Forum Replies Created
Is it your only property?
If I read your question and somehow missed the final sentence, and it is your only property, you could argue that it was your PPOR for the time you were living there and any profits would be exempt from CGT due to the main residence exemption.
It would also be free from income tax as you would not have been running a business.
As Rob says above, if your primary intention is to make a profit, then you could be up for tax on the full $100,000 profit at your marginal rate.
As you can see, yopur intention is very important, and sometimes costly.
ummester wrote:its really very simple.Being that the house you can buy and rent are essentially the same quality and value:
If the interest on the loan can be locked in for less than what the rent cost you PA – you should buy. If the interest is more than the rent – you should rent and save.
You either have to pay a LL or a bank. You pay the one that costs less.
You also need to factor in the increases in rent over time, compared to the relatively stable mortgage payments.
So it might be cheaper to rent in year one, but more expensive from years 5 onwards.
Yep, we do this for our IP. We allow pets and charge a slightly higher rent.
NonnieE wrote:Hi Matt,The lease expires in July and he is paying a good rent for the area.
Nonnie
That's when he's actually paying it.
There's so much stock on the market atthe moment, I'm not sure I would bother with the hassles of this property.
Instead of LVR, do you mean servicibility? Your income will only service so much debt, so you will be limited in the amout of properties you can purchase.
If you bought at $350k, interest only, your total monthly repayments would be about $3500 (including your current loan) Your gross income is about $5100 a month, plus rent.
There is no way to tell when your servicibilty would improve enough so that you could purchase property no. 3. It wouold depend on the increase in your income, rents etc.
Hi Sue,
The problem with selling and buying something else is that he costs of selling and buying are high. You would be up for agents fees, perhaps CGT on the sale, and stamp dutyu on the new purchase.
If it was my property, I would keep it and look to purchasae another property. I wouldn't sell.
Well done on your purchase, it sounds like it is working out well.
muw009 wrote:Thank you for everyone.BTW I got message from my accountant said that I can apply magin scheme.
It is because when we purchase the block, the seller didn't apply margin scheme for this.
I'm really confuse about the margin scheme….
This is a prime example of why people should see their accountant BEFORE signing the contract, or setting up theior business.
If you have entered into the development with a purpose of selling (which it looks like you have), then you will be liable for GST.
However, it also means that you can CLAIM GST on all of your building expenses. (From suppliers who charge GST, some items will be GST free)
When selling, you should have chosen to apply the margin scheme. The margin scheme basically means you pay 1/11th GST on the difference between the contract selling price and the contract purchase price. If you sold for $2.85m and bought for $1m, you would pay 1/11th of $1.85m, or $$168,181.
You will need to check the contract of sale, because the purchaser needs to be made aware that you are intending to use the margin scheme. If you haven't notified the purchaser on the contract, you may be up for 1/11th of the total sale.
I've used this website before: http://www.sqmresearch.com.au/ .
It costs you about $50 for a full suburb report, but it was well worth it for our purchase. The suburb report shows all price changes and when the advertised price changed.
Hi Susannah,
If the property is in your name only, and the borrowed funds are used solely to purchase the investment property, then you can claim all the interest in your name.
There would be no deduction for your hubby.
finance2011 wrote:Hi, I have a question:Lets say we actually live in a property as your principal residence from the first date of possession . Then due to work change, you go to another city/state and buy another property and live in that one. During this time, you leave the first property and rent it for up to 6 years. Is this property free of CGT when you sell it.?
I have read that you can only have one principal residence (for CGT purposes) at a time. How does this affect when you are living on the other owned property.Thanks
Correct, you can only have one PPOR at a time. When people leave their property and rent it out, they are usually renting themselves in their temporary location. If you were renting yourself, you would only have one PPOR, and it would be CGT free for up to 6 years if you were renting it out.
IF you have bought somewhere else, you can still elect to classify the first PPOR as your main residence, and it would be exempt from CGT.
However, your second PPOR would be subject to CGT, from the time it was purchased to the time the first PPOR was sold.
As Luke said, you can claim for travel to and from a property you own, but you can't claim for travel to a property you might buy in the future.
ummester wrote:1. Some cities – Melbourne, Sydney, Canberra – do not have 200k units, your pushing to find them at 300k.
2. Affordable has been factually qualified outside Australia as being 4x the average income or less. Of course, we are different, so our affordability levels must also be:)
.
Average income is about $57,000. Four times this, with a 10% deposit, is approx $250,000.Here's something on the outskirts of Melbourne
Something a little closer to Melbourne
Wynyard wrote:What would a family, with two toddlers, who have lived in inner city Melbourne most of their lives, built up social networks, jobs and a life (it was affordable to rent until the last five years) do on a $40,000 household income? I did some rough maths on rental properties of $300-$350pw, and there's nothing left each week, even before nappies or clothes have been bought.What would they do? Leave it all behind due to inflated property prices. Move to a rough neighborhood or the country, where there is not the same industries or employment options available.
A family on that level of income would be receiving large amounts of government welfare. Family Tax Benefit Part A, as well as Part B if it is a single income family. Maybe even Rent Assistance as well.
Here are the choices.
a) Continue to rent
b) Move to somewhere more affordable
c) Increase your income
d) Hope and pray that house prices come down.There is a difference between 'overvalued' (a matter of opinion) and 'affordable' (a matter of fact).
Someone earning the average wage can afford a $200k – $250k unit / house in the outer suburbs of most capital cities.
They may not WANT to, and that's their choice, but affordable housing is available if you really want to find it.
ummester wrote:say a 500k car = a 10mil house, where are the houses that equal 5k and under cars?Oh, and BTW, the difference between a 500k and 5k is proved by the qulaity of the vehicle. How does that work with housing? You can get a 5k car within 30km of a city:) And cars depreciate with age – as houses should.
I agree that land value should apreciate, to a sustainable degree.
It's quality of house AND the land it's built on. The 'quality' of the land is pretty much determined by it's location, so a block of land in the desirable inner suburbs is worth more than the blocks of land 40km from the city.
And yes you can get a $5k car within 30km of the city. That's because they have wheels
ummester wrote:The difference is there are no houses down under that have prices equating to budget cars.Really?? None at all? I'd beg to differ.
fWord wrote:The result: masses of people who cannot afford a house. This does not mean that all houses are unaffordable. It merely means that property that is located in a desirable location become too expensive for most to be able to buy.But isn't this the same for any consumer item? I'd like to buy a Ferrari 458, but I can't afford one. So I buy a car that I can afford.
We couldn't afford to pay $1m for a house in a blue ribbon suburb, so we bought, 2 and a half years ago, in a suburb where we could afford a decent house.
What's the difference?
I personally wouldn't buy an Adelaide CBD apartment, because of the capital growth concerns and the lack of a carpark. For $300k you could buy a nice 2 bedroom apartment in the inner East (Norwood, Dulwich etc) with a carpark which will rent really easily.
It also will cost you a lot less than $600 per quarter for the body corporate fees. The rent will probably not be as high as the CBD apartment you are looking at, but I would think the capital growth would be better.
MattyH wrote:Also I remember reading stamp duty for an IP can be written of over several years. Is this correct?Hi Matt,
No, stamp duty is not deductible, it is added to the purchase price of the house. So your cost base for CGT purposes includes the cost of the house, plus stamp duty, transfer fees, canveyancers fees etc.
You may be thinking about borrowing costs, such as application fees, banks charges for attending settlement, mortgage registration etc. These are deductible over 5 full years or the term of the loan, whichever is shorter.
For our first loan, we went straight to the bank. We got a reasonable deal and we were happy enough to go with who we were banking with.
For PPOR no. 2, we have gone with a broker, (after first dealing with our bank) and I'm glad we did. Firstly, my wife and I are both self employed, so the information the bank was after was detailed to say the least. We just forwarded all the info to the bropker, and he was able to deal with the bank and their ridiculous requests. It saved us time, effort and heartache.
Some background, my dad worked for NAB and its predecessors for 32 years, so going over to the 'broker' side was not an easy step. Dad is still talking to me though, which is good.
I also would prefer to pay a 'fee for service', rather than have the bank pay a trailing commission, and am reminded of the saying, 'he who pays the piper calls the tune'. But if the banks are happy to pay the broker for introducing business to them, and the broker can get me a better deal than I can get myself (which he did), then isn't this a win/win/win? I think so.
