Forum Replies Created
Hi Simon,
Thanks for taking the time to post this update – sounds like “All’s well that ends well” so, well done you!!The bloke could have been kosher re “family health scare”, but it is always scarey when you “don’t hear from someone”, eh? Smart move reporting it via Gumtree – seems to have put the cat amongst the pigeons and had him scrambling to update you. ;)
Great that it didn’t need to proceed down the Ombudsman path.
Benny
Hi Sean,
Hmm, I hadn’t heard of politicians selling off their investment homes. Do you have any kind of source (e.g. news media article?) re that? It sounded from your words that someone had alluded to it, so maybe no direct references – more of an allegation eh?Re your comment about “banks reducing the number of Interest Only Loans” the article here talks to that:-
https://www.propertyinvesting.com/apra-now-officially-restricting-interest-only-loans/In essence, it seems the “hot” housing markets of Sydney and Melbourne have brought this on. The RBA wants to be able to stimulate the economy, but it can’t do that without further adding fuel to house prices. Thus APRA has stepped in to regulate things a bit – and that will hopefully cool the housing markets a little, even while the economy picks up. Let’s see what happens….
Benny
Hi RMAA,
If you were able to share some actual numbers (e.g. what was the Fixed Rate, what is it now, and even an idea of how long you would have fixed, etc – whatever you feel comfortable sharing on a public forum), I would certainly be interested to hear further comment from one or several of the MB’s on here.With the wealth of knowledge these folk display on here (including being fully aware of all recent APRA changes) I would think some brain-storming could turn up even more good value, both for you, and for others who might be in the same boat.
How about it? Care to share? Who knows where it might lead, and the ideas that may spring from it. I am aware that some of the big 4 don’t use external MB’s anyway, and it could be that you have NO option re “going elsewhere”. If so, then let’s hear that from you and our MB’s so we all may learn more of the traps that are out there awaiting us….
Benny
Hi Frank,.
Sorry, I thought I had replied to this – in short though, I prefer an older house to a duplex. I am also struggling to get my head around a purchase price of $950k – that just seems insane to me, but then I have only ever bought in Brisbane and surrounds.
Steve would say “Buy problems and sell solutions”. In buying a newly built house, you are buying a solution. As you said, in ten years you will be selling an old duplex, but if it is in a good area (I’d hope so, for that amount!) then it will still have lots of value.
But, what if you bought an old house instead for $850k? Will it have bigger land? You will have saved $100k that could go toward a reno, and/or it might even take the sting out of sub-dividing the block and selling or building on the back of the block (??) Again, it depends on you, your skills, your goals, and your serviceability.
A house puts a few more metres between you and your next door neighbour too – unlike a duplex, where they pretty much share your land. Let’s see what others think,
Benny
PS I don’t know who is marketing the duplex sale, but have you used the “cooling-off” time to check for other comparables? i.e. is that purchase price “about right” for that area of Sydney? Or are most other duplexes less costly, and by how much? If the latter, have a careful look at whether you really do want to go ahead after all…. How much would you save by buying through another marketer? ;) Have you done your due diligence on the company selling these?
PPS I thought I had answered it previously – about three weeks ago, here:-
https://www.propertyinvesting.com/topic/5034548-semi-duplex-v-house-cg-rate-same-or-different/Your question was slightly different, but the basic tenet is the same.
Hi Sark,
Thanks for the clarification. From these extra words then, a few more questions spring :-
1. You seem to understand that the Equity in IP1 and 2 must be “available” – although you don’t include figures to demonstrate this, your comments re “LVR for both IP1 and IP2 will be 80%” gives me the impression you have this covered. So, “check!”
2. I can’t think of anything substantially different in doing it one way over the other – but I am not a Mortgage Broker – could there be some extra “value adds” that one of those venerable people might be able to add here (consider next point, and options it might provide…)
3. You don’t mention lenders – could it be that you might look at mortgaging the new IP with a totally different lender? If so, that might lead to benefits that you perhaps haven’t even considered (e.g. not all eggs in one basket, better rates or lending rules, easier future loans from a different lender, etc). And there you are getting right into the sweet spot of the Terryw’s of this world !! MB’s know this stuff backwards,
Benny
Hi RMAA,
I think your rant is totally justified – I would be seething too !!Seeing that Jamie has replied, I would suggest opening the bidding with him to see if you may be able to “have your revenge and eat it too” (excuse me while I mix metaphors in midstream!)
e.g. If you are in the situation where you are able to refinance away from this gormless mob, and into a new situation (hopefully with better rates, but hey… stick it to ’em anyway, as it doesn’t seem like they deserve your ongoing business), then initiate a chat with Jamie (above) about your options.
Once Jamie knows more of your current situation, who knows – he may be able to provide GAINS for you, even while you kick some butts. Revenge is a meal best served cold – so with your rant over, give Jamie a call just in case he can serve up a cold snack for them, while he fills your plate with a hot meal!!
;)
Benny
Hi Shehan,
It always amazed me just how many different options become available to me when I talked with “someone who knows”… and when it comes to property finance, a Mortgage Broker is the way to go.Of course, there are brokers and then there are Brokers (some buy a franchise and learn little more than what their franchiser teaches them, mainly selling to “Mums and Dads” so they don’t get to learn the intricacies of one who deals with investors). But pick one of our helpful Brokers on here, and I’d be quietly confident that you will have someone who will be a full bottle on so many aspects of lending that many more options may become available to you.
Consider opening the batting with Ethan (above – check his signature) who has already put his thoughts there for you to chew over. It could well be that you have options you just don’t know of (yet).
Benny
Hi Sark,
I was wondering which is a better option. I have two IPS which have equity around 200K. I can service only one more loan of 600K. Should i use all of my equity and borrow the remaining 400K from new loan or should I just get the 10% equity and borrow remaining 540K from new loan.
In the long run which would be a better option
Since you are talking about “using all of your equity” vs “using just 10% equity”, it strikes me that you are to be borrowing the same total amount anyway.
Am I right? If so, then (like Terryw) I see no sense in you paying LMI unnecessarily.
If I am not right, then please add some more words around your meaning of “using all of your equity” – e.g. do you already have an Equity loan in place that we don’t know about (???) so, to you, it seems like you are using “cash” rather than borrowing more.
Benny
Hi Keith,
Also I was asked to sign the buyers declaration about my price being final even though we are not in a multiple offers situation. Is this OK?
This sounds to me like a “function of that particular agent” rather than a normal way of doing business. Is this one of the “Jenman approved” ways, perhaps?
I was wondering if there were any rules around the timescale that an agent had to abide by once a contract was signed by a potential buyer to present this to the seller. I have an agent (QLD) who is finding every trick in the book to delay presenting the contract as she is waiting for other offers to come in (and there aren’t any at the moment).
Have a read of the REIQ website (Real Estate Institute of Qld) – they issue “guidelines” around how an agent should act, but they are known up here as a toothless tiger !!
As far as I am concerned, the agent will be working for the seller (as always) but then, that SHOULD include “presenting all offers in a timely manner” and letting the seller make up their mind re whether YOUR offer is good enough, rather than taking the opportunity away from the seller. Of course, the agent might know the seller is away for a week, and to “hold all calls” (or that might be what they tell you) – but then, don’t we have mobile phones?
This sounds like a good time to mention adding a “sunset clause” to all of your offers (e.g. “this offer will stand only until 4pm on xxth of May 2017 – beyond that date/time it shall be void”). It is a good way to get an agent like this off their butts and doing their job for the vendor !!
Oh, and do get your solicitor to provide you with a “sunset clause” – that one of mine is unlikely to be a “right and proper clause” to use.
Benny
PS Maybe call the agent to suggest you should come in and ADD a sunset clause to the contract. ;) See, if the vendor hasn’t signed it yet, you should be able to do anything you want, including tearing it up !! Maybe suggest THAT one to the agent – their answer could be quite telling !!
Hi TheBish,
A quick search brought up this thread:-
https://www.propertyinvesting.com/topic/4404134-anyone-else-spooked-by-this-talk-of-removing-negative-gearing/Look at the dates, and you will see that Labor was in power (the Gillard Govt.) and yet, with all of the clanging and rhetoric, that Govt. made no changes to the laws around negative gearing that existed at that time (and still now). Probably for many of the reasons outlined in some of the replies to the thread.
An interesting read…..
Benny
I agree totally with your results Terry. It made me sit up and take notice !!
Did you try doing the 5% one? Even that tiny amount made a HUGE difference to the take-home amount. It took nearly 40% off that $1m figure !! When expenses compound, they have a massive effect too.
Benny
Hi Simon,
Note I am not an accountant or similar – so this are what I “think” is the situation:-If I purchase a ip & Reno am I up for cgt from day dot
No CGT until you sell – but (what I think you are meaning) are you wondering what Cost Base that CGT is calculated from? As I understand it, the Cost Base is calculated from the Purchase Price, Costs of Purchasing, plus any Capitalised expenses (e.g. the reno you are just doing). As an example, let’s say you buy for $400k, it costs $30k for Stamps and/or other purchase costs, and then you spend $40k on a reno. The cost base would therefore be 400 +30 +40 = $470k.
Then, when you sell it, the price you got, less selling costs is used to determine the Capital Gain. e.g. you sell it for $620k, and it costs $30k to sell, so $590 less the Cost Base (470) is your Gain. You then get taxed on $120k (or 50% of that if owned for more than a year) at your Marginal Rate.
That’s roughly it – other things do come into play, but that is where more advice is needed. e.g. other Capital Costs you might expend during the years you hold the property, and there seems to be something else involving Depreciation that I am not sure about – perhaps others can step in with some thoughts there….
or can I get a valuation done before it is rented after work is completed?
You can choose to get a valuation done any time you like – I don’t believe it would affect anything re CGT or the calculation thereof – but hey, I could be wrong…. let’s hear from others on that, as I am still learning too…. ;) And there might be other benefits of doing such a val (unrelated to CGT).
I hope that is some help,
Benny
Hi Bish,
Terrific title – seismic it would be, indeed – but when exactly? That’s the question….Good question Nigel but that’s not what I think, that’s what the Labor policy clearly states. How they do that – I’m not sure but I’m assuming they know a bit about when they can and can’t make the policy effective from.
Labor aren’t in power yet – but then, the LNP are hanging on by their fingernails (what was their majority again?) Doesn’t take too many by-elections to tip this whole apple-cart upside down. THEN watch out !!
I wonder though if this is more a “Look WE have policies, not like that other lot!” from Labor, and they are getting in ahead of the budget.
Unfortunately, this appears to be yet another knee-jerk policy that Labor are famous for, with lots of unintended consequences lining up at stage left, ready to come marching in once implemented.
Still, it is good to have our situations all thought out in advance. Could still be a couple of years away, or it could be 2018 (too soon for 2017 methinks).
Benny
Hi Simon,
It depends on where you are going with this. I had an occasion to do similar and I chose the slider, as the house layout and location suited a possible “home office” – but could also be another bedroom, giving me, or the tenant, choice. The room created behind this front room became a study (but could also have been a “backroom” for the office – filing, storing goods, computer setup, etc).
If your situation doesn’t suit such an option and was simply to be an extra bedroom, then maybe you don’t need a slider.
Benny
Hi DM,
Sounds like you are doing pretty good. And good on you for pointing your friend toward what could be a better direction for them. The possibilities re going for IP’s first always appealed to me (after crunching a bunch of numbers), but as I already owned a PPOR, we just went from where we were.
But, if these friends of yours have an option, why not look at it? Perhaps point them toward this post:-
Note that the answer provided to “Which is best – IP or PPOR first?” in this example is purely from a financial perspective. There is always “another side to the situation” that this post doesn’t go into. Still, I hope some of the points made in there get your friends thinking of their options !!
Benny
Hi Anna,
I can’t point you toward any specific company – but I wanted to share some very useful words that came to us recently from someone who has years of experience in the Insurance Industry. You will hear that from his words and the ideas he has presented here for us.https://www.propertyinvesting.com/the-12-most-common-pitfalls-when-insuring-your-rental-property/
I was astounded on first reading his comments, and I am happy to point you to them, so you too can be more aware of “what to look for” when hunting down insurance.
Benny
Hi Zehra,
would you say more argument to fix tho ?
That is quite dependent on your circumstances – financially it may be beneficial right now, but then it “locks you up” in a Fixed Loan, and the costs of breaking them can be HUGE !!
Like, don’t go Fixing a loan if you have any plans to sell within that 3 year period, or if you think you might need to re-finance within those 3 years. Is your current income secure (are you a PAYG employee, and is the company “in good shape” and liable to keep on employing you for the next 3 years – or are your skills such that you can “walk into another job anywhere”?)
Also, be prepared for a sudden jump in Rates when exitting from the Fixed Loan in 3 years time. I used some a bunch of years back and the 6.1% Fixed rate ended in early 2009 just when Variable Rates had gone to 9.10% – no, it was not a 3% increase, it was around 50% !!! OUCH!!!
I am sure there could be lots more reasons that Terry can add too, especially with his knowledge. The above are just a couple of the more well-known reasons to fix, or not. Certainly, now is a way better time to fix than 2009 (when at 9.1%). Unfortunately many “Mums’n’Dads” DID fix at 9.1% back then – they couldn’t afford to pay higher, so they locked in at that rate. And then the RBA realised they had got it wrong, and the Rates were on the way down to the “lowest in history” by the end of that year.
Fixing right now is financially not too bad at all – just be aware of some of the traps, especially the Break Cost.
Benny
Hi Rickey,
I would like to find out if I am also exempted for this newly built home (as I read somewhere that the overlapping time of six months for 2 PPOR can be applicable) Thanks again.
Ah, there you go – that is the real question – and that is one that I will leave to Terry.
First, here’s a few “reasonable man” thoughts thrown in that might apply in your case:-
I have heard of that law – I suspect it applies where you might have bought another existing home and then took several months to move into it (for one reason or another).
In the case of a new home being built, there would be less likelihood of any problem as you cannot move into any new place until it is habitable, so if it takes more than 6 months to build, so be it. But, if you delayed moving into it once it is built, then there could be some extra things you need to know about CGT – and that is where Terry comes in.
Benny
Hi Rickey,
You wouldn’t be assessed for CGT on the new house until such times as you were about to sell it, and any CG Tax at that time would depend on “what else had happened between now and then”.What are your plans for the OLD home though? Are you planning to sell it? It sounds like it might be CGT exempt based on your words – but I am not an adviser, so don’t take my answer as gospel. It also depends if it was your PPOR (Principal Place of Residence – or home) for the whole time since you bought it. If not, then there “might” be some CGT to pay when selling it, depending.
Benny
Hi Jaxon,
An interesting take on the question. There I was, about to say to myself “Jaxon just doesn’t understand…”…………. and then it hit me – you are right Jaxon – we really don’t know WHAT might happen in the next 10 years.
Thinking in terms of a Govt that wants to squeeze more people onto smaller blocks of land (maximise urban infill), perhaps laws might be passed that makes having a large block of land financially disadvantageous.
Just like what happened with cars in the 70’s when the first oil shock hit – no-one wanted big engines after that – everyone flocked to buying small engined vehicles as the huge running costs hit home.
In this case, any financial impediments (taxes) that might be imposed on those owning larger blocks of land could swing the average punter toward buying only homes with small blocks. Supply vs demand would then do the rest to push the “house on 600m2” way down in value compared to a “duplex with 300m2”.
Or, thinking again, maybe that could push people even more toward apartments (with really tiny land allowances). As Jaxon said “It depends on a bunch of things” – one of which could be that Govts might go overboard attempting to affect free markets by “steering them too much in one direction”. Any bets that Govts WON’T do this? And if they do, which direction would that be?
Well said, Jaxon, your response was a good catalyst for further thoughts,
Benny
