I did try to calculate as well, just to ensure the calculations are correct. Tried it a few times, seemed ok so I stopped counting. Do you guys check regularly?

Elisey, would be interested to know how you go, whether there is any mistake.

Thanks,
Catts

Hiya,

I don't know much about Land Tax, but this is my 2cents worth:
1. OSR does send valuation March – May but your property is only valued every other year or even longer depending on the zone. But definitely not gonna get the valuation notice every year.

2. OSR calculates your tax based on their valuation and a specific formula which includes threshold and PPOR. It is only negotiable if you disagree with the land valuation, which you need to lodge a complaint on asap.
 
3. ATO's tax is self-assessed ie. you tell them what income you have + allowable deductions – tax you already paid during the tax year. The balance is your tax bill / tax refund. The allowable deductions include your Land Tax.

4. It is not true that OSR get on to you if you have >1 property. As soon as you are over the threshold and a Land Tax becomes payable, you will get a notice letter from them. However, this is only for investment properties.
For example, if your ownership on a property is 5% and below the threshold, you will not get any letter. As soon as it becomes say 50% ownership ie. over the threshold, they'll  be on your back. And they will know the change in ownership as the lawyer's paper work flows to them.
Another example is, if your PPOR becomes an IP. So still only 1 property but now over the threshold.

Hope this helps?
Catts

Josef,

ATO will only approve your PAYG Tax Variation based on your previous year's tax return. if you did not get any tax return last year, you would not get any tax variation this year. That also means, if you used your IP as PPOR last year you wouldn't be able to claim your IP losses for this year's tax variation.

Besides, the PAYG Tax Variation only helps with your cash flow, but doesn't solve your negative gearing problem ie. you will still lose money.

The only ways to make it positive are:
1.  to reduce costs – anything you can reduce. Maybe self manage your property rather than use a property management company?
2.  to increase income – can you increase rent? Rent will increase through time. So eventually your IP will become positively geared. Question is, how long is that gonna be and can you absorb the losses until then?

What ever the self proclaimed experts tell you, it is mathematical logic. Either reduce cost and / or increase income.
They'll offer you bells and whistles leading to nirvana – keep a cool mind and an eye on the fees they are charging.

Hope this helps.

Catts.

Noob,

A strategy is a very special thing, you need to develop it your self. Be very wary to get it from somebody else even if they say they tailor made it to your specific needs.

A strategy needs to accommodate your long term goal, your risk appetite, your income, your savings / spending pattern, etc.

Having said that, I cannot give you the fool proof strategy. But here's what I'd do if I were in your shoes ie. if I have that much spare cash… u lucky thing!!

My personality:

1. Risk averse – after all I am an accountant and work in a Bank. I understand the risks associated with Banking, gambling shares, etc. Hence, I like to see my wealth grow steadily though somewhat slow but I don't want to get short term shocks / sharp decreases.

2. I like to have a lot of buffers – I like to have approx. 6 months worth of cash so that if I can pay my dues for 6 months without working. The ideal, apparently is 3 months.

3. My investment is for long term ie. to generate retirement income. So I keep what I have and add more, rather than swap what I have for bigger ones. Besides the costs are so high (stamp duty + solicitors fees + agent fees, etc etc) why bother swapping? Just get more new ones.

4. Quality is important, but quantity is definitely desirable. So rather than have 2 big houses in say Kensington and Vaucluse (blue ribbon suburbs), I'd rather have 1 house in inner west (still very good but much more affordable) with apartments in various blue collar and white collar suburbs.

5. I like a simple life. Simple also means flexibility. Bells and whistles usually comes with higher fees and difficult to monitor. So I do not cross collateralise, etc. The only bells and whistle I have is 100% offset facility. Everything else is simple and cheap.

So given $8000 per month disposable income I will:

buy 5 properties one of which must be a house in a area with capital appreciation (north shore or inner west of Sydney)

the other 4 can be where the rentals are good, however wouldn't hurt to get to areas with good capital appreciation as well, like Potts Point, Elizabeth Bay areas.

I'll pay attention to my land tax – most likely 4 properties will exceed my Land Tax threshold. So I'd be considering looking at Victoria or Qld or Adelaide. Currently I'm interested in Frankston in Victoria.

I say 5 properties because I currently pay only roughly $6000 for my properties. With $8000 + negative gearing, you can get at least 5.

Good luck mate – you lucky lucky thing….

Hi Nooob,

Wow… your finance is really awesome. Am green with envy.

I agree – never get financial advisors, they are just waste of money. Same thing with tax accountants and accountants in general. But then again it's my personal opinion and plus I know most of the things they know. I work in Banking and am an accountant. I do all my taxes and my investments myself. I only hire lawyers and building inspectors because obviously they know bits I don't.

Having said that, if I were in your position I will do:
1. Buy 2-3 IPs, not just on2. Claim as PPOR the one which is more likely to appreciate in value.
The IPs should be 'diversified' into high rental and high value appreciation (which usually mean big cities)
High rental can also be high demand (which can mean around low to medium market / blue collar or student accomodation) and high rental $ (which means near the city / white collar area)

2. I buy properties for future source of retirement income. This is because rents are inflation neutral – you are hedged for inflation. Unlike say savings, etc. Also you can insure your rental income – you cannot insure dividen. Which means your cash flow in retirement is secure.

Anyway – lots of things to talk about. I don't even know where to start. Maybe ask more questions so I know what else to say.

Thanks,
Catts.

Hi Cana05,

The ultimate objective of property investing is to have positively geared properties. Besides, all properties will end up positively geared unless you keep increasing the mortgage. When your property becomes positively geared and you still want to be negatively geared, then it is time to invest again. Plenty of options – maybe buy another property or shares or topping up your super or any other types of investment you want.

I agree with previous response, increase the rent if you can.

Hope this helps,
co

Hi Richard,

Thanx for the input.

Westpac may have seen PL inquiry at Veda but inquiry is just inquiry, not necessarily materialise into a loan. If they had followed up with Citibank they would have known about the PL. So it was a calculated risk.

I paid off the PL as quickly as possible because I want to get down to 80% asap. Besides, I like to have my finances nice and simple. Having a PL loan was an additional chore to keep up with. So paid it off furiously and now I'm back with only IP mortgages.

Still paying off furiously… all my mortgages are principal and interest payments. I know paying off principal is one of the mortal sins of investing… but hey, why not.

Many thanx.

Hi Carlin,

I was able to show my accountant that 100% of Citibank loan went into the mortgage as suppose to paying lawyers fees, stamp duty etc. He let me have it as a deduction. He says it doesn't matter what loan you have, as long as the purpose is for investing. If you are "stupid" enough to invest with the more expensive loan…

The catch is, you must not tell the bank or they won't let you, they'll insist on LMI. It is also about timing:
For mortgage pre-approval, bank doesn't need proof of 20% money sitting in your acct for 3 months
The 3 months proof is only required when you already have the property and about to sign the contract.

So I took the citibank loans when I was still looking. The money was sitting in my saving acct whilst I continued looking for the property. Lucky I found it a few weeks after citibank loans and arrange for contract day to be a few weeks after the 3months citibank date… just to be safe. 

Because my savings acct was with Westpac, the lender looked into my acct himself and was happy to sign off the final mortgage approval.

So the key is timing and planning… good luck!

PS: I hate mortgage insurance because it is for the bank's benefit, not me.
Purchase price is $950k. If I go bankrupt, the bank sells my house..  say for $890k. The remaining $60k they claim from the insurance company while I get nothing.

So it benefits them, not me. Honestly, why cough up $23,000 of your hard earned money just to safe their b***??!

Well,

As far as I know you can only get FHOG on your first property and that property must be your PPOR. Otherwise you don't get FHOG.

Whether LOC is the best option depends on your circumstances and investment strategy. I personally don't like LOC as it is providing bells and whistles I don't need. Unless you have lots of IP that managing your normal loans is overwhelmingly confusing, it may be a good idea.

Another point though, not all LOC is the same. So you really need to know what you need and negotiate with your lender. Just incase they provide you bells and whistles for pooches and you actually need the ones for felines…. figuratively speaking.

Cheers,
Catt