Excessive accountant fee?

[jesusislord93]

Hi all

Me and my partner reached out to an accountant for advice regarding buying a second property and converting our current PPOR into an investment.

We are about to begin the pre approval process, and have attained two rental and valuation appraisals and are currently setting up a Depreciation Schedule inspection.

We reached out to an accountant with the below questions who stated their fee is $550 p/h - is this excessive?

Questions we wanted to ask:
1. How do we instruct the broker to structure the loans to avoid cross-collaterization?

1. What is the difference between using equity v refinancing/drawing out cash from our current loan to purchase the new property?
2. if we refinance the current property and draw out cash to use for the new property, will this amount be tax deductable as it will be now applied to the investment property?

 

[covenantcat]

@jesusislord93 I will certainly answer all your questions and provide detailed advice. My rate is $525 per hour.

BTW, I use the $525 per hour to pay my 3 staff, the rent on my office, my proffessional indemnity insurance etc, it does not all go in my pocket.

 

[buckman98]

@jesusislord93 Don't think it's excessive if it's the principal/director answering your questions.

The directors/partners at my firm have a similar charge out rate per hour from memory.

 

[jesusislord93]

@buckman98 Is it bad etiquette to say that this is out of our price range and to see if they have other accountants who can assist us?

 

[buckman98]

@jesusislord93 Don't think it is bad etiquette to say it is out of your price range at all - sometimes we don't even get a reply.

However do you mean ask for a referral to another firm that they know of which is more affordable or refer you to a junior accountant within the firm to provide you with advice?

Because I don't think the principal will actively refer clients onto other accountants unless it is something that is outside their expertise. Unfortunately you will need to do the leg work on that one.

Every firm is different, but they may not allow junior accountants to provide advice and if they do it's simple and the principal will review the advice anyway. Might be slightly cheaper!

 

[lindseym1013]

@jesusislord93 You’re paying for expertise not time

As for your questions

1. It’s two loans. It’s not complicated
2. That’s basically the same thing I mean do you wear pants or jeans?
3. Nope as the money is applied to the new place you’re buying which is not a IP

 

[jesusislord93]

@lindseym1013 Thanks for the reply

On point 2. My understanding was that if we purchased using equity then the loans would be cross collaterized as the funds would be linked to the exisiting property?

And if we drew out the cash, that enables a “break” between the two properties thus avoiding cross collaterizaton

I should mention that this understanding has come from a previous accountant who ended up confusing us more on this issue and I’m wondering now whether it’s been made more complex than it needed to be

 

[lindseym1013]

@jesusislord93 From a tax perspective, equity vs refinance and draw out cash has the same outcome which is it’s not deductible.

It is cleaner to keep the loans seperate so you can refinance them separately and with different banks if you wanted.

If you default on a loan the banks will come for you no matter how you structure it.

 

[jesusislord93]

@lindseym1013 Ok, and you can only keep the loans seperate when refinancing?

 

[calidan]

@jesusislord93 Cross collateralisation is a silly concern. You will have unlimited personal guarantees against both properties. There is no circumstance under which you would default on a rental property mortgage, give the investment property back to the bank and keep your main residence

 

[jesusislord93]

@calidan Thank you for that, although I am a bit confused/curious as to what would happen in a case where you would default on one loan that was cross collaterised

Would you just sell the IP to cover the debt and keep the PPoR?