Forum Replies Created
- TT1222 wrote:Our situation is: my husband and I got married recently, before married, each of us bought one property as the first residential property in QLD. We decide to live in my property after marriage, and put his as investment. His house originally bought at 630k, with 540k' s home loan. And in the past couple of years, he repaid more than the bank required, thus now he had appox. 110k redraw balance in his loan. The loan balance now is approx. 430k.
if we are going to let the property agent to rent his house out, and start to use it as investment property, what do we need to do?
TT1222 wrote:1)is it worth to do a valuation?You will need a valuation done – while your husband was living in the property it as free from CGT. Now that it will become an investment property it will start to incur CGT from the day it ceases to be 'his' home. The valuation will establish what the property was worth when the CGT clock started ticking.
Note CGT is not as bad as some people make out, particularly if the property is held as investment for more than 12 months.
TT1222 wrote:2) we are expecting the net gearing of This investment will be negative, thus we want to get more tax benefit from his personal tax return. Therefore the question is the loan principle we can use to claim interest is 540k or 430k? (We can redraw the 110k balance out too pay off my loan which we are living at moment.) does refinance will help?Your husband will be eligible to claim the interest on the existing loan balance ($430K) Note it is only the interest that is deductible and not the principle.
You should consider converting hubby's loan to interest only and direct surplus cash into your loan or into an offset account linked to his loan.
TT1222 wrote:3) depreciation schedule, how can I get it for this property? Do we have to? If not, what benefit we can get if we get one.Phone a Quantity Surveyor (Deppro, Depreciator, Washington Brown ) and ask them to complete a depreciation report on your husbands property. The report will outline all of your husband's depreciation claims.
mjm2 wrote:We are wanting to get into property investment, with the aim to buy multiple properties for future financial security for ourselves and our kids.
Nothing wrong with the broad concept – specifically how do you intent to do this? Lots of rental income and live off rent or wait for the properties to grow in value and then sell and live off profits?
While this question seems so simple – the answer really determines what sort of basic property plan you should follow and, further to this, what sort of property to buy.
mjm2 wrote:We currently live in the general suburb we want to stay in, however not the specific area which is quite a bit more expensive. Our aim is to move to that part of the suburb at some pointIf this is your goal then stick to it.
You are already entrenched in the suburb of your choice, albeit not quite in the exact area, so stay there. Your existing property will continue to track the suburb's performance so you'll be keeping up with the area. Any upgrade in the future will be achievable.
mjm2 wrote:So recently we started out looking to use the $400k that we can borrow to purchase an investment property and have submitted an expression of interest of a property under the NRAS scheme (for quite a bit less – $290k).However we are now feeling a little shaky about the area (rural QLD, just out of Toowoomba) although the NRAS appeals to us.
I am not a big fan of NRAS primarily because the stuff I have seen is over-priced and the product is frequently sold on tax benefits with the merits of the property being overlooked in discussion. A key question to ask yourself is why are you buying this property? Does it fit your overall plan (above)? and would you buy it without NRAS tax credits?
mjm2 wrote:We have also just been exposed to the idea of selling our home and renting, while then having the profit from selling this house (maybe $500+k) and maybe whatever we can borrow from the bank to use to start purchasing a couple of investment properties. We have heard that we would be saving money on all the costs and responsibilities of maintenance/upkeep of our family home, whilst gaining some income from our investment properties.Sounds like a salesperson wants to increase the number of property sales to you. As Jamie says above you do not need to sell you home to invest. Jamie is a broker and knows what he is talking about.
One step at a time and see if you really do want to be serious property investors – only then, if the answer is yes, consider selling your home.
I might add my home is sacrosanct and selling it was never part of our plans – we wanted certainty of environment for the kids and ourselves.
mjm2 wrote:Obviously this is 'not the Aussie way' and feels a little daunting although it does make sense to us. We are pretty low risk people but definately feel we can be making our money work better for us than it is currently.See above comment – hold your horses and only when you are really comfortable and have been property investors for some time – then come back and revisit this question. I often tell clients property is not a sprint, it is a series of small, specific and measured steps.
Hope this helps
Thanks for that – I will have a read when I get some time.
Cheers
Hi Leon,
As Terry has said you need to sell (not simply transfer) your share of the 'old' property to your wife and use the proceeds to pay down some of the mortgage on your new house.
While this all seems relatively simple you do need to seek professional tax advice to make sure you get the whole thing right from day one.
I am not an accountant but I assume Part IV of the Tax Act could become an issue too. Be interested in Terry's opinion on this aspect.
Hi Paul,
While you may have initially bought the property 'because a friend offered it to you" I suspect there was another underlying reason you bought the property.
For example was it to generate rental income or was it to buy an appreciating asset – both of which, in turn, will lead to a net increase in your wealth position. Does that sound about right?
That is correct Paul – if redraw is for investment purposes the interest would be deductible.
Hi Paul,
Exactly why did you buy this property?
jmsrachel wrote:The exact words the agent said was "we let you purchase this property at below market value,Err no – the vendor accepted the price.
If this comment is a 100% reflection on what happened then this agent/agency did not comply with their fiduciary responsibilities to the vendor.
Maybe things are 'tight' in the office and every cent counts. No excuse though
Hi Kat,
Assuming your $300/week is net of all costs that will give you $15K/annum less tax.
So if you wanted an income of $90K/annum (before tax) then you'll need six properties.
Sounds like the Agency Principal wanted the sale and the management.
Interesting customer relationship skills – given RE is based on relationships this is not a good sign for this agency.
Hi Jerome,
Sounds like they may have been talking out Tweed Heads on the Qld/NSW border.
Pretty happy with the outlook for Perth property at the moment.
Some points you may wish to think about:
* low unemployment rate
* population growing (according to various sources) by 1000/week
* current property stock levels below long term norms
* Long term supply of englobo land is constrained
* Vacancy rates low
* Rental returns increased by 11%+ (units) and 15%+ for houses over last 12 months
Obviously these are macro level drivers with some of the location specific drivers varying from place to place.
I am not a Terri Scheer insured person but 6 weeks is common for tenants absconding and not paying their rent.
There is often a separate section which provides more extensive coverage when the property is made inhabitable through damage such as a fire. I would have expected your fire would have been covered under this section rather than an absconding tenant.
Some professional packages allow a 'number' of free valuations each year. Typically this may only be 1/2 valuations so you will need to check your package (assuming you are on a package) conditions.
Varies from state to state – which state is the property?
No worries. Running a business would certainly suck a lot of time out of your day.
There is some research which suggest proximity to a railway line is a big plus for capital growth.
If I were you I would first look at the fundamentals of the area and the property and only when this is sorted worry about the management issue. To me management is a 'secondary' consideration – with my personal preference being to employ an expert in the field.
Maybe wait to buy the holiday rental ay your dream location when you have money to burn.
Not now!
Somebody345 wrote:Was first looking at an NRAS property in Evanston SA and now i'm looking at other options first as I thought they seemed a little overpriced compared to other houses in the area.
I have seen a bit of NRAS stuff advertised and this comment could be applied to a fair proportion of the stuff I have seen advertised.
Somebody345 wrote:My question is, would a new or near new townhouse in scarborough be a good place to invest? To me the area is great, being coastal and not far from perth. And with the new development going on there later. Also the rental returns seem good for the prices. BUT Scarborough has gone down over the past few years! I just dont know. I guess main concern is the property depreciating. I keep hearing "Perth is at its peak, somethings gotta give soon, mining looks like slowing down"…
Because Scarborough has 'gone down' over the last few years doesn't make it a bad investment area, That description could applied to many of Perth's suburbs in the same time frame. If you are looking at price movements look beyond the last 3/4 years and then compare those results to other suburbs.
REIWA publicise long term growth and rental rates at http://reiwa.com.au/Research/Pages/Price-growth-by-suburb.aspx – I suggest poking around there for a while as part of your research.
Bear in mind the stats are only available to show past results – there is no website, organisation etc that can predict the future. Having said that I do believe long term past figures are a good place to start with your research.
Do you live in Scarborough?
Reason I ask is that some investors get so focussed on their local area they are scared to cross suburb boundaries. You may find there are other options a little closer to the main arterial transport routes. Personally, while Scarborough has the beach it does miss out a little on other property drivers.
As an aside Perth rental returns have been improving over the last 12 months. Unit rents have increased by 11.4% and houses by 15.7% (APM Research recently released) so I expect Scarborough rent returns have probably tracked the wider market.
If you are worried by prices 'depreciating' you may wish to consider some form of renovation, small scale development or subdivision. Might be worth considering.
For mine Buyers Agents really come into their own if you are not familiar with the area, lack confidence or don't have time.
So, if you can put the time in to learn the market in your chosen areas you probably don't need a Buyers Agent. I suspect the market in y our list of suburbs is very much in your favour at the moment so you will be able to take your time and negotiate hard.
Maybe look for something suitable for your needs and that has been on the market for a while as a starting point.
Robert Kiyosaki just filed for bankruptcy according to this news article.
Probably not a good look for an author of wealth books.
Hi Terry,
That is correct – conveyancers/settlement agents pretty much an interchangeable title and cannot give legal advice.
Any curly ones will be referred to a property lawyer.
