Forum Replies Created
I wouldn’t totally agree though about LOC. If you has the discipline and use the redraw to get money for purely investment purposes, the whole interest would still be deductible.
What would be interesting though is if you redrew the money for another IP, would you need to keep track of the how much of the loan is for which IP ??
In short, I would not touch an IP loan with redraw ever again.
Originally posted by Supa Freak:Hey Scott, I desperately need a new kitchen in my PPOR, anyway i can claim part of it due to the fact that we run our biz from home?
SF
Can you move your old kitchen to one of your IPs and claim depreciation on it ? This will offset the cost of a new one in your PPOR.
I noticed that a lot of people here recommend Gathrum Goss for accounting. In particular, the big boss, Dale.
I am fairly sure that Dale can’t possibly see everyone and in all likelihood he prob charges an arm and a leg.
Has anyone dealt with other less senior people in the firm ? Are they almost as good as Dale ?
Actually the answer is – BOTH ! … LOL !
My IP loan is a LOC with redraw and an offset account. For whatever stupid reason, I parked my monies in the loan itself. Actually, it was so I could actually see the amount owed being reduced (albeit temporarily). It was a purely psychological comfort thing which I am really regretting.When I set up the loan, I thought I could redraw the funds without affecting the tax status of the loan. Like I would only take out as much as I had put in extra, and not a cent more. But apparently it doesn’t make a difference to the ATO.
Yeah, I remember Paul C talking about the benefits of LOC, but I think he was referring to PPOR loans and not IP loans.
I think what Julia is saying is that for IP loans, having an offset account is better than LOC for tax simplification. You can move money in and out of the offset account without affecting the tax deductability status of the loan. While at the same time, reducing interest paid. Sorry if I misunderstood you, Julia !
This ruling is not totally obvious on the ATO website and I am fairly sure a lot of mum-dad investors are in the same shoes as me. They’ll probably only realise the implications at FY end when they pay their annual visit to the friendly neighbourhood accountant.
Glad to see that this line of discussion helps !
To prevent the mess from getting worse, I have stopped all parking of funds and only pay off the interest every month.
As the amounts transferred are not much in this case, would the ATO be lenient with me and treat it as an unintentional lodgement error ?
I have never been audited or dealt with the ATO, so I am not sure how strict they are. Are they anything like the US IRS in the movies ?
It is pretty ironic that the ATO rulings penalises my actions. Considering that I parked extra money in there to reduce interest on the investment loan, which in turn actually benefits the ATO by lowering tax-deductible interest.
You are right, there are a lot of transactions that I did as I deposited my salary into the loan and lived off it. So there were quite a number of redraws for personal use. Oh well, I’ll try to sort it out a bit myself before I go to an accountant.
What a bummer !
Let’s say I redrawe some money from my PPOR loan for buying a PI. For example, the loan is now $150,000 and the split is $100,000 PPOR and $50,000 PI.
If I deposited $1000 into the loan, can I choose to pay off the $100,000 PPOR part (which is non-deductible) ?
Thanks !
Let me clarify my question a little bit.
For capital works expenses less than $300 (e.g. wall tiles, light fittings, paint, etc), is it possible to depreciate it 100% ?
Or do I need to depreciate 2.5% over 40 yrs ?
Thanks !
For initial repairs and if the cost of the paint is less than $300 (i.e. minor fixes), does that mean I need to depreciate it @ 2.5% over 40 years ?
I don’t think that is totally true all the time.
For example, the place I am living in now is a new estate and the value of a house like mine has gone up in 2 years from $175K to $280K.
I guess its because outer new estate prices start low, there is more room for upward price movements.
That’s a good point about being on the same page, Derek. My wife and I suffer from differing views when we look at properties.
She has a higher expectation of the place she would like to rent as a tenant, so the houses that she likes tends to be of a higher quality (i.e. newly renovated).
While me on the other hand, have a much lower expectation, so a plain liveable place is good enough for me.
IMHO, if your intention is to have it for a PPOR and rent it out later, the best value would have to be in a new housing development like Caroline Springs, Cragieburn, etc.
Reason being to buy land and build a house on top of it is cheaper than what you would have to pay for if you bought a new-ish house in an established estate.
Capital gain is also better too (i.e. higher rent as well) and you are lowering your mortgage at the same time. So when you do finally rent it out, it will be +ve CF from day 1.
Yeah, Kay, I know what you mean. Just that after a month of searching, I still haven’t come across a property that would match your criteria. Probably because this will be my 1st regional investment and I do not want to go to far away.
So I kind of lowered my expectation a bit, but still +ve cf … [happy3]
I believe that this baby step will help me to earn a lil’ bit of cf while still enhancing my knowledge and experience.
I am almost as new to this as you and I was in the same position as your husband.
By nature, I am not too high a risk taker and I kept telling myself I wasn’t ready to start because I did not know enough.
But eventually I managed to get my bum of the seat a month ago and started going for inspections, exploring areas, etc. While I still haven’t bought anything yet, the experience and knowledge that I have picked up wold never come from any book. Not to mention that networks that I am slowly establishing.
In short, go out and start looking while at the same time continuing to read books, magazines, etc. You don’t have to buy anything until you are totally comfortable.
Originally posted by Phil:I have found my dream property but I can’t buy it yet because I’m still building my last house. Can I put in an offer but have a 12month settlement period?
Thanks
wow … You are still building your home and you found another dream home ?!
Reminds me so much of my wife when we were building our current home and she saw another house that she wanted more !
Thankfully, I managed to keep that one a dream. [biggrin]
After looking at the returns of a number of properties, I noticed that to achieve +ve cashflow I would need a gross yield of 7.5% and above (assuming 20% deposit).
I now use this as a general rule of thumb when looking at properties and assessing if they have the potential of being +ve cf quickly.
LOL acey ! .. [biggrin]
Reason why I posted this was that I tried really hard on Google but could not find anything substantial. Maybe I am searching incorrectly.
But I guess no news is good news sometimes !
Originally posted by westan:i get ones like that all the time, now days i don’t send any money.[biggrin]
westanDoes that mean that previously you have sent money before ?? … [wink]
I’m a bit confused when you say no capital is required. no money is needed until you find something to invest in ? Or is this like a research team ?
I am no expert but I actually had a friend who was part of such a team. They were going well for a while – bought a few places and made some money. Then some people had to leave for various reasons (e.g. getting married, lost interest) and some people weren’t putting in their fair share of work, etc. So after a while, it just wasn’t workable and everyone was totally stressed out. I think they have sold everything and distributed the earnings / losses.
In summary, its good if everyone is fully committed and willing to share in the hard yards. But for a team of 10 or more, it is pretty unlikely so have a good exit strategy planned.
