Maximising Cash Flow/Managing Cash Flow with Investments

HI All,

My wife has just started her maternity leave, and looking at the budget I am looking at a means to maximise cash flow.

Currently we have three investment properties totalling $2.04M, geared up around 76% - 82%. The reason for the gap is the LVR is dependent on if I max out two my (currently undrawn) lines of credits or not. I have around $100k in Australian Equities with $5k owing via a margin loan.

The only other liabilities I have is a $20k credit card limit that gets repaid every month, and a $15k outstanding credit card with a current balance transfer 0% offer until September 2016. I have auto transfer each fortnight to chip away at this balance by the time the balance transfer expires.

Effectively I have no non-deductible debt and now in a position to maximise cash holdings as much as possible. I dont have any reason to further obtain any more deductible debt, as the expenses I hold now effectively reduces my taxable income down to the $78k mark p.a.

Now in terms of my net salary, 28% of it goes towards the "out-of-pocket" expenses for the three properties. Another 12% is directed to an offset account that looks after the rego/insurance for three cars my wife and I share. The remaining 60% is currently being saved in an offset account. Out of this 60% a portion gets withdrawn each month to reduce the credit card to be repaid each month, general living expenses etc.

I have not included the $15k owing on the balance transfer credit card, as I have effectively placed excess cash I have on hand now to the three investment properties, and targeted that "28%" towards the balance transfer credit card.

Each year I get around $15k back via tax return, and around $10k net bonus.

Hopefully the above is easy to understand, now my questions are:

How can I look at maximising cashflow even further. I'm not exactly sure how I can do this besides reducing my living expenses etc, but I live quite a frugal life already. What I am thinking is utilising one of my lines of credit to look after the weekly out of pocket expenses for the three investment properties, and possibly can claim interest back on that line of credit.

Please ask me any further questions to help facilitate a better answer.

Cheers.

 

Get your tax of $15K back weekly instead of offering an interest free loan to the ATO all year - with a tax variation application.

 

Hi Alan,

Thanks for the swift reply!

I am aware of this option which I'll look into. Thanks for this!

 

Other than that, stop having babies, they are very cash flow negative

 

Do you have a cashflow plan for your tax affairs ? Typically this starts with the tax return info and then you convert it to cashflows eg. Cashflow plans should be monthly

- Interest outflows (deductible) switch for actual repayts (ie P+I amounts)
- Timing of specific rental payments eg strata etc.
- Take out non-cashflow items like depreciation, QS deductions since these aren't paid
- PAYG variation and tax refund timing issues will allow net salary to increase each month but at expense of a lower annual refund. ie target say a $3K refund and $1k extra cashflow a month.

PAYG Variation can also apply to a bonus if nominated. A PAYGV requires a estimate of your 2016 tax position and also YTD payroll info. It may mean a substantial cashflow benefit for the next 6 months. You redo for 2017 in May 2016 etc....

 

@r3ckless as Alan has already mentioned, applying to the ATO for an Income Tax Withholding variation to a great tool for maximising cash flow. I used it for 15 years to allow me to hold more property than I would otherwise have been able to.

Might as well get it back working for you throughout the year until waiting until the end of the year - they arent paying you interest on money that's rightfully yours.

Additional to the above have a look at the financial structures flow chart I've attached below. You maybe able to tailor it to your own situation/needs.

I hope this helps.

 

Not too sure if your all loans are interest only that would help as well with cash flow greatly

 

Your post is unclear to me. Are you spending more than you are earning?

 

Hi Paul,

Thanks for the reply. Sorry what do you mean by cashflow plans?

I have a spreadsheet that I know the outlay, or out of pocket expenses that I mentioned above. As mentioned it is 28% of my net fortnightly salary. This percentage is derived from looking at rental income less interest repayments/strata/rates/water.

 

Yeah makes perfect sense. Thanks! I'll have a look at the spreadsheet soon. Just downloaded it!

 

No, not spending more than I am earning. Not sure how that was found Terry.

Let me know if there are any gaps etc.

 

You ask about improving cashflow - do you mean improving income or decreasing expenses? Or both?

 

Hey Rick,

I checked out that diagram!

My setup is quite similar.

- Each home loan is standalone
- Each home loan is attached to an offset account. All rental income goes into this account for said property. All expenses related to this property ie loan repayments and other expenses are debited for this property. Essentially keeping the inflows and outflows of each property completely separate.

Periodically I have have set up a LOC, again standalone per investment property which is my "equity capture" account. I obtain valuations every few months, any increase I borrow up to 90% LMI waived against each property. As I know the market will flatten, and potentially move backwards, I want to capture any equity along the way in the form of a LOC. That way when I do come to extract and use the equity, I am protected from any short fall in valuation.

My other transaction accounts are all offset, and simply all directed to offset one particular loan.

 

I am looking to improve/maximise cash flow. The obvious answer is decrease expenses to improve cashflow, but as easy as that is to type, I am not in a position to reduce any further my expenses. It is frugal at the moment..

 

Get a 2nd job / send your wife back to work

From what i gather, its not like you are spending more than you earn, so just chill and enjoy the time with your kids.... they are only that age once.

 

I see what you mean now. If it was just cashflow you want to improve you could use the LOC to pay the investment loans, but this won't improve your overall position.

All you have to do is maximise income while reducing expenses. Sounds simple.