Hi
My wife and I have an IP(1) that we have just tenanted whereby the rental income is greater than the interest charged per month. In our other IP(2) whereby the rental payments are less than the interest charged, we have the rent paid directly into the mortgage account and we 'top-up' the loan each month to cover the mortgage repayment. If we were to fix the interest rate for a given period on IP(1) we will be unable to withdraw the extra monies to cover the costs of rates, insurance, etc.
What recommendations do you all have as to how we manage these rental payments from a tax and receipting perspective?
Thanks
Michael
I don't see why you can't put the rental income from IP(1) into the mortgage account for IP(2) and then have both mortgages drawn from the same mortgage account. It doesn't matter where the money goes as long as you account for it on paper.
As long as you record all rent as income and all interest payments on the mortgage as outgoings and keep them separate on paper, you should be fine. I have held up to 20 properties as the one time and just use an Excel spreadsheet.
Cheers
K
Thanks Linar…
Didn't mention that IP's are in different names, one in mine, one in wife's and one in joint.
I assume this would still be ok as long as we keep good records?
Michael
That makes it all far too difficult. I think you would have to treat each transfer of money between entities as a loan. I have my properties in several trusts and companies and occasionally I need to use money from one entity for another entity. When I do that I record it as a loan between the entities.
To my mind, any benefit received would be far outweighed by the time consuming record keeping and the extra money I would have to fork out to my accountant to unravel all the "loans".
cheers
K
I would try to set up an offset account and just have the rental income paid into that. Ideally this should be on your home loan (yourPPOR) if you have one. Then just get your interest payments taken from that account. You could still have other named loan accounts coming from the one account.
The problem with getting your rent paid directly into the loan is that one month they may not pay and you will miss the repayment.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I have a bank account that the rent goes into and then I just log into the internet banking and schedule the repayment to the amount required for the mortgage repayment. I can even do payments into other third party bank accounts.
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