Hi Steve.
Bought your book and enjoyed reading it. Very informative. It covers a few things I had not taken into account which leads me to my first question.1/ Re: CGT and depreciation. I am not buying to sell, but eventually for sound reasons I may need to do that. You give an example that depreciation is only a deferment of tax and I understand the way you have justified that. But if you keep the property for more than 1 year (as I would be planning to) you would only pay tax on 50% of the depreciation benefit, and possibly at a tax rate which is less than when the benefit was obtained. Therefore (assuming you are in the same tax bracket) there is still a 50% benefit in any depreciation claimed. Am I right in this assumption?
2/ Re: P&I or IO loans. I am not sure what your reason is for preferring P&I loans (other than forced savings for those who can?t save). In both cases you pay the interest, in one you are forced to pay some principal also, in the other you can bank the same amount of the principal in an offset account with the same end result. In IO you can withdraw your extra money, in P&I you can access the extra equity and use it in the same way, but it is easier to be able to access cash. Have I overlooked some advantage with P&I.
3/ Although prices have risen a lot, for the sake of this example wouldn?t it be better to have one house rather than four for a total of say $200k value and assuming rental +ve cash flow was $60 a week in total either way. By buying four you would have 4 lots of conveyencing and potentially 4 times the maintenance/repairs.
4/ Positive cash flow of $15-$20 per house: A lot of people appear to be only getting $15-$20 per week. Is it worth the risk for this amount considering a minor repair or maintenance issue could swallow the entire years income in one go. And what if interest rates went up just a little, you would end up negatively geared. Or if you were unlucky to have a vacancy of 5 weeks and normally received $200 a week, there goes your annual income basically. From what I have read on this forum, in magazines and on other forums, there are a lot of people in this borderline situation. Have I missed something, I?m trying to take a lot in all at once?
Thanks
RenoI vividly remember giving my thoughts on these 4 topics. But it seems to have disappeared.
Confused.
Yack
I had that same thought, but think that maybe we have both replied to another one of a similar nature in teh same forum room, and also had read this post a couple of days ago and they seem to be mixed up now!!!!!!!!!!![upsidedown]
Cheers
Leigh KThanks
Yak and Leigh, you are not losing it. I had the same message in general questions but received no reply from Steve so added it hare as was suggested – doesn’t look like Steve will reply.
Renovery important issues – hope Steve has the time to reply
If You never never ask, you’ll never never know”
You might be lucky and get a reply from Steve, but he’s been extremely busy of late.
Also, you’ll find that a lot of people don’t even read long posts.. short and sweet posts seem to get replies faster. You might want to split out the 4 questions into 4 posts.
Originally posted by reno:
2/ Re: P&I or IO loans. I am not sure what your reason is for preferring P&I loansSteve’s Grandpa had a saying which went a little something like “You’ll never go bankrupt if you don’t owe a cent”
Steve has a saying “If you have a plan for getting into debt, also have one for getting out of it”
3/ Although prices have risen a lot, for the sake of this example wouldn’t it be better to have one house rather than four for a total of say $200k value and assuming rental +ve cash flow was $60 a week in total either way. By buying four you would have 4 lots of conveyencing and potentially 4 times the maintenance/repairs.[eh]
There is no answer to this.
If a deal is positive cashflow, it’s positive cashflow. If there are four of them, then bonus.Maybe it would have been better for Steve to have less properties, but more expensive properties, but we all agreed that “From 0 to 13 properties in 3.5 years” wasn’t as catchy as “From 0 to 130 properties in 3.5 years”[wink]
The reason was probably because at the time, there were a lot of cheap positive cashflow properties.
4/ Positive cash flow of $15-$20 per house: A lot of people appear to be only getting $15-$20 per week. Is it worth the risk for this amount considering a minor repair or maintenance issue could swallow the entire years income in one go.You ask – Is it worth the risk?
If the deals which you’re coming across provide $15-20 per week cash surplus, and if this is too much risk for you, then don’t invest in these deals.Brent Hodgson
PropertyInvesting.com
Admin ManagerI’m going on a property buying tour!
Want to receive the e-mail diary of my trip, hear about some of the great Positive Cashflow deals I find, and perhaps discover some great opportunities for yourself? e-mail or PM me!
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