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I think you need to do lots more research before jumping in.
Do you realise how much a $750K property will cost you to hold each week? With LMI and borrowing the deposit that's some serious negative gearing. Hope you have a high income.
madbray wrote:The strategy that I have been taught, through my parents & their accountant, is based on negative gearing & tax minimization. I have implemented this strategy myself and as mentioned in previous post I do have investment homes.
OH NO!!!! I believe tax minimization is the icing on the cake. It is not THE cake. Buying a property to lose money so you can save some tax just does not make sense.
madbray wrote:Furthermore, the accountant that i currently use (same accountant as my parents) has always advised against using trusts, and any other different structures. Therefore, my structure…if you can call it that….is very simplistic….my properties are in my wife's name, or my name…..dependent upon what was best at the time to minimize PAYG tax and potential Land tax consequences.
Best to speak to someone that knows about trusts (like Terry), not someone who doesn't like them. Did you ask your accountant to explain why he advised not using them?
Your payments would be very low and hence your tax returns would be very low. You only claim against what you pay.
You can have the rent go wherever you want. If your interest is low then you'll be cash flow positive and you'll pay tax on the surplus.
Speak to an accountant before you make any decisions.
What strategy are you interested in (or currently following)?
It depends what your goals are. One person will say 2 $500K properties, another (like me) will say buy more cheaper properties.
Some people like expensive negatively geared properties as they believe they'll get better capital growth.
Others like cheaper properties as the yields are generally higher making holding multiple properties much easier.
I also like cheaper properties because I want to retire soon (better cashflow).
Most investors I know are after cashflow for the same reason. If you don't need the cashflow and believe the properties will give you higher CG while paying the negative cashflow each week, go for that.
There's no right or wrong as everyone has different objectives. Some people also don't want to deal with multiple properties or properties they wouldn't live in themselves.
Lucky everyone doesn't think the same.
Yes you claim all costs of buying and selling.
You can set up a business if you want. Speak to a professional about the pro's and con's of doing that.
You work hard (at your day job) then you go home and work hard on your investing.
Nights, weekends, whatever it takes. When you are further along the line you may be able to go part-time or leave your day job but in the meantime be prepared to put some overtime in.
I can't see a viable reason why B would buy half a house to let someone live in it and not get any benefit. Unless it is a mother helping a child etc.
It's just like throwing money away. They are paying half a mortgage for nothing (well there may be CG).
No rent, no deductions!!
Are you saying that A is NOT living there? So is B living there rent free? Why?
In this case A cannot claim it as an IP because it has to be rented at market rent in order to claim tax benefits.
If A is living there this is NOT possible. A cannot claim it as an IP. To claim tax benefits it has to be an income producing asset. It is not therefore it is NOT an IP.
It can be very advantageous to rent out your PPOR tax wise.
If it is in a high yielding area you may wish to live in a more desirable low yielding area so you have the benefit of living in an area you can't afford while getting good rent for your PPOR.
I'm assuming you moved in straight away after the build. If so you can rent your PPOR out for 6 years Capital Gains TAX FREE (assuming you do not have another PPOR to claim).
While it is rented out you can claim all costs (interest, rates, insurance etc). Do the sums to see if it suits your circumstances. It often does..
Google "serviced apartments" and you'll find LOTS of info. Or "serviced apartments Sydney".
We looked at one in 2008 and bought a VERY SMALL 1 bedroom unit in Potts Point instead. The serviced apartments have gone up very little in 5 1/2 years. Our unit has gone up at least 50%.
LESSON learnt- ALWAYS have a lease.
Be very careful just cutting power. If you think this is going to drag on you could send her a letter saying she needs to connect the electricity ASAP. THEN cut it off. It's then her responsibility. But then she has a claim that she's paying elec etc.
Can you move back in, then force her out? It's difficult with you not in there. If you are living there it's just a matter of getting a boarder out (as opposed to a tenant). Much easier.
Otherwise this could drag on for years. Don't you watch Current Affair.
I feel for you. Forget the family connection. Do whatever it takes. She can go to public housing and cry "I've been kicked out etc".
Thanks.
I actually have one there and contemplated selling it. A few years ago there was no population growth predicted so I couldn't see what the driver would be for CG.
I guess the new infrastructure has changed that.
It is CF+ and I never hear from the tenants so I'm going to wait a little while. See what happens.
The Dark Knight wrote:I invest heavily in albury region.Why?
If it's under one title I don't see how you can split it.
Like a house that you live in and use a room for business it goes as a % of the total property.
You need to speak to a solicitor and a property accountant.
What's the land worth? The owner only gets $303,000 so it would want to be worth a lot less than that to make it worthwhile for the owner. And in the build time he has to pay rent somewhere.
Or am I misreading this?
You need to decide what the advantages and disadvantages are as per getting you closer to your goals.
We have one of ours on the market at the moment because it has jumped in price a lot in the last 18 months and I don't see a huge increase in the next 5 years.
Also as we move into retirement cashflow is king. The sale gives me that.
Look at what you have now (regarding cashflow and equity) and work out whether you will be better off in say 10 years than putting the money elsewhere.
5.8% is OK. If that is gross though you need to take out rates, insurance etc etc. But of course you have CG on top of that.
As you said though, some options take work. Only you know if you want that. To tell you the truth though I don't know why you are limiting yourself to 5 properties.
Reach for the stars!!!
I recommend you read "The secrets of the Millionaire Mind by T Harv Ecker. You can download it free. It will change your thinking.
There are a few meetup groups.
I go to this one. http://www.meetup.com/sydney-investor/ In the past they have been in the city, Chatswood or Baulkham Hils.
A few a year. There is no cost (besides your drinks and dinner if you want. Just turn up and chat. There are beginners and more experienced investors. Most are into property but not all.
There other groups that organise guest speakers though. Just do a search on Meetup.com to find what you are looking for.
If you want some structured type meetings you could go to these.
http://www.rightpropertygroup.com.au/homepage
They meet fortnightly at Rydges and Parramatta. The charge is $10 and they have set topics. It's a great way to learn the basics. Get there a little early to chat or hang around afterwards to meet like minded people.
You can learn a lot just by chatting to others. Sometimes what to do and sometimes some great stories of what NOT to do. I saved a lot of costly mistakes by learning from others mistakes.
I couldn't imagine any solicitor (for the seller) allowing this.
What's to stop the buyer putting options on thousands of places then later just choosing ones that are financially viable? Nothing!
Great points Mark. Especially with all the rooms not being connected.
Personally I think tiles throughout an entire house can feel cold and impersonal.
In warm climates I like polished floors but in colder places I like carpet in the lounge. I always have carpet in the bedrooms.
