Do You Need To Separate Rental Income From Personal Income as an Investor?

Dilleen Property Group 2022

The question of “do you need to separate rental income from personal income?” is something I only figured out once I went through the process myself. In my opinion, it is completely up to you and what works best for your current situation. I personally do not separate my rental income from my personal income/everyday account. I find that having it all in the one account simplifies it for me.

Example Scenario

Property value: $330,000 (10% deposit used for the purchase)

Loan: - $300,000 on your net banking account (e.g. Commonwealth Bank)

Everyday Account: + $10,000

Off-set Account: As an example, if you have $50,000 in this account you will only be paying interest on $250,000 ($300,000 - $50,000 = $250,000).

Ultimately, in this scenario there are a few different ways that this can work. Some investors do this differently, and there is no right or wrong answer. Always do what works best for you. Using the example above, lets say you receive $400 a week in rent and this goes into your everyday account along with your personal income. You can essentially put your loan on weekly, fortnightly, or monthly repayments (completely up to you). Personally, I do monthly repayments. Hypothetically, we can say that the monthly repayment for the property is $1,000 a month. Usually, this figure will be directly debited from your nominated account on a day that you select.

Another option, is holding the money in a different account from your everyday account where your personal income comes in. Some people find it easier to separate the rental income from the everyday account to save confusion. This may be what you prefer. I personally have all my rent for different properties into the one account as I find it simplifies the process for me.

To summarise, you do not need to separate the rental income from your personal income. However, at the end of the day it is what works best for you. My advice is to not spend too much time over analysing the situation and focus on what you need to do to get to the next property.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.