Forum Replies Created
The original price. However, speak to a solicitor. There are a couple of traps that competent advice should avoid. Also in some states eg NSW if the purchaser is related to the vendor the OSR requires a valuation.
I’m excited to hear about all these investors/potential investors leaving the NSW property market. Why? Because reduced supply of rental property will lead to higher rents
From my point of view yes I will be up for land tax. However, when I pay $100 land tax, it is tax deductible, so on a 48.5% tax rate, I’m out of pocket but not much. When I eventually go over the old land tax threshold I will be saving money because of the reduction in rates. But I’ve probably already made up my loss because of higher rents.
The 2.25% sale levy. The real issue is if your sale price is somewhere between 12 and 15% higher than your purchase contract. However, as the levy will be a deduction on capital gains, my loss will be about 1.7% not 2.25%. Of course if prices are reduced because investors have moved out of the NSW market I will not make as much profit either but I will have saved a lot of money when I buy, so I will be getting a better rent yield.
The problem with the levy is that people alter their decisions because of fear of tax and might not make the best decision for themselves. Years ago I knew people who were paranoid about paying income tax so they would borrow and buy more plant & equipment for their business. Instead of paying income tax and keeping some, they were paying all their income to finance companies.
crj
There seems to be a fundamental difference between advising someone on the merits of an investment and telling them that the valuation obtained by the bank is for tens of thousands of dollars less than the contract price.
There are a couple of issues from some of the program participants:
1. if I borrow money and as part of the terms the bank requires a valuation and I pay for the valuation why should I not be entitled to know the information
2. there has been an expectation by many people that the bank does a ‘valuation’ becuse this is what banks did less than 30 years ago. Maybe good banking practice should be to say to someone as you have sufficient security the bank is not interested in the value of the property you are buying and you should get an independent valuation if you have any concernsYou need to look at what your reasons for considering selling are. Possibly you think the Qld properties are still going to be slow to appreciate or the -ve cash flow is something you want to avoid or your seaside units are too much work for the return.
From a tax point of view from what you have written it looks like if you sold your Qld properties at this stage you would not be up for much capital gains tax if they are minimally above your purchase price whereas there could be a fair bit of tax with the others. May be you should talk to an accountant as there might be options to reduce CGT on the seaside units if they fall within the active asset issues for small business.
Most capital growth comes from land component which you will not own.
Other issues to consider would be how difficult it might be to use the equity in the unit to purchase something else, how easy will it be to resell if you need to, what security do you have for the lease with the park.
You need to consider what you are trying to achieve with this purchase
A link to a website giving information on the Consumer Credit Code is:
While FW is right that different consequences might happen depending on whether one is “in business” or not in many areas of taxation, it would seem to me that the taxation consequences for many wrappers would not differ significantly as even if someone was not in business, if they wrapped within 12 months of the date of their purchase contract CGT event A1 would apply and there would be no 50% discount of the capital gains
Try the local council website. Information provided varies, but worth a go
crj
In a thread called Collinsville Rugbyfan did a good breakdown of the kind of things to do due diligence on in a mining town. I’m sure you could adapt this and use the information as a basis for determining whether rents will continue at current levels
Redlilia
You will need to do plenty of homework.eg Who is managing the property? Is it one of the national storage companies? If market revaluation, bear in mind this might fall.
How much storage exists or is planned for Townsville? Can your storage space be divided into smaller units if that is where the market is in the future?
What is going to be stored? 91 sq m is a large area for self storage, much more space than the contents of an average 3 br house
A mob advertised in the Finanacial Review on Thursday p 18 offering strata title self storage Melbourne CBD yields from 8.1%
National SElf Storage sold a number of their complexes into a property trust managed by APN last year. Not sure of yields
Dear Faraway
In NSW the law requires the Vendor to obtain:
a. a copy of the Land Titles Office copy of the title
b. a copy of the plan of the land
c. a S 149 Certificate. This certificate is obtained from the Council and shows the zoning of the property
d. a copy of the sewearage diagramSuggest your sister gets written quotes from solicitor/conveyancers. I think under the Legal Practitioners Act the solicitor has to disclose costs in writing at the beginning of a matter.
crj
Cash in $20000
Inflation 13.67% = 2734
Cash out after paying loan $50000
Profit $26266Still fairly simplistic calculations as does not take into account costs on purchase and sale and any additional cash put in during the 5 years.
However, in my view your investment’s ability to beat inflation depends on what your cash investment is
Dear Redwing
Of your 8 scenarios:
a. 4 are basic errors by the landlord or the PM in failing to cross the t’s and dot the i’s. If they are PM errors the landlord would have a claim against the PM. However, obviously the better solution is to look at what steps the landlord can take to prevent these. These could include as standard procedure getting the PM to send a copy of the signed lease and condition report to the landlord as soon as they are done. A PM could also have this as a step in their system which might be a point of differentiation for them.
b. The 5th scenario might be misfortune. However, during the periodic inspections the landlord or PM has conducted has the tenant ever been asked is there anything that you’ve noticed. As an aside has the landlord/PM been proactive in responding to tenant’s issues. I once rented a house where paint was peeling on two ceilings from a roof leak that had been repaired. Before I rented the agent said the landlord would get the ceilings repainted. Two years later when the landlord sold this was raised with the new landlord. Leaking caused by inadequate guttering had also been raised with the agent and both landlords. No action taken. Why would a tenant raise anything with a landlord/agent whose attitude was like that? If the landlord/agent in the 5th scenario was not as inactive as those I’ve experienced, who is to say that the tenant’s experience hasn’t been shaped by other landlords’ attitudes. I was staggered last year when my PM rang me and said the tenant had asked whether we could fix some taps which the tenant said hadn’t worked for a considerable time. This was the first time it had been raised. Why? Another story might illustrate. I have a friend with an IP. His attitude is if the tenant asks for anything get the PM to terminate the lease at its end.
c. Scenario 6. An easy mistake to make – trusting others to act honourably. Maybe the landlord should have seen the police. Cancelling a cheque can be a criminal offence.
d. A landlord who has been put on notice of potential danger ignores it.
e. Finally, the risk of do it yourself. What background checks were done on the tenants? If you’re going to do something it needs to be done properly.crj
Swannie,
Talk to a broker and you’ll find most of the companies have a insurance policy for invest properties which will cover public liability cliams against you. I also like to cover for rent for 6 mths to a year so that if something happens to the property I’ve got income coming in.
Don’t know any brokers in Sydney
crj
Martine,
Different strategies suit different people. With new property you are obviously going to have tax benefits with depreciation and building write-off. You might still have +cash flow property as described by Margaret Lomas in articles in API because of these non-cash deductions, that is the rent plus tax refund is more than your cash outflows.
You have obviously chosen well with your land. Congratulations on what you have achieved so farcrj
Rachel,
Many smaller country towns have good demand for rental as a lot of people eg police, teachers, nurses work in the town for 3 years or less and don’t want to buy for that time.
Capital growth is often spasmodic. If you need to sell, it may take a long time to get a buyer.
In some smaller towns real estate agents have stopped managing properties.
Get some good local knowledge eg does the area flood. Get a building inspection. A lot of properties are older, some towns have soil subsidence problems, some don’t.
You can be successful in small towns, but a larger centre might be better. I looked at one block of flats in a town of 3000 last year which was listed for 200K. It was auctioned in 1993 for about 150K. Last year 9% gross return. I looked at another block of flats in a slightly smaller town 220K, potential rent $700 p.w, no property managers in town, issues with some tenants because of lack of background checks.
If you’re getting a better return it is because the risks are higher. If you can cope with the risks you can do quite well. If you’re going to lie awake for years wondering whether you’ve done the right thing look for somewhere else.
Good luck
Ken
When I went through Goondiwindi last year housing there struck me as quite dear, so the price in Boggabilla mightn’t be too bad if people who work in Goondi are prepared to live in Boggabilla and commute. Talk to a couple of agents about how likely you are to be able to rent after the 6 months is up.
A lot of valid points have been made. As part of your due diligence I suggest you check flooding, because I think it’s on the McIntyre River
As you’re in Sydney, running a business, you’re a long way from Boggabilla if you need to organise maintenance etc.
crj
Dear clavil,
do you want confirmation of your beliefs or otherwise. There have been a number of postings recently which indicate that while +cf investments are difficult to locate they can still be found. It may be that the location/type/whatever of these properties does not meet your parameters for investing and that’s fine. If that’s the case you can while you are waiting to invest do a number of things eg reduce other debt, invest in other areas eg stockmarket
Best in what context.
What is best for one investor might not be best for another eg renovating might make sense for someone with some skills and time as they are converting these into an asset, but it might not make much sense for someone who lives a long distance from the property.
Do you mean best from capital gain or cash flow
What would be a good investment in one place might not be good in another
You need to work out what’s best for you. This will depend on many factors eg borrowing capacity, level of comfort with debtBindi,
Maybe you should concentrate on one or two areas, become very familiar with them and get to know the agents. Get the local papers, ring the private sellers.
Also, look at different ways to amke a property +cf eg if it is on a large block of land can you subdivide it and sell off the surplus thus reducing the cost.
