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Bank Accounts - How do YOU strucutres yours?

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  • Bank Accounts - How do YOU strucutres yours?

    Just wondering how you structure your bank accounts for your investment properties in the following situations, and how it works, assuming you have a mortgage in each case...

    (a) 1 investment property
    (b) 1 investment property with manager
    (c) 2+ investment properties
    (d) 2+ investment properties with manager

    Q. Does the customer pay straight into the loan account, or a separate one?
    Q. Does the manager collect rent into their account, then pay into yours?
    Q. Do you have one account for each property, or one account for all your properties?
    Q. Do you keep the account(s) topped up in case the rent doesn't arrive? (assuming you don't have a revolving account).
    Q. Do you have a separate account to your loan account for your property and all mortgage paymetns come out of there? (which is also where the rent get's put).
    Q. Anything else you can think of that you've learnt through trial and error?


    Thanks!

    Regan.

  • #2
    a) 1 investment property
    If revolving credit -loan payments can be taken out of same account, if P&I loan - have enough in account to pay if rent does not go through, or from another account.
    (b) 1 investment property with manager
    They usually collect money in their own account and pay you either fortnightly or monthly - monthly is most common.
    (c) 2+ investment properties
    (d) 2+ investment properties with manager
    Same as above.

    Q. Does the customer pay straight into the loan account, or a separate one?
    Either is fine - as above.
    Q. Does the manager collect rent into their account, then pay into yours?
    Yes.
    Q. Do you have one account for each property, or one account for all your properties?
    Again can be either - if revolving credit, you can often have quite a number of properties in the one loc account.
    Q. Do you keep the account(s) topped up in case the rent doesn't arrive? (assuming you don't have a revolving account).
    Only if you don't want to go into o/d if the rent doesn't come in.
    Q. Do you have a separate account to your loan account for your property and all mortgage payments come out of there? (which is also where the rent get's put).
    Can do, banks will often set up what is best for you, so no need to get too concerned with all this.

    Regards
    Graeme Fowler
    Facebook Property Chat Group NZ
    https://www.facebook.com/groups/340682962758216/

    Comment


    • #3
      We use separate Loans for each of our properties.

      We use NZ Home Loans and Westpac.

      We use a mixture of interest only and PI and a mixture of fixed and floating.

      All of the accounts that are Principal and Interest and floating are revolving credit.

      We operate one of these mortgage accounts in the name of an LAQC as a repository for our excess funds, salaries and the rents associated with all of our properties with that lendor (NZ Home Loans).

      For the Westpac mortgages they prefer to have a base account that you put the rents into that feeds the mortgages when they fall due. We have two properties in another city managed by a property manager who collects the rents into their own account and then gives them to us less fees and repair costs on the last day of the month.

      Multiple lenders is a good thing as is having loans that aren't all of the same type. Lowers your visability at review time at the Bank and gives you some smoothing of interest rates being paid.

      One tax pitfall is to have a revolving facility in your OWN name, that you claim tax benefits for, that you use to finance your day to day existance. Every payment you make from this account for your own personal use reduces the amount claimable as the mortgage for the purposes of an expense. An expensive mistake if audited by the IRD.

      Hawkeye

      Comment


      • #4
        Yes I do agree that whatever you do in terms of bank accounts. Keep your personal accounts seperate from the rental accounts. as Hawkeye mentioned if you use it for a personal use it will reduce the amount you could claim.

        Comment


        • #5
          Originally posted by whitt
          Yes I do agree that whatever you do in terms of bank accounts. Keep your personal accounts seperate from the rental accounts. as Hawkeye mentioned if you use it for a personal use it will reduce the amount you could claim.
          Don't quite get you there Whitt. I have everything in one account personal and rentals, and it doesn't affect what I can claim on (that I can think of ).

          Cheers
          Find The Trend Whose Premise Is False - Then Bet Against It

          Comment


          • #6
            Hi Gatekeeper.

            One tax pitfall is to have a revolving facility in your OWN name, that you claim tax benefits for, that you use to finance your day to day existance. Every payment you make from this account for your own personal use reduces the amount claimable as the mortgage for the purposes of an expense.
            The important aspect is the ownership of the account you are using to fund your own expenses.

            People who understand Accounting far better than me on the forum might be able to give you the exact detail of why this is so.

            We were told this by separate advisors, who market themselves as understanding the needs of Property Investors, when we approached them about structuring our business affairs.

            Hawkeye

            Comment


            • #7
              Hi,
              I understand about the personal revolving credit limiting your interest expense. Really just the need separate bank accounts I was wondering about.
              Find The Trend Whose Premise Is False - Then Bet Against It

              Comment


              • #8
                I used to have all my houses lumped into a couple of large loans.

                I have since separated everything out with one loan per house, and this is for several reasons (but not limited to) :

                - Ease of accounting at year end, and allocation of interest charges
                - The ability to have property specific expenses and income against one property, and therefore more easily monitor performance.
                - Ease of selling / moving mortgage providor of a specific property rather then having to extract it from a large loan or blanket security.
                - By having a single loan allocated to a single property, it is easier to avoid the bank taking blanket security, and this is additional leverage for you when negotiating interest rates etc
                - It gives you the ability to have different loans on different fixed terms, mitigating against having huge amounts come unfixed all at once.
                - Different loans can have different payment dates, therefore smoothing your cash flow

                I have one house on a revolving credit loan, and that is where all my rent goes in, and expenses come out (rates, insurance, etc for ALL my houses). My properties (with that specific bank) take their loan payments from the revolving credit, and I have set up automatic payments out to other banks a few days before the payment dates for those banks.

                But then again, "this is only one mans opinion".......

                The Dog

                Comment


                • #9
                  eg.
                  You can claim bank fees at tax time on the account which you use for your investment property. But if it is intermixed with personal use it gets difficult to allocate.

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