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How do you pay your IP expenses?

Discussion in 'Property Finance' started by Hanso, 30th Oct, 2015.

  1. Hanso

    Hanso Member

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    I have read recently about using the equity loan(leverage loan) for all IP related expenses. Obviously deposits, stamp duty etc will be drawn from the equity loan, but it was also recommending having all interest repayments for you IP loan coming out of the equity loan and rental income being paid back in.

    I’m interested to get a general consensus of what everyone here does, do you use your equity loan for all IP expenses or do you have all income and expenses flow through an offset against your PPOR?

    Is there any real difference in the two options mentioned above? Pros/cons?
     
  2. York

    York Finance Broker Business Member

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    Interest being paid by a loan? Where is @Terry_w? :D
     
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  3. teddy1

    teddy1 Member

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    Hi Hanso,

    My understanding is you cant use a loan to pay interest based on ATO rulings, Terry will confirm.

    You are correct with using equity loan to pay for deposit, stamp, pest etc. These funds should be transferred into a seperate (IP) transaction account and this is only used for IP purchases. Rent should go into the offset account that is linked with the equity loan account

    Cheers
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  5. S0805

    S0805 Well-Known Member

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  6. Hanso

    Hanso Member

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    Thanks Terry that clears it up for me
     
  7. sash

    sash Well-Known Member

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  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I wasn't saying capitalising interest is ok - but that I have discussed it in these threads. In each thread I warned the readers to get a Private Binding Ruling and/or Tax advice.

    Interest would normally be denied where the dominant purpose is to get a tax advantage.
     
  9. sash

    sash Well-Known Member

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    Yep......spot on...someone I know found out the hard way...
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What happened to him? Fine?
     
  11. sash

    sash Well-Known Member

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    I believe no fine...but disallowed.
     
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  12. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    All rent into the account of the entity that owns it (either ppor offset or unit trust accounts). Opex and r&m expenses paid from these accounts.

    All repayments from PPOR offset as I use unit trusts so I am the borrower. Excess from the unit trusts disbursed every 2-3 months to beneficiary (me).