Forum Replies Created
Daisii,
It’s true, your husband would be able to claim a bigger deduction if the property was all in his name. However, if you to change the ownership it will trigger a stamp duty payment, just like selling your half to him.
The other longer term point to consider is if/when you plan to sell. Lets use the following scenario:
1. You’ve held it for more than twelve months in joint names.
2. Your husband earns $50k pa, you earn $0
3. You decided to sell for a profit of $60k (after fees).Scenario 1- Joint names.
1. you split the capital gain and receive the 50% capital gains discount.
Your capital gain = $30k
Your taxable income = $0 + $30,000/2
= %15,000
Your tax = $1560 (approx)
Profit after tax = $13440Your husbands capital gain = $30k
His taxable income = $50k + $30,000/2
= $65,000
His Tax= $18360
Income + profit after tax = $46,640
Total combined Cash flow = $13440 + $46,640
= $60,080Scenario 2: Property in husband’s name
All the capital gain is taxable in his name
Your income $0, tax $0
His income = $50k + $60,000/2
= $80k
His Tax = $27,792
Income + profit = $52,208
Total combined profit = $0 + $52,208So by holding it in his name only, you would be $8,000 worse off the year you sell. You need to determine if the yearly tax deduction plus the price of stamp duty to transfer is greater than this.
Hope that makes sense, sorry it’s so long. If you can’t follow it feel free to email me some specifics and i’ll plug them into a spreadsheet i’ve set up for this stuff.
Brett.
[email protected]btw, i used a free tax withheld calculator from the ato web site to calcualte the tax.
This isn’t adviceIn WA anyone can buy the ‘Urban Renewal’ properties. Caz, you still buying in Kwinana? I’m building an IP on a block in Parmelia, Department of Housing sold it to me 6 months ago for 27k with 6k worth of building incentives. Now these’s no full size house lots avaiable unber 40k.
I think there’ll be a heap more growth there as they progressively build the bus station neat the shopping centre and then the train line in three years, and it still has good rental yields (not quite 11 second stuff).
Brett
make sure you check if that rent includes GST. if it does, then the ‘actual ret’ is 9.1% lower.
People,
A quick word of warning about the WA reginal trends and indicators docuemnts. Watch out for the population growth projections! There seems to be a lot of areas that have exactly the same growth rate (eg that of the state as a whole) for future projections. Someone seems to have done a striaght line projection over much of the state.
I’ve been through about 30 of them with the same intentions as you guys, only a few (the larger towns/ areas) had actual projections for the region.
brett
I think the issue of when/ how a finders fee is paid is irrelevent in the long run. If someone gets a deal through this forum and then doesn’t pay what they agreed, I think it would be the last deal they did… a few posts and public naming would sort them out.
It all comes back to integrity, honesty and win/win.
Brett
Who was the agent if you don’t mind naming names? I live and invest in Mandurah and would love to add them to my ‘steer clear of’ list.
Great storm wasn’t it? I was silly enough to try and play golf Sunday morning.
Thanks,
BrettI’m interested. please send me some more details of the property to [email protected] and also include details of what you’d like out of the deal.
thanks,
brettA friend of mine has eight house in Port Pirie (he used to work there). Very good rental demand, long tenancies and steady capital growth (4% pa last three years).
BUT… The main industry in town in the Port Piries Lead/Zinc smelter. This was owned by Pasminco, now owned by the banks after Pasminco folded. This smelter is certainly in it’s twilight years.
Port Pirie’s future relies heavily on the go ahead (or not) of a proposed new Magnesium refinery. Given that the QMag project in Qld has been a completed disaster (they stopped building nit when they ran out of money), it could be hard for the SA one to get off the ground. check out http://www.mgil.com.au
An investment in Port Pirie is really an investment in magnesium… do some research on it.
Brett
If you clear it with your bank, you can ask your bank/ broker which valuer/s they use and arrange the valuation yourself.
In WA you need insurance from the date of settlement.
Brett
Just thought I’d include a couple of other points:
1. Why focus on which is better? -ve gearing is a good investment for certain people, not better or worse than +ve, just different.
2. Most business ventures start off losing money, but with growth turn positive, then very positve. It’s harder to end up a billionaire without putting in any ‘hurt money’.
3. Not everyone wants/ needs extra cash today. For me 75c in the dollar capital gain (post tax) in 12 months is better than 50c in the dollar (post tax) income today.. and always will be unless inflation hits 25% pa.
4. Consider the time frame of the investments. I do my numbers based on 15-20 year holding periods. Nothing I’ve bought will be -ve cash flow after five years, so it generally comes back to capital growth ability as the main deciding factor.
5. “Don’t put all your eggs in one basket”. I’m working on having at least three sources of income, 1. +ve cash property/vendor finance, 2. capital gains, 3. a business totally unrelated to real estate. If one falls over i’ll still have two legs to stand on (see The One Minute Millionaire).
Anyway, that’s my 2c worth.
Brett
For the record I have 4 properties, currently negative, but will go slightly positive when construction on two of them is finished.
To say you don’t have time will be a self fulfilling prophecy.
Ventura,
If you/ your friends are still keen, please send me an email. I might be able to help them into a house of their own.
brett
[email protected]check what LVR you can get, commercial loans are generally 70% max, some go to 75%.
Your comments about risk are noted and have been considered. One point to note on the risk side is that a director’s assets are fair game when you are sued anyway.
My own position is such that I don’t feel too exposed. I’m a consultant with good PI insurance. Damages are limited by contract to haveing to re do reports, which would consume time, not assets. I have a good accountant who’s happy with the set-up. The long term objective for the is to stop trading (when there’s enough passive income).
I have opted to go this way for cash flow reasons. I can buy stuff for cash and have ~6 months to finance it how i like before i pay my company tax (which is what paid for the purchase).
Regards,
BrettThere’s absolutelty no good deals in WA. I’m over here,[
] trust me. (well maybe there’s a couple, but don’t want to share)Seems interesting that a lot of people are concerned about prices dropping. Personally, as a long term investor, I’d love to see them go backwards for a bit.
The people all over IP home-opens trying to get into the market now will work well for us when it turns… they’ll all be trying to get out. Think of the opportunities!
I love the Herd Mentality. [
]I’m developing a couple of things in WA. One thing to watch is the difference in prices now and when you complete the development. Selling off the plan in a rising market can hurt you, particularly if you’re only doing small projects and don’t need the pre-sales for any finance arrangement.
I’ll give an example:
Triplex block in Mandurah, WA.
Purchased 18 months ago, yet to build (other projects going on).
Feasibility unit sale price at purchase of land: $169-$179k.
Current similar unit sale prices: $200-260k.This will double my profit for the deal.
Other interesting point with developments is the land appreciation aspect (maybe not for rural stuff). I bought the block for $109k, valued 2 months ago at $165k. This growth in land value can mean that no further cash is required to develop the units.
I’m starting to factor this growth in land value into development plans. Rather than rushing in to develop straight after settlement, waiting for 12-24 months can make a big difference to the numbers (if you’re in a rising market and can afford to carrying costs). Not exactly cash flow postive property, but one deal like this a year can yield $90k+. Thus, less time required overall.
Regards,
BrettTerry/ Richard,
thanks for the feedback. Both comments highlight the things issues I’ve tried to get around.
1. Directors + PG: Not much good as I’m sole director, with all income sourced through the company.
2. The company is technically a trading company. I’m a professional working for my own comapny, basically a sub-contractor.In response to why buy through the company, it’s because I’m accumlating money there by only taking half the earnings as a salary. By doing this i invest with cash that’s only had 30% tax paid rather than 48% tax.
I’m getting finance now, as I’ve just got my second years financials. Further investigation with my mortgage broker has revealed the hold up has likely been the LMI guys rather than the banks themselves.
Thanks,
BrettI think there’s value in the off-set/ Credit card set up if you spend a lot. My partner and I spend about $5k a month on our card, so that means we’ve got $5k not being charged interest each month (interest = $25/month).
With our fixed monthly repayement, we pay on average $25 less interest and $25 extra principle. This should knock $9k interest and 1 yr, 5 mths off our loan period. Not huge, but a year without a mortgage is better than one with it, and no change in spending was required.
] trust me. (well maybe there’s a couple, but don’t want to share)
]
