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Maybe you should slow down and explain the situation and what it is you're trying to achieve?
Hmm, in that case I suspect your accountant is confused, maybe like me he's confused your past with your plans. The renovation is a capital expense incurred as an investment. If you borrow money for it, the interest should be deductible.
Well that's two different things. You're talking about living there while you renovate?
Think of the condition of the house when you buy it as the starting point. Work to bring a property back up to the starting point is a repair, work to improve the property beyond the starting point is an improvement. So even if its run down when you buy it, you're not repairing it, you're improving it. A repair cost is immediately tax deductible, an improvement cost needs to be depreciated.
Now when you talk about claiming the loan as an investment expense, I'd have thought the interest would be deductible, but I suspect you're talking about deducting the the actual principle?
Hmm, interesting. I guess I've only heard of situations where the existing fencing could be considered sufficient for the purposes of both parties.
As far as I'm aware you're never in an obligation to pay for new/replacement fencing. If you agree to fence then you need to pay 50%, but you aren't required to agree.
Now this might be different for different councils maybe? Or if there is no existing fence at all? I'd call the local council and ask them.
Wow, I read threads like this, and I'm so happy I accidentally stumbled onto a great manager. Great communication (both ways) regular inspections, verbal catchup after each inspection with a following written report. Advice if I ask for it. Happy to put rents up. Vets potential tenants and presents top few for us to choose from. As far as I can tell she's also responsive to the tenants so they should be happy. Did have one issue with a tradie she was using, but I addressed that with her and she took it on board.
So I guess I'd echo what others have said here, but from the opposite perspective. What I like about good property management is all the things people here have said annoys them if its not done, being done well. I just need to trust I'm going to hear what I need to hear in a timely fashion, that my wishes will be listened to and acted on, and that the PM is actively working for my benefit.
Jamie M wrote:If serviceability is really tight – look at fixing some (or all) of the loan. They assess the serviceability on fixed rates differently.That said though – you need to make sure you can afford it! Look at your income/expenses and make sure that it won't be placing you in any financial hardship.
Its very easy (and tempting) to ignore banks when it comes to servicability, but sometimes they're right. People (investors) have a habit of considering servicability in terms of exactly todays interest rates, with 0% vacancy and no unexpected expenses. I'm not saying anyone in this thread is guilty of that, I'm just reminding people that your calculations need to account for the future. What if rates go up a couple of percent? If you own multiple properties, what if more than 1 is vacant at the same time? If you're relying on personal earned income for servicability, what if you're laid off? How long can you keep things going while you look for a new job?
In my experience, I've had it run both ways. Banks refuse to lend me as much as I've been comfortably confident I can afford, and banks offer to loan me much more than I feel I could confidently repay. Its important to do your own numbers. Sometimes a period of consolidation might be better than expansion.
The only questions you should be asking yourself are "Do I want to sell? If so, for how much?".
People seem to get carried away when a developer knocks on their door for some reason.
Risk/Reward tradeoff at the moment. Just settled and rented out a nice 3 bedroom house giving us that, a block of 3 flats and our PPoR. Could probably afford another one, but right now I'd prefer to make sure we have comfortable reserves in serviceability, and start paying the PPoR down aggressively. Whilst the next movement in rates will almost certainly be down, over the next few years there's a risk things could get chaotic and they could go anywhere. Whilst the gurus talk about this being a great time to buy (little sidenote, but I've never seen the "gurus" say otherwise, whatever the market conditions), I really don't think theres going to be any particular growth in the next 2-3 years, so I just don't think there's any rush right now. Also my wife just took a fair sized paycut (for lifestyle reasons), and whilst we have our budget, I'd like to confirm its realistic before placing too much trust in it.
I do get tempted by a reno style project, but despite the hype of the aforementioned gurus, I don't think they're as simple as they'd like us to believe. A very small amount of renovation on the latest purchase show'd me that its not as simple to find the time to work on them as I'd like to think right now (2 very small children). Sure I could sacrifice time to make it happen, but tbh I just don't want to.
lifestylez wrote:Your numbers look mostly correct to me. Don't forget you can claim depreciation on newer properties which will increase your after-tax cashflow. For example, if your gross cashflow on the property is -$15,000/year:Tax Saving @ 30% tax rate: $4,500
$10,000 Depreciation @ 30% tax rate: $3,000Therefore your after-tax cashflow is actually -$7,500 and not -$15,000/year.
Just to clarify, you only get immediate benefits from tax deductions if they can be offset against income. In simple terms, this usually means if you buy in your own name. If you buy in a trust, you get to carry those deductions forward in order to offset against future profits, however for the immediate year you still need to cover the full costs (i.e., $15k using the example numbers above).
For a lot of the final show I really wondered how they'd handle a total profit of only around $10k. After months of contestants talking about how winning the show would be "life changing". And no, I don't imagine the other contestants got paid anything, it was a competition, the risk was to spend all that time and walk away with nothing.
For all the talk by property guru's about the strength of the Sydney market right now, there was an awful lot of discussion about how tough the market is during the finale.
Don't forget a depreciation schedule.
In an inflationary world, expect higher (perhaps much higher) interest rates, so if we get into that boat people will need to be in a position to handle increased repayments, be that from income, or from reserves. I've been reading a lot lately too, and I'm darned if anyone can tell if we're going into a period of hyper-inflation, deflation, or just more and more 'flat'ness, so I guess being prepared for multiple eventualities would be key.
You seem to be confusing independent with interdependent. Interdependent would imply the partners depend upon each other.
I don't mind them, but I don't get why all sites have a search criteria of 'more than' for everything other than price. If I want to look for 2 bedroom apartments, I want to look for 2 bedroom apartments, not 2+ bedrooms. Just seems like a strange criteria they all enforce.
Don't disagree with either of you. I guess I'd say calculated risk is good, but blind risk is bad. Its the people who just accept that what the banks will loan them is what they should borrow that scare me (for their sakes). Its like the people who hear that negative gearing is good and paying tax is bad, so they run out to buy the most negatively geared property they can find without putting any thought into what the actual goal is (making money).
That said, I was reminded the other day, the first property I bought was a 2br unit in Hawthorn (Melbourne) about 12 years ago now. I remember shortly after I bought it, another unit in the same complex came up for sale, and my (now) parents in law were visting my (then) girlfriend and I. They talked about how they'd always wanted to buy an investment property but didn't, but when I suggested they come to this auction and try to buy they shrugged muttered some excuse and changed topic. I couldn't help but think how much better their situation would be now if they'd taken a chance and bought that property then.
They're a little different than pig number 3 above since they do own their own home, but they never bit the bullet to invest. That said, it seems like some people buy any old property and any old price just to say they're investing, instead of considering whether they're actually good investments aimed at meeting specific goals or not.
itsandrew wrote:Nice allegory but it seems to be a bucket of cold water on aspiration.Kevin who then should own property? Are you advocating a return to serfdom? I'd be interested in your thoughts on this especially for the third little pig.
Andrew
I didn't interpret it that way, it seemed more a warning of the dangers of over-committing in a desire to have it all now.
A lot of people dont (or didn't) want to settle. I was on my 3rd PPoR before I actually owned a 'house'. I worked up to it. I know plenty of people who insisted that if they were going to purchase, it had to be a house in the area where they wanted to live.They weren't going to climb a ladder to get there, they wanted to go right to the top.
When I did finally buy my house, I went to the banks to see how much I could borrow. I then did the figures and thought "wtf, I can't afford to borrow that much". I didn't have a very extravagant lifestyle at all, but taking on that debt would definitely have cut into my standard of living, and left no room for negative impact on my commitments. So instead I figured what I would be comfortable committing to, allowing for rate increases and possible impacts to income.
A lot of people when I mention doing my own sums to work out what I could afford look at me in amazement. Its never occurred to them to spend any less than the maximum the banks tell them they can borrow. Now I've just settled investment property number 4 with safety net in both savings and serviceability, and they're still struggling to make repayments with no idea how they'll handle rate increases.
(Terry, correct me if I'm wrong)..
A contract is only unconditional after all the terms have been satisfied. If the deposit was a term in the contract that hasn't been satisfied, then the contract can't be unconditional yet. Check the wording on the contract.
angelinsydney wrote:2. I never used to believe in the concept of "a lifestyle I have gotten used to." But in my old age, I discovered it is true. People get use to a certain lifestyle. And it's really very hard to wean them off the cafe latte. So, here's the clincher: there's no easy way. You will go through withdrawals. From the caffeine, the late nights, the high heels, the hair dresser. But it must be done.Of course, this works the other way too. I saved the most money in my life straight out of university. I was used to living on next to nothing while studying, so found it easy to just continue that way. Over time my expenses went up, but those first few years helped set some good things up.
