this if I have extra repairs etc. Always good to have a backup.

kay henry

MarkyMark,

I set up 2 bank accounts. All the income and expenses from properties and wages go into account No.1 and I try to keep this account at less over $5000. The second account is my saving account where it had higher interest rate on this account. Each month I check my bank accounts, any leave over from account no.1 which is over $5000 will be transfer to account no.2.

Every month there are a lot of rental statements so I check it and compare it to account no.1 if it match then I file it away. Each property have one folder so it is much easier at the end of financial year for tax purpose.

Kind regards

Jet Dollars
“Ask and you will receive. Seek and you will find; knock, and it will be opened to you.”

I like to torture myself administratively so I have an offset account for each mortgage. Incomes and expenses for each IP goes thru’ the relevant offset account.

This way I can see clearly how it is going easily and the ingoing/outgoings for each property.

You could say its something like a company with departmental cashflow statements.

Hi Mark,

Not an accountant.

If you have mainatined a good paper trail there shouldn’t be a problem with mixing personal and investment expenses as the purpose of the expenses determines deductibility.

If there is interest incurred on the credit card due to a late payment you will then get into ‘messy maths’ working how much of the interest is deductible and how much isn’t. For the dollars involved I wouldn’t worry about even trying to work this out.

The downside of having an ‘investment’ credit card is that it will impact on your borrowing capacity – something to consider depending upon your situation.

Derek
[email protected]

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Ali G,
Your credit card limit alters your borrowing power.
Example:
You have a disposable income of $500.00 per month.
You also have a credit card that – when maxed out – has a minimum repayment of $100.00 per month.
The bank will only loan you money based on $400.00 per month to make sure you can afford their repayments. A lender will always look for the worst case scenario.
Hope this helps.

Regards

Patrick

The dumbest question is the one you don’t ask.

Hi

Generally lenders take 3% of the credit card limit as being a monthly expense whether you pay it off in full every month or not.

With a LOC, it is not really existing capital, but a loan each time you take money out-and you can borrow up tot the limit at will. So banks will take the full limit as the borrowings no matter what the balance is.

Terryw
Discover Home Loans
North Sydney
[email protected]

Thanks Barnsey, MarkyMark and Terryw for your replies.

I have also been told in the past that a LOC is secured against existing capital so I am still wondering about this too MarkyMark.

Thanks again – I am learning so much from all of you.

Cheers,

Ali G

Mark

I would say drawing down capital is using cash (or selling assets etc) from the business. LOC is securred against equity, but it is just the same as borrowing, no different to getting a term loan.

Terryw
Discover Home Loans
North Sydney
[email protected]