Forum Replies Created
Hi Patted,
The tax process is pretty simple really.
Assume the property runs at a loss (negatively geared)
Assume you earn $80K
Your Rental income is $10K/annum
Your rental expenses are $20K/annum
Taxable income is now 80K + 10K – 20K = 70K
You will then be taxed as if you are earning $70K and not $80K
Assume the property makes a profit (positively geared)
Assume you earn – $80K
Your rental income = $20K
Your rental expenses = $10K
Taxable income is now $80K + $20K – $10K = $90K
The ATO will calculate how much tax you should have paid over the course of the financial year when they receive your tax return. If you have paid too much you get a refund. If you haven't paid enough you'll get a bill.
Personally I don't have a problem buying a property that is slightly negative cashflow. Make sure the reason you buy the property is to make a profit in the long term Too many negatively geared properties and you will find yourself with reduced overall cash flow and additional borrowings will be restricted.
Hope this helps
Had to steal your thunder one day
Seems the ANZ decision to break away from the RBA's first Tuesday of the month announcements has given the other banks more time to keep rates at existing levels for longer.
Competition would be a good thing. Oh for other big players in the market.
And, as if we needed a study to tell us what we all knew about rate fluctuations read this.
Hi Patch,
I understand affordability constraints are an issue for you and that is why you are looking at a unit.
The one problem with most units is that you are hamstrung by the level of improvements you can make to the unit and become dependent upon the general market moving.
You may wish to consider a property that you can add value to. Maybe something that could be improved through value adding, tidying up, replacing a few things, a new coat of paint and so on. Maybe look at a larger block which is able to be subdivided so that at some stage in the future you can sub-divide and sell off the back block or, if you find your financial circumstances significantly improve, build a unit at the back. Corner blocks are best for this.
Key points for me are; don't financially stretch yourself too much for your first purchase, consider using the FHOG to get into your first purchase – just make sure you meet the requirements and obligations of the FHOG and consider bringing a border in to offset some of the costs of your property (there are tax issues with this – not insurmountable but they will need to be considered).
The capacity to add value should be a primary consideration at the moment. Simply buying a property without being able to add value or improving capital growth at the moment will be the slow road to getting ahead. I firmly believe the markets, in general, will be slow for a while and simply sitting on your hands waiting for property to increase in value will be property's poor cousin for a while.
Interest only loans are commonly used in Australia by property investors – there are also a growing number of homeowners using interest only loans too.
We tend to use Interest only loans as the monthly interest bill is deductible and in the early years a properties rent return is generally at its lowest point. In effect you are paying the least when the rent is at its lowest.
The loan is taken out over 25/30 years with the Interest only period generally limited to a 5/10 year time frames – I do believe a couple of lenders will look at 15 yr interest only periods. At the end of the interest only period it is expected that you resume principle and interest payments at such a rate that your loan is paid off in the 25/30 year time frame established in the initial contract.
Have you considered an interest only with offset account option?
If you are committed to your aim of owning the properties outright and using the timelines you have mention I would take my loans for a 30 year period but make payments as if it were a 20 year loan. This means you can reduce your monthly repays if you fall on harder times.
Have seen another economist suggest we'll get a full 1% drop in rates over the next 12 months. Well we have had 0.25 so it will be interesting to see what transpires.
What is that joke – send two economists into a room with the same set of figures and you'll end up with three different opinions.
I did an RPData search and there is no record of a Mr/Mrs Freckle owning property in Aus.
Of course it is a remote possibility that Freckle is not 'Freckle's' real name.
insanowayno wrote:Saw on the news or similar last night that low doc loans are popping up again, an elderly couple on $23k annually was offered a loan for $850k with a $7k/moth repayment lolPeter Switzer was commenting on them coming back through some dodgy brokers fudging numbers to get high loans through…. and some banks offering 97% lvr
You got a link to that story?
As far as I know the imposition of the NCCP was about protecting consumers from such lending practices. Given NCCP is supervised by ASIC any lenders/brokers party to loans of that magnitude should be very nervous.
Be interesting to hear from one of our resident brokers.
Be interesting to see who this all plays out over the next 6 months or so. Given we are apparently saving more than we have done for a long time I wonder how much of the rate reduction will flow through past the 'save' and 'pay down debt' and 'the banks not passing on full reduction' issues we currently have.
Probably not a good sign for the wider economy – especially with some 'economic experts' suggesting more rate reductions will be in the offing.
Road trip would take tooooooooooooo long. Ever REA along the way would be another stop looking for the next deal.
How long do you think you will cease work? The answer may make a lot of difference to your grand plan.
Are your properties cashflow positive? If they are then your mortgage repayments and expenses are covered by the surplus rentals.
If they are not then find out which property is costing you the most and maybe, consider selling that off as per Terry's suggestion. You may find the sale of one property might make a lot of difference to your overall situation.
If you are going to plough excess money into a loan account, and your own home is most advantageous, then make sure you have redraw facility just in case you need to access additional cash along the way. If your home loan does not have redraw facility then look at an offset option. This is moreso the case if there is a chance your existing home may not remain your home forever.
Hi Boris,
In your first post you said, "I simply don't want council getting their hands on my future superannuation and potential large long term gain."
I don't know enough about you (age, income, experience etc) but in the long run this property shouldn't make or break your super plans.
Step back from the emotion of your current situation and treat this 'offer' as a business decision and try and get the best out of the situation you find yourself in. You already seem to have two skilled people in your team so make sure you milk them and their expertise so you can milk what you can out of this block if you do end up selling.
Don't forget 'super' is your goal – not this property. This property is only helping you to achieve your goal – the property is not the goal. There will be others.
PS – I am not saying give in – I am saying negotiate as hard as you can so you get the possible outcome for yourself. .
Hi Shahin,
For more details https://www.propertyinvesting.com/forums/help-needed/4346188
Are you seeking true mentoring programs or assistance to achieve an investment philosophy?
Before anyone races off to 'join a mentoring program' they first need to broadly establish what their goals are and how they intend to achieve them. As Nigel said true mentoring programs are specifically targetted at your needs and not at a mass audience.
If you want to participate in a mass produced 'cookie cutter' approach then there are plenty of comments about various organisations on t he Interweb.
Hi Wendy,
Check your PM Agreement – some PM will charge (try to charge) for obtaining quotes.
Any fees and charges for obtaining quotes or supervising work should be outlined in your PM Agreement.
Hi Wendy,
I have no problem with Freckle's 'half-empty' perspectives.
I learned long ago that really listening to people who had a sometimes contrary point of view on different matters was a very helpful leadership attribute. While I don't agree with everything he says, his often sobering points of view are more often than not worthy of consideration.
To give you an example of what I mean – about 6-8 years ago this forum was full of people who understood Steve's 11 sec rule from his first book. The problem was that was the only thing they seemed to remember from the whole book. Maybe it was the easiest part to 'do' as there were other chapters devoted to property selection based on fundamentals and logic.
Having Freckle onboard helps keep the whole PI ship steady.
Hi LIsa,
$11K of a property worth ??????????
Convert the 11% to a percentage of the current value and you'll know how much the property has to grow for you to be in front.
PS You'll need rental increases of around $200/week to get to cashflow neutral. What are the chances of this happening?
Terryw wrote:My mid life crisis will happen when I am 50.15 years ago?
possumpal wrote:I have nearly completed 12 months but am struggling to make good money and struggling with the all the ethical things and pressures that comes with sales. I cant see myself sticking with this for much longer.
The first 12 months in RE would be the hardest and you have entered at a time when the number of investors, in particular, are well down on long term averages.
Having said that if you feel as if your ethics are being compromised then it is time to move on. Compromised ethics are not a good thing to have nagging away at the back of the brain stem. Believe me you'll feel better for it.
Good sale people do not need to use pressure techniques – if you feel the need for increased pressure to close a deal I would suggest you are going about it the wrong way. Service first sale second.
