Forum Replies Created
Hi Redwing,
He must have made it – I noticed an ad in the weekend papers.
Derek
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Hi Snapdogg,
Maybe your wife has heard of these stories.
http://todaytonight.com.au/stories/904184.html
Derek
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HI Ez,
I couldn’t remember whether or not your program included tax deductions in is hence the reason for not posting your details here.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Missy,
I would ask the agent for an ‘offer to buy form’ fill all the details out but leave the price to last. I would be very surprised if a written offer isn’t presented.
You may well get the contact details off the offer form (assuming an absentee land owner) and if the agent doesn’t present the offer or it is rejected do not be afraid to contact the owner directly and outline the situation.
You may also spend some time firming up the reason for only offering $14k less so the agent and owner feel less confident about achieving the preferred price.
If all else fails – reaffirm your offer/s – walk out the door – and keep looking – let the principal know you will not be buying off his/her office.
Investing is about finding a good investment not falling in love with a place (OK some affection is allowed)
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Staffreid,
I suggest you search this forum for posts by Julia – she is an accountant in the area and may suit your needs. Then give her firm a call and see what you think.
Also look at http://www.bantacs.com.au
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Wormit,
Ian Somers has such a program that calculates your cashflow situation after tax deductions called PIA. It is available for ~$250 and includes some approximations for depreciation allowances too.
It is downloadable at http://www.somersoft.com and there is a trial version (albeit fixed numbers) for you to play with to see what it can do.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Andy,
Dale’s Trust Magic is a good investment at ~$100.
I will email you copy of the contents pages so you can see the depth & breadth of detail. Book is available at http://www.gatherumgoss.com
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Servant,
It is also possible to create a tenants in common situation with someone else who may have access to a ‘deposit’. Obviously these sorts of arrangements need careful consideration and a frank and open conversation about your respective aims and aspirations – if your goals are very different chances are you will fail. On the otherhand a reasonably well aligned investment belief increases your chances of success.
Nonetheless such arrangements are not to be entered into lightly.
There is the old fashioned ‘save and invest’ in an ‘Ing’ account or similar – don’t be disheartened you may well find that a clear goal and a desire to improve your future can manifest itself in a better saving regime too. A careful budget and before you know it then you are there.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Tim,
According to this mornings SMH Ed Burton requires you to sign a waiver:
Qutoe from the article “However, Mrs Reed said she had to sign a waiver before she entered the seminar last Saturday. “We had to sign a declaration saying we weren’t going to sue them.” End quote.
Gee – that would fill you with confidence wouldn’t it !
For the full story http://www.smh.com.au/articles/2004/04/11/1081621836078.html?from=storyrhs
Derek
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Hi Kbeeh,
You can have you cake and eat it too.
One of the myths surrounding property investment is the belief that you need to save a cash deposit before you can buy a property – as a ‘rule of thumb’ this is only true for your first property.
Thereafter you can use equity to create additional ‘cash’ and then you are in a position to launch into an investment program.
For example assume the property (whether its a PPOR or an IP is irrelevant) is valued at $160K with debts of $80K.
Based on these figures a bank will typically recognise 80% of the property’s value ($128K) less the existing debt of $80K leaving you with equity or ‘cash’ of $48K for the next property.
If you were prepared to pay Loan Mortgage Insurance you could have the bank accept 90% of the value of the property as security = $144k – thereby increasing your equity or ‘cash’ to $64K.
While LMI incurs a cost the penalty is far and above outweighed (risk increases too) by the ability for you to leverage the value of your assets even further and thus enabling you to hold more assets in your portfolio.
LMI is not for everyone but there are some distinct advantages. For example we used LMI for properties number 2 & 3 but haven’t since then as we have sufficent equity available to us.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Wormit,
As Lucifer has indicated there are some specialised issues to be considered when undertaking commercial investments. This is a highly specialised area and needs thorough research – a better place (in my opinion is solid residential) to start as people always need somewhere to live whereas in times of economic doom and gloom businesses are not as secure unless you can find a solid long term proven tenant.
When choosing your broker ensure they are investors too – it is to your advantage to slow down a bit and ensure the foundation structures are right from the beginning. No need to invur unnecessary expenses which can hold you back on your investment journey.
A good broker will also be able to discuss options such as offset accounts, revaluations, structure etc. I have a recommend in Perth if you wish to use their services drop me a PM.
PS there is no need to rush – property is not a get rich quick vehicle.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Taz,
Building depreciation comes in a two part deduction.
The first is known as building (or capital depreciation) and provides opportunity for the investor to claim a deduction of 2.5%/annum of the construction cost (as distinct from purchase price) for the 40 year depreciable life of the property. To qualify the building construction need to commence after September 16, 1987.
As an aside any building that commenced in the period 18 July, 1985 – 15th Sept 1987 is eligible for a 25 year 4% building or capital depreciation claim.
You may also find the building underwent significant renovations and these too may be eligible for depreciation claims.
For this reason it is essential you accurately determine the recognised date that construction commenced. Shire/electricity or water records may be of assistance. Also endeavour to find out if (when) any renovations were made.
Additionally plant and equipment (loosely described as not the walls, floor and ceilings) also have a start up value at time of purchase and will be depreciated over an ATO approved lifetime. The length of life and the depreciation rate varies considerably between items.
The costs are deductible and do vary from company to company. You will also find some companies are more able/willing to travel to inspect properties. I suggest you give some a call to see what they offer – a good company will also be able to tell you whether or not it is worth your time and $ getting a report done.
Scott (depreciator) will add some clarity to your questions as he is an expert in the field. Probably on holidays at the moment.
Whether or not the item mentioned are deductible will be determined by your accountant. If they are considered self-education then you will miss out – however if the resources are considered integral to your business then they may be deductible – Julia will be able to give a definitive answer.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi ab (mind if I call you ab?)
Yes that is the 11 second rule but (there is always a but [evo]) there are as many equally other important issues that need due consideration too.
Finding a property meeting the 11 second rule is important if you are cashflow focussed but then there is also rental demand, short, medium and long term prospects for the locality, infrastructure considerations and so on.
By the way – welcome and ask all the questions you want – the only silly question is the one not asked.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Chan$
SA = South Africe? [biggrin]
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Wormit,
There are two primary issues a bank considers when determining how much you can borrow.
Initially they consider your ability to meet any loan repayments (serviceability or DSR).
Typically banks get uncomfortable when your total repayments reach around 30-35% of your gross income. In determining this figure banks will consider existing loans and also your credit cards.
The other aspect banks consider is the loan value ratio (LVR). Here the bank will compare the total value of your assets with your outstanding loan commitments. Typically banks will lend up to 80% (higher if you are prepared to pay loan mortgage insurance).
In your situation you have only given your income level without providing any reference to the value of your home nor the outstanding loan balance – as such you are best running your figures past a mortgage broker as they will be able to fit your individual situation into a bank model that best fits to determine your borrowing capacity.
At the moment you only have $10K in cash free but you may also have equity in your unfinished house which could also be used to finance deposits on investment properties.
I would be wary of using your $10k towards a deposit as this money may be very useful to help finish off your house or to put in an offset account to reduce your monthly interest bill on your house.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Wormit,
I have a different investment belief to most people on this board as I am a growth focussed investor who prefers to invest in areas closer to the city which have a long term growth history and which meet my criteria.
As to whether or not 8% is manageable, or good, for you only you can determine the answer to that question. Without knowing the area you are looking at (you don’t have to tell me either) I recommend you check the long term growth, rental demand & employment opportunities in the area, infrastructure plans, the short and long term outlook for the area, distance from large population centres etc.
I, for one, am concerned that many investors have become too focussed on the 11 sec rule without ensuring the other fundamentals also stand the test.
For example I was speaking to someone in a small town, with declining population, not far from where I live that sees locals selling up to eastern states investors chasing cashflow.
Local REA are having a field day and the demand for low priced properties is creating a ‘false market’ that gives these ‘johnny come latelys’ the belief that even these towns have growth – my question what happens in a normal property cycle and with a declining population.
Hope this helps
Derek
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Hi Simon,
Hmmmmmm – an interesting dilemma.
Gold Coast prices have moved significantly in the last 12 months and all projections are that this will continue. Brisbane is in much the same boat although Matusik or Shrapnel are predicting some slow down in 2/3 years time for the Brisbane market.
I am currently looking at either Gold Coast or Brisbane properties and will not get a lot of change out of $350K in the markets I am looking at. Units in the area can be purchased for $220K – may be this is a good place to start.
While you may lose the FHOG investing in Queensland this, to a certain degree, will be offset by a reduced stamp duty rate. From memory Vic has one of the higher rates of stamp duty – but you’ll will need to check this – as I said from memory only.
On the other hand Melbourne is your home and your priorities will determine whether or not a home or an IP is your best option at the moment. There are long term ’emotional’ benefits to owning (or should I say paying off) your own home – and yet there are others (especially in todays market) who are quite happy getting a subsidy from the landlord due to the generically low rental returns in some of the capital cities at the moment.
If you adopt a long term viewpoint either strategy is of value.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Spot,
I am not a mortgage broker but as I understand it mortgage duty is a state levied tax and as such is imposed in the state the mortgage originates from which in your case is SA.
The other stamp duty often referred too is property stamp duty (tax levied on property being purchased) this originates from the state where the property is located.
As I said from the outset – not a mortgage broker and more learned people than I will comment.
I would also suggest you consult another broker and get a second opinion as your loan structure seems very clumsy.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Wormit,
Peter has replied to this question in the other forum board.
I’ll add a few comments to his (read them too) – you have just read a book that has motivated you to invest in cashflow positive property – that is the easy part.
There is so much more you need to do – see how much you can borrow, explore the need for a trust etc, getting yourself out and about and know to REA, developing your own expertise in identifying a good buy or not (just because a REA agents says yes – doesn’t mean it is), finding conveyancers you can work with and and and and – you get the idea.
In some respects you are now at the ‘reality check’ stage and are just starting to come to realise there is hard work involved – it is not just a matter of opening up the West and getting the deals from there – the better deals have already gone.
I recommend you read some of the posts here (as you are doing) and start making notes – getting tips etc and then reread the book to distil the fine details required to make your joourney a success.
Hope this helps.
Derek
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Hi Bec,
Don’t confuse being able to identify kids at a young age and doing nothing to assist them.
While we can identify the kids we certainly do spend an inordinate amount of time trying to work with parents to assist the little tyke.
Without fail every year goes by and my staff have and continue to say to me at the end of the year – I wish I could have done more for ‘Mary’ or ‘Johnny’ – attempts to identify and rectify social, psychological, emotional, behavioural and educational matters are significant and ongoing throughout a year.
We also often find that there are a number of other organisations involved with the same family – health department, child welfare, family counselling services, police department, housing department and so on – the list can be seemingly endless at times.
The Australian Governments (both parties) have, for a long time, maintained their financial focus on secondary schools as this sector has the greatest level of voter attraction.
Despite the best efforts of the Australian Primary Principals’ Association (Govt, Private & Independent Schools) to change this way of thinking to an ‘invest in the early years’ approach the governments have maintained the focus on secondary schools. State governments also follow this mantra with their $ and people resourcing levels at school which considerably favour secondary schools.
In recent years the Canadian and English Governments have consciously shifted their focus to an ‘investment focus’ and looked at the needs of 0-8 year olds.
The results have been nothing short of amazing with considerable sums of money being ‘saved’ because the complex issues we cuurently get faced with are being rectified sooner rather than later.
Anyone who has got kids in primary schools should be making sure this message is heard by their respective federal and state politicians.
On a site note I notice Paul Clitheroe has been appointed to chair a body looking at the matter of ‘financial education’ – there is an article in this months Money magazine.
Derek
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