Hello Forum People
I have begun to search for IP’s [cap] and made one or two offers in the area I am in. All very well and good, they were + CF, but I am becoming more concerned about investing in property as oposed to shares, due to the new land tax coming into effect on 1 Jan 05.
The new land tax is .4% of property purchase up to $100 000, which will mean:
1. less cash flow return, OR
2. even MORE work to get that $30 a week positive cash flow.[angry2]
It seems much easier to purchase good quality shares that have a current dividend return of 5-10% (at the right price), and any capital gain a bonus eg NAB.
Any thoughts?This is general financial advice and you should seek advice from a licenced financial advisor who knows your situation.
Shares are more likely to change price up or down due to their high liquidity.
Banks will not loan you as much money against shares as opposed to property.
Property can go down or the price can stagnate in between boom times.
Property can be invested in over a long time period where as shares may need to be monitored more frequently.
Fully franked dividends have 30% tax paid already and franking credits can reduce the tax you will pay on the dividend earnings.
Property gives you control of the investment and you can add value, this can’t be done with shares.
Shares don’t have tenants,land tax, insurance,rates, water, stamp duty or maintenance.
If you plan to hold the shares for more than 12 months you will get a 50% capital tax discount.
Shares could be a way of spreading your investment into more than one asset class rather than tying up large amounts of money in one property. With shares you need to assess your risk tolerance.
Speculative shares have a higher risk than blue chip type shares.
If you wanted to take out insurance for the shares you should study how to hedge your share investment through put options.
Shares can be invested into with smaller amounts of money like $1000 .
If you wanted to start investing in shares you should read books on share trading and start with small amounts of money while you are learning. You would need to contact a broker to set up a trading account or an online broker.Check the brokerage charges before committing to a broker.Also on the subject of Land Tax.
Here is SA, the land tax is calculated on the accumulated value of land. So the more you own the more you pay.
My agent has started purchasing properties for me in really weird percentages. For example, Property one is owned 99% me and 1% my wife, Property two 98% me and 2% my wife.
What that does is start up new land tax account numbers and provided we keep buying the low ends or under $100k mark no land tax for us. Even if we go above it, the land tax is not a great issue for the type of properties we buy.
Now if we had our entire holdings just as jointly owned 100% our land tax bill would be very painful I must say.
Byronent
Adelaide SAThe new land tax changes in NSW are miniscule in effect for many investors in rural areas. One property I have that grosses several thousands has land tax of $18.00 a year. Another with four tenancies will be the equivalent of at most $2.00 per week per tenancy.
I am very happy if these changes will keep people away from investing in NSW, as there will be more opportunities for me.
And as many people hold their properties through trusts they will find rate decrease from 1.7% to 1.4%, though this might be offset by increases in land values.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
