Forums / Property Investing / Creative Investing / Do you use offset account for Investment property?

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  • Profile photo of siewlinsiewlin
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    @siewlin
    Join Date: 2012
    Post Count: 19

    hi i was thinking of putting all my salary into offset account for this IP , reducing the amount of interest rate repayment will increase my cash flow. Is this a good idea? Thanks for sharing !

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    Is reducing the holding costs of your investment property (and thus increasing your profit) a good idea? Yes.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,173

    Only a good idea if you don’t have a non deductible loan.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    To more clearly explain what Terry mentions above:

    Let’s say you have a mortgage (aka debt) against a home you live in (commonly referred to as your PPOR, your Primary Place of Residence). Let’s say you also have a mortgage against an IP (Investment property). Let’s say both these mortgages have offset accounts under a circumstance where money in the offset account assists with reducing how much debt balance interest is charged on (usually this circumstance is the loan being on a variable rate rather than fixed). If you could choose which offset account your salary and other spare cash should go into, then your money is more powerful in the offset account of the PPOR (or other non-deductible loan). This is because the mortgage interest on this loan is not tax-deductible. As such you’d focus on debt reduction on that PPOR loan before focussing on debt reduction on an IP loan.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

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