What do you mean with experience?

You can just inform the agent in writing that you want to terminate the contract because the building inspection highlighted structural problems. You do not even have to tell them what it is.

Do your numbers and make a decision.

Be it be the right one.

Good on you Anne.

I would certainly advise you to read Steve McKnight’s latest book (0-260 properties in 7 years) and probably his 2nd as well (1mio in properties in one year)

In both he describes people who were exactly in your position and decided to sell. I know it is not very anti this forum where everybody encourages to use the equity in your PPoR. While this is certainly possible and what I have done (we are too attached to this place), I believe that financially you are in a better position to rent and use all your equity.

You are paying somebody rent who makes perhaps 5% yield, while you try to find much higher yielding properties. You will be in a much better position to access funds as you have more equity it is easier to service the mortgages.

Talk to a good accountant and a good mortgage broker. Especially the mortgage broker can run a couple of scenarios through his computer.

Good Luck

You definetly want to eliminate any ‘personal’ interest on your home loan.

I do not know if you have to sell off your investment properties to achieve that (you did not give the value and loans on those).

There may be other ways to achieve that. How long would it take to pay off your home loan if you refinanced and had all income paying off your homeloan, while the interest on the IP gets accumulated.

I presume that the only reason that two properties are cf= is the CG over the last years.

In general I think that your idea to move on is correct. I just would not rush it. Perhaps get rid of the cf- one first. Then you can use the equity in your home to purchase new, better yielding properties.

My first actions would be to do Steve’s financial tests:
Gross Rental Return
Return on Investment
Cash on Cash Return
Growth on Equity Return
Net Profit Percentage
3 second solution NPP> 3xInterest Rate
Profit ? 2x Interest paid
Danger Money Multiplier: Profit > 5x Risk Free Return

I suspect that your current property would fail most test.

Next I would consult a good accountant and MB and discuss the different options with them.

Then go out and locate deals that suit you better.

Hope this helps

Good Luck

I think if you have ideas on how to make the existing properties positive cf, I would go with that. You gain experience and it is always good to do something for your parents.

Another upside is that they are probably very willing to give you some starting capital if they see that their investment is making more money.

And the money really does ‘stay in the family’.

To set up a trust you should really talk to a good accountant. Tell him what you plan to do and ask him on the best structure. My accountant gave me two pages of pros and cons. The main ones were:

Pros:
– Asset protection
– Income streaming

Cons:
– Setting Up Costs (about $1500)
– Yearly Running Costs (about $1500)

For me it was the right thing as I can also stream the income from my company through it and make sure that I do not pay more than 30% tax.

Good Luck

Why don’t you tell him that 1/2 is not enough, you want at least 1/3 or 1/4 of the money.

I believe that you are not correct on the PPor Marc.

Check out the ATO website:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36878.htm&pc=001/002/026/016/003&mnu=9278&mfp=001/002&st=&cy=1

It states there:
To obtain full exemption from capital gains tax:

* the dwelling must have been your home for the whole period you owned it
* the dwelling must not have been used to produce assessable income, and
* any land on which the dwelling is situated must be two hectares or less.

My understanding is that you have to pay prorata CGT.

EG You owned your house 10 years and it increased $100,000 in value. The first six years you had no rental income. Then you rented out half the house for two years and the last two years you rented out the whole place.
Your capital gains tax would be
6 years = 0% of $60,000
2 years = 50% of 50% of $20,000 = $5,000
2 years = 100% of 50% of $20,000 = $10,000
Total CG to be included in your tax return $15,000

Hope this helps

Good Luck

Ruroshin,

I think if you try to sublet and use a PM to do it you will be skating on waferthin ice.

My advise either do it yourself and keep complete control of the situation or leave your fingers away form it.

Gooc luck

No, but maybe if you share your problem we can give you ideas on possible solutions

I think it is important to talk to a accountant and mortgage broker about this. You have to be able to clearly demonstrate that you used your loan on your PPoR for an investment.

You may have to restructure your loan to achieve this.

But in general you will be better off by first reducing your home loan.

Good Luck

You can definetly secure a construction loan against the value of the final project. The bank will lend you up to construction cost or 80% of the market value, whichever is less.

Their only issue will be servicablility. Even if you intent to sell them at the end of the construction process, apply with the intention of renting them out. You can always change your mind later.

The bank probably wants a letter from a real estate agent stating the likely market rent for the project and a valuation from a registered valuer (they may arrange this).

Another point. I would suggest to talk to a good MB (there are a few on this forum) about the different options. They arrange for the best solution for your needs and it does not even cost you anything (the lender pays them a commision). You have to be careful that you get the loan at residental rates and do not get classed as commercial.

Good Luck