Forum Replies Created
- Originally posted by Ricardo B.:
Hi! I’m thinking of ways to cut down on spending to continue building my hard-earned savings (a bit more than 100k)which I want to use for investing.
Hi Ricardo,
Not able to comment on the ‘house sitting’ question but I noticed you have savings of $100K.
If you are wanting to invest then you should be able to borrow some additional funds and start investing sooner rather than later. It seems to me you are saving money that is left after the ATO has had their piece and as such with money from banks, tax and tenants you could be investing now – if that is consistent with your goals.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Bernie,
The situation you describe is often described as being how people ‘accidentally’ start out as property investors.
Your PPOR will remain CGT free for a further 6 years provided you do not buy/build another PPOR so there is no need to hurry and sell your property. If you do hang onto the property for more than an additional 6 years then any gains will be apportioned over the length of time you own the property.
You will also be pleased to know that all expenses associated with the property will become tax deductible; loan interest (not repayments in the case of P & I loan), water & city rates, building/contents/landlords insurance, property management fees, repairs (as distinct from upgrades) and so on.
Ultimately whether or not you retain this property will be determined by your short and long term goals and financial situation.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by MortgageHunter:To achieve this you need to make all IP loans IO and pay all the principal payments into the PPOR.
And establish an offset account linked to your PPOR account into which you deposit all income (wages and rent) so that the balance helps to reduce the monthly interest bill.
And if you are very disciplined with a credit card use this for your purchases and pay the CC bill off at the end of the interest free period to help maintain as high a balance in your offset account for as long as possible.
If you lack spending discipline steer clear of the credit card strategy.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Zig,
Agreeing with Simon – deposit funds and expenses are deductible. Interest on interest no.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
HI Regrow,
Just a quick note – capital depreciation is claimed as a percentage of the building cost of the property and as such I would argue that if you are buying this property at $195K then you will not get a depreciation claim of 2.5% X $195K as there is no allowance for land content nor any for plant and equipment.
As a rule of thumb you can allow approximately between 15% and 40% depending upon the nature of the building for plant and equipment.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Helen,
The ATO website Rental Guide 03/04 does have a guide which explains depreciable items on page 20. There is also some clarification of repairs V improvements on page 9 and again on page 18.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Bennido,
‘potential’ is much better than ‘no potential'[biggrin]
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Geo,
GM is a former associate of HK.
Some articles that may be of interest.
http://www.theage.com.au/cgi-bin/common/printArticle.pl?path=/articles/2002/02/25/1014471628931.html
http://www.theage.com.au/cgi-bin/common/popupPrintArticle.pl?path=/articles/2003/04/04/1048962935230.html
http://www.reca.asn.au/hallofshame.htmlDerek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Act and Dorky,
Looks like I was fortunate when I moved my property at the end of January when Kelly found me a tenant first.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Adrian,
‘Borrowing costs’ are spread over five years or the life of the loan, whichever is less. Borrowing costs include loan establishment fees, title search, fees and costs for preparing and filing mortgage documents including broker fees (where applied) and mortgage stamp duty. Valuations and lenders mortgage insurance are also included as borrowing costs.
If the total of these costs is less than $100 then the full amount is immediately deductible.
Acquisition costs include conveyancing costs, advertising expenses and stamp duty are not deductible – rather than come into play when the cost base of the property is being calculated.
I recommend you download a copy of the ATO’s Rental Property Guide 2003-04 version.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
HI Tass,
Set yourself up with a line of credit/equity loan secured against your existing home and then borrow the remaining funds.
Bear in mind that the funds drawn from your line of credit/equity loan will not be tax deductible as the purpose of the loan is to buy a PPOR.
You will also be able to repeat the same process and buy IPs if that is part of your plan.
If this is the case ensure you split your line of credit/equity loans into personal and investment components for ease (and accuracy) of preparing your tax return.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Qld,
Congratulations on your successes to date – a millionaire after 6 years of investing is not to be sneezed at.
I prefer to use equity in preference to saving a deposit primarlily because savings are made in after tax dollars and the time taken to save the deposit saw some investors miss out on some growth. Whether this is an issue in the current market is ultimately up to you.
One little ‘tweak’ you may want to consider is to use equity for the next property and park your savings in an offset or redraw account so they are still accessible and at the same time reducing your interest bill and therefore improving your cashflow situation.
Having said that the ‘next’ property could be looked at in the context of your portfolio rather than as a single entity. As such it is possible that the first three properties may be able to sustain any negativity in the fourth property.
But hey – it ain’t broke so why fix it?
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Kid,
Congratulations on your achievements – I for one would be interested in hearing a summary of the key points such as what got you started, what strategies did you use to discipline yourself into a savings routine, did you have mentors/supporters who helped you along the way and equally as important what’s next?
I am sure your story would be of interest to the number of ‘young/starting out investors’ who frequent this site.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Geo,
Calculated as follows:
First $21600 = $2652 Tax
Next $18400 @ 30% = $5520 Tax
Total $40000 = $8172 Tax payable exc Medicare levy.The first $6K is reflected in the various thresholds.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Geo,
The first $6,000, nil tax then 17% marginal.
At $21,600, $2,652 tax then 30% marginal.
At $58,000, $13,572 tax then 42% marginal.
At $70,000, $18,612 tax then 47.0% marginal.Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Allan,
The tax is commonly called an ‘exit tax’ but is more correctly referred to as ‘vendor duty’
http://www.osr.nsw.gov.au/pls/portal/docs/page/downloads/other/vendor_duty_factsheet.pdf
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Ronulas,
If it is investors (particularly out of towners) who were buying in the town and drove up prices – then I fully agree with Mortgage Hunter – from your comments about increased numbers of properties for sale it sounds as if buyers will now have the upper hand and the prices are unsustainable.
As such your money may well be at risk.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Wayne,
I would argue that mainstream tenants want a safe, well kept property with a landlord/PM who attend to maintenance problems in a timely manner.
After attending to heating/cooling, security and safety issues I don’t believe the ‘little things’ add much in the way of value to a property or to the rent returns. Why spend $1500 on something that gives no return?
I would prefer to keep the $1500 for repairs so they can be actioned quickly when/if required – in the meantime put the money in your offset or redraw account where it is readily accessible.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Ali,
Ultimately only you can decide if the extra $15 is worth it.
To a certain degree the willingness of the landlord to reduce the rent will be determined by the length of time the property has been vacant and by the number of vacancies in the area – do you know these answers?
Given we are in winter when properties are historically harder to rent I would suggest that you have the upper hand, particularly if you are prepared to walk away and look elsewhere – you need to remember there will always be somewhere else to rent.
If you really want the property then by all means ask for the A/C but bear in mind you could also counter with a ‘that is the limit of our budget, is there anything else to rent?’ type of comment.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Fitz,
I tend to agree with your position – the courts have ruled against the tenant and as such it would appear (to my sense of fairness anyway) that your insurance company is ducking and weaving.
Suggest a call to your Ministry of Fair Trading (or similar in your state) and talk to them. You may also find some answers at the following website http://www.complaintline.com.au
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
