Forum Replies Created
- Originally posted by Domo:Quote:My accountant is suggesting to make my positive geared IP into a negative geared IP so that I can save some tax.
Hi Dom,
Your accountant is looking at things entirely from a taxation angle – that is what accountants are generally employed to do – and if you are paying more tax it also means you are earning more – what is the problem?
Maybe you accountant is asking you to look for ways you can redirect your existing tax paid so it is used for better purposes.
You need to determine what you are trying to achieve by investing in property as this will determine what is right for you.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi GSSW,
The $750 should be reducing the amount principal amount on your home loan – so this figure should continue to reduce ny $750/month until the loan is either paid out or refinanced.
I am assuming the MISA account effectively operates as an offset account and as this is greater than your home loan it means there is no interest being levied on your home loan.
My position on this is that you are in a healthy position with a few options up your sleeve; establish line of credit against available equity to start an investment program of some description, pay the loan off entirely and then set your line of credit up, use the $109K as a term deposit and use this as security for property deposits, pay cash deposits for investments, buy investments outright and so on.
For me I would prefer to leverage my available dollars/equity to maximise my holdings – it really depends upon your beliefs.
PS – I moved this discussion into the finance section and deleted the other post which is a repeat of this one to save you having to follow two threads.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi GSSW,
I am not a broker so take what I say with a grain of salt.
My take on this is that even though your account is not incurring interest you are still required to make minimum payments of $750/month as per your original loan documents.
The upside of this is that the $750 will be all principle and as such you are not paying any interest whatsoever and you will potentially own your home even faster.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Beancounter,
Asking $155K over agents valuation and you feel they are not working had enough – seems to me you want your cake and eat it too.
$155K overpriced is a big ask – so either you want to sell it or you don’t.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by Monopoly:Emc I too enjoy my beauty pamperings, facials, manicures, pedicures, bikini/leg waxes, etc etc, and for me, they’re worth every cent; I feel (and hopefully to others, look) like a million bucks afterwards!!!
So – is this considered an investment in an asset or a renovation?
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Blondie,
Congratulations on your first IP – you are now in the game and ahead of all of those wannabes.
Without knowing the ‘ins and outs’ of your financial position or the property I would suggest that you are best served by increasing your equity level as quickly as possible so that you can progress your journey.
You will know if this is best achieved via cosmetic renovation, full blown renovation or plain and simpple paying down the loan as quickly as possible.
This can be achieved via additional repayments and/or an offset account which receives all income and retain the money in this account for as long as you possibly can.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by Domo:While negative gearing is associated with a negative attitude eg I don’t want to pay more tax.
I don’t necessarily agree with this for all negatively geared investors Dom – those that are only focussed on this aspect of their investments will, in the main, make poor decisions as their reason for investing is wrong.
When I look at a property I analyse it to see what the likelihood of sustained growth is.
If these fundamentals are in place and if the cashflow is ‘negative’, yet still affordable, then the property will be considered as a suitable investment. I for one are quite happy to put some of my money into a good property for a long term gain – which suits what I am on the road to achieving.
Bear in mind my aim is to have a high net worth position when I ‘retire’ so that I can explore a range of possibilities then – for now I am focussed on accumulating those properties.
Bear in mind something that is negative today will not always be negative and that as recently as 12-18 months ago it was possible for investors to readily purchase a property that was cashflow positive within metropolitan areas – the dramatic growth, increased interest rates and flat rents have largely changed this situation in the meantime.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dom,
I come from a position where the real wealth in property is achieved through capital growth and have a portfolio that is neutrally geared after depreciation is considered.
The growth has created a situation where we have surplus equity which has since been leveraged into a specialised managed share fund and also into providing start up funds for a commercial development on the last remaining block of land in a satellite centre in Perth.
These last two strings to our bow are providing the ‘cashflow’ to support the next properties (maybe three) which will be ‘negative’ after tax but which will be blue chip performers in the next 10 years or so.
In essence our growth is through property and our cashflow is via share funds and/or other means.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi all,
Tis an interesting matter – for which I suppose there is no right nor wrong answer.
One of the key points not yet raised here is the agent is employed by the vendor and surely this matter also comes into the ‘equation’ somewhere.
PS Baloo – maybe you should ring the agent and say “I will no longer deal with you because……”
Just some rambling thoughts.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
HI Redwing & Sue,
Moved !
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Ken,
Welcome to Oz and also to this community.
I am not Steve but in answer to your question <will I have a chance in successful RE investing? how should I tailor-make my own strategies to invest in RE?>
If you are committed to property investing and have the desire to do well then you are largely on the road to success.
You will need to work out some critical details such as what is your investment timeframe, what are your goals, are you a cashflow or growth or a bit of both investor, what are your limitations (financial, fmaily, cultural) – and how can you overcome these, how risk adverse are you, how much do you know – is there more learning to be done.
A couple of things you can do are keep asking questions or searching the forum for comments about relevant aspects of property investment, if you are a seminar type of person then attend educational seminars or if you are a reader read a few books discussed in the heads up forum.
Once you have the answers to the more critical of these questions then you are in a position to judge for yourself whether or not your property investments will be successful.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Lea,
I prefer to use equity for my deposits as it is ‘easier’ to get – savings are the bits left over after the ATO has rifled your pockets whereas equity can easily be achieved by buying under value, renovations, waiting, buying well or paying off P & I.
I prefer to use my cash in an offset account or for paying down non-deductible debt.
Makes more sense to me – maximise deductible debt and minimise non-deductible debt.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Bruce,
Depending upon your total situation I would prefer to have the money available to me either in an investment line of credit or redraw account so that I coould channel all the otherwise saved money into reducing some debt around the place.
And, if there are significant repairs to be made then take the money from the redraw or line of credit.
I have a line of credit set up for IP expenses including repairs or improvements.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by gattaga:i read a book that said by adding a carport to a property it would increase its value by 10000.has anyone done this or know of other ways to increase property value,or a book on it.also is it better to buy 3 bed houses instead of 1 and 2.thankyou
Hi Gattaga,
There is no absolute answer to the question as a properties value is largely determined by comparable properties in the market and also by the price someone is willing to pay for the property.
As a rule of thumb a carport will add value to the property but as for a definitive value that is impossible to tell.
On a similar note the value of 1, 2 or 3 bedrooms will be determined by the demographics and location of the properties. Some pundits are believing that smaller units are the way to go whereas others will emphatically state 3 bed houses are better.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Pickle,
A PAYG variation can only be completed when you rent the property and it allows you to claim your tax refund every pay period rather than waiting until the end of the financial year while, in the meantime, you are on bread and water.
See the following links – they may be of assistance.
http://www.ato.gov.au/individuals/content.asp?doc=/content/17023.htm
http://www.ato.gov.au/corporate/content.asp?doc=/content/43572.htm
I would also recommend you complete a detailed budget as from my rough calculations your cashflow is going to be very, very tight depending upon the size of your deposit.
Have you checked, or had an independent person, check the figures out as they relate to your situation?
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Pickle,
Congratulations on your purchase – yes it will be negative cashflow but given the water views you should do well in the long term.
Without knowing your salary etc it is hard to provide much in the way of concrete comment but you can assist the cashflow situation by placing the $20K in an offset account – this will have the effect of reducing your monthly interest bill.
When you do move out you will be able to apply for a PAYG variation to your pay period tax – a depreciation schedule will also help this if appropriate. These will help your cashflow. Convert loan to I/O as soon as you possible can.
You maybe able to give the place a bit of a cosmetic renovation (paint and patch up) to improve your cashflow with a higher rent return after vacating.
And finally – it is not a race so I would advise you ‘bed this one down’ first before moving onto something else.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Clare/Jo,
Try this for a definition;
http://members.aol.com/intwg/trolls.htm
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by TeacherK6:After 5 years of dealing with investment properties i have had my first tennant to fall behind in rent, trash / damage the place leave a mess and do a runner in the middle of the night.
Hi Jason,
While these events are unpleasant and distressful they do need to be seen in the grand scheme of things. Events such as this do happen and you now have an opportunity to clean it up and you may even find your rent return will increase too.I am curious – where is the PM in all of this?
However I have learnt a lot from this experience. Im not going to let this situation sway me and have decided not to sell. I was very lucky to be fully insured, and hopefully the insurance claim will be finished with no more problems.SO, a lesson to all owners of IP’s GET LAND LORD INSURANCE!!! THE FEW EXTRA HUNDRED DOLLARS IS WELL WORTH IT!!!!.
Insurance is a critical defense mechanism in a property investor’s arsenal and as such I would never leave home without it. I go to great pains to make sure insurance never lapses on our properties as things can happen at the most inopportune time.
I recommend anyone contemplating not insuring their property have a good read of this months page 78 article about landlords rights – particularly the section discussing public liability.
Forget lost rent and a trashed property – the big costs are potentially in public liability issues.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
In our situation our core banking is with Westpac but we have other loans with other institutions Ie simplistically 20% (edit inserted or 10% depending upon your strategy and beliefsCall me stupid but I don’t understand this. Just when I thought I knew enough to set up my empire, I learn a whole lot of new stuff. Just goes to show, you never know everything!
[/quote]Hi Calvin,
By way of numbered example – assume we had have available $100K in a LOC (with Westpac) and saw four $100K properties we wanted to purchase.
It would be possible, in an extreme example, to go to four different lenders and say ‘I have $20K deposit + $5K closing costs’ I want a loan for the remaining $80K.
As to whether or not this structure and approach suits you that is where a good broker can enter the picture. They will be able to assist you set up a structure that is consistent with your goals and financial constraints/opportunities that will serve you well into the future. Spend a bit of time getting ‘it right’ now and you’ll save yourself some heartache and money later.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Selena,
You can email munecita by simply clicking on the email button on the bottom left corner of one of her messages. This will take you to an email facility which forwards messages onto the intended recipient.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
