Forum Replies Created
Some random thoughts early in the morning!
You will need to consider the purchase price she is asking.
What price are you prepared to pay?
Whether or not she has family who may have their noses out of joint if is is perceived that you have lowballed her.Is she wanting to remain in the property? If so……………………….
Is she going to pay you rent?
If so what rate – given she is on a mortgage rental amount may be relatively low – there may be some government rental assistance subsidy to assist.
Her age, her health which all have a bearing on how long your arrangement will be in place.
You investment may be a long term one before you can do anything – are you hamstrung until she dies or chooses to move out.Hi Liz,
I am not a broker so take what I say with a grain of salt.
It sounds like you are a little fixated by interest rates – interest rates are only part of the finance equation as you also need to consider serviceability, or, in other words, how much you can borrow.
Thanks banks have different servicing calculators and you may find that another bank, not currently on your radar, may be a better option for you. If this is the case then switching banks now, when debt levels are low, may be a viable option.
For these reasons alone I would grab hold of a broker (two have already replied to your original question/comments) and see what they think.
Pays to get your financing foundations right as early as you possibly can – and that is now.
My thoughts.
dangermouse99 wrote:im trying to start a portfolio so I can eventually quick work (5-7 years) and live of the income from these IPs.
Dean
HI Dean,
That timeline is very ambitious – you may want to adjust your time frame a little.
Nothing wrong with what you want to achieve – might need to be a little more circumspect as you will need EVERYTHING to go right for you with such a short timeline.
Hi Brokota,
Given your stated goal is 35 yrs away this means you have plenty of time for your plan to be fulfilled. Quite simply the more time you have the more chance you have of succeeding.
Keeping an eye on both the growth and cashflow aspects of what you are doing and you should be fine.
You may wish to fine tune things a little after taking some baby steps. Initially keep doign what you are doing and then over time you may wish to expand your strategies through small scale developments, sub-divisions, renovations, land banking, vendor financing and so on.
Key thing is to get a general direction in mind (which you have done) and keep working your way towards the end point.
Along the way there will be times when 'nothing' seems to be happening. This is normal – stay focused and the end result will be exactly what you want.
zanymrie wrote:Then they will put together a plan to pay off own home sooner by capitalising the interest on the investment property.Hi Marie,
The ATO has recently ruled that capitalising interest on the investment property is no longer allowable from a tax deduction perspective.
On this basis you may want to re-think this aspect of the strategy – or certainly speak to your accountant. about the structure.
Hi Dub,
Not only are there the financial consideration there are also the emotional considerations.
A 'lot' of our lives revolve around work including hours per day and our social circles. To a large extent the daily patter of our lives is semi-organised for us by virtue we work 8 hours per day. Take away the 8 hours per day and a gaping hole is left behind.
People often say I'll go 'fishing', 'play golf' etc but the reality is that there are only so many games of golf one can play or fish one can catch before the novelty of never having to work again wears off. That is why so many people include some volunteering and/or part-time work in their lives – for the social contact.
A lot has to change when work is finished. That is not to say it is something to be worried about but it is certainly something to plan for. Starting early is always to an individuals advantage.
I have seen first hand the effect poor planning has on individuals lifestyle – I am currently working very closely with my parents trying to work some strategies to extend their life (and quality thereof) at home. Seems my old man didn't change his spending habits when he finished work and now has to make some serious adjustments to make.
Cattleya wrote:ATO will only approve your PAYG Tax Variation based on your previous year's tax return. if you did not get any tax return last year, you would not get any tax variation this year.The PAYG ta variation is a forward estimation of next (or the current) year and has no relationship with the previous years return.
While last years return MAY give an indication of what may or may not happen there is no direct relationship as people's situation can change, The key issue is to make sure your forward estimations are as accurate as possible so that you do not end up owing ATO money when your actual return is submitted.
At the moment the OP is only working on cash income and outcome. It is also possible there are non-cash deductions available to the OP through depreciation. If these are significant enough then the property can become cashflow positive (after tax).
For example – if a depreciation report recognises $7000 claimable depreciation then this figure is used to reduce the amount of tax payable. The key issue is the $7000 has not been first paid – hence the phrase non-cash deductions.
Back to opening comment – while the first property you asked about has negative cashflow you may find that, by looking at your overall portfolio, the situation is closer to neutral/positive thereby minimising your total outgoings.
Might be worth stepping back and looking at your whole portfolio position rather than just each property individually.
Hi RJJK,
Approval delays can be minimised a little by working with people who know what they are doing, buying property with long due diligence clauses so a lot of the work can be done before you pay anything and thereby reducing your costs, talking at length to the relevant planning departments and so on.
Developing is very much a risk V reward scenario.
Make sure you have a good chat to a broker first – getting finance for developing is 'interesting' at the moment and given you are a rookie developer this may also work against you.
Certainly not trying to rain on your parade just making sure you go into this (if you do) with your eyes wide open so there are no surprises.
option 2 can be profitable and, at the same time stressful. Such a business venture should not be entered into without extensive discussion. Make sure you have a good broker and accountant onside to outline the pitfalls of such a venture.
How stress proof is your friendship? It will be tested – moreso is the case if neither of you have development experience. If this is the case you may want to consider using one of the many companies who do this stuff in Perth. While you give up some of your profits you do gain their experience. Whole swag of adverts in Saturdays paper with companies doing small lot developments.
Option 1 is the safer and slower option. Good luck finding something cashflow neutral in Perth.
We are currently downsizing our home with a view to building a new smaller property in the neighbourhood.
New place will be designed so that it could become a B n B in the future and at the same time cater for the kids and their families visiting from time to time. New place is immediately adjacent to my folks so they will be able to remain in their home for a longer period of time.
Have got the boat and camper trailer already parked in the garage and currently using them for pre-retirement practice.
We have super resources which are soon accessible, a property and share portfolio working away.
Started in a new business 18 months ago and are now ramping that up.
At this stage working towards doing small scale developments on a personal level in 'retirement' to provide ongoing cashflow and/or capital.
PS me 53 this year and wife 51.
Things are coming together quite nicely at the moment.
Try Classic Conveyancing.
Done plenty of work for me. Fay (Principal) very efficient and has good staff on board.
Note they are only conveyancers not propertyy solicitors.
PAYG Tax Variation is a forward estimation of your tax position and differs from your annual tax return. After completing and submitting your PAYG tax Variation the ATO wil send your employer a letter advising them to reduce your pay period tax by the determined amount.
If the property is relatively young the depreciation deductions could be quite significant and worthwhile.
To put a little more perspective on this what is your annual income and how old is the property?
Have you got a depreciation report and submitted a PAYG tax variation. This will ease the pain and may alleviate the need/desire to sell.
Nooob wrote:I did talk to two financial advisors both from two different banks with not much of a positive feed back and then I found this post in tips:
Hi Noob,
As a rule of thumb most financial planners are not fully supportive of property in any wealth creation plan. I do know a couple who understand the importance of property in an overall strategy. Those who are attached to banks are, in my opinion, even worse as any advice they give will be based around their bank products.
Initially you will need to ramp up your saving regime so you can take full borrowing advantage of your income level. Reading between the lines you may need to make some serious changes to some lifestyle/spending choices to effect this. In my opinion this should be your first task and while you focus on this spend some time learning and bouncing ideas of people who are in position to give good advice.
Rather than worrying about the number of properties I would first identify how you will use the properties into the future.
Broad brushed statement – if you are seeking an income to supplement or eventually replace your income then you will need to focus on cashflow properties. If you are seeking to sell off the properties over time then you may be more interested in properties likely to increase in value.
At the moment I would be really focussing on properties which can be value added – this will serve to kick your investing along as you need to make up for limited cash savings/equity as you start your journey. Without equity growth you will continue to run into borrowing hurdles which will hamstring what you are trying to achieve.
At this stage I wouldn't be overly fussed about identifying which property should be your PPOR yet – that can come and your situation may change.
,
wendywoo wrote:I would really like to learn more about how to avoid cross collaterizing. How is it possible, when you need the equity in your PPOR as security for the IP loan? Thanks for info.Not a broker Wendy and I am sure one of the qualified brokers, Terry, Jamie or Richard etc will pull me up on any of the finer details.
But most people who want to avoid cross collateralisation will establish a line of credit type facility which is secured by your own home, use these funds for deposits and purchasing costs and then obtain a separate loan for the remainder of the purchase funds.
This means for example your home loan and line of credit could be with bank A and the remainder of your IP loan with bank B.
Are you using a broker or your own bank.
Reading the thread it seems as if you are doing this all yourself with you own bank.. If this is right get in touch with one of the brokers on this forum and use their services.
Getting finance structures right is a critical part of your investment journey too.
Hi jnb,
Welcome and I hope you hang around and grow with the rest of us.
Reading your post a couple of times it would appear as if you are yet to really work your overall strategy to determine what it is you are trying to achieve. Reading between the lines it would appear your focus is too heavily orientated towards tax savings rather than wealth creation. Sometimes the two events do not run in conjunction with one another.
You cannot live off negatively geared property in retirement other than a staged sell down process. Is this in keeping with your overall plans?
Are you currently renting out what was/is your PPOR and are there plans/possibilities that you will move back into it in the future?
Notwithstanding my earlier comments about tax saving – if you will not be moving back into the property in the future convert your loan to Interest Only with the surplus funds being placed in an offset account. I would try and link th eoffset account with the investment loan which has the highest interest rate for maximum benefit.
If there are plans to buy another home at some stage in the future you will then be able to grab the available funds and use them as your deposit money and avoid any messy tax issues. Some people think you can use an IP for security for a line of credit type facility and use those funds as a deposit for their new home and that these funds are deductible because they are secured by the IP – the ATO determines deductibility by looking at the purpose of the loans, in the scenario above the funds were used to buy a home therefore no deductibility.
While your question seems so straightforward the knock on effect of various actions is significant.
Qlds007 wrote:First valuation – $496,000.
Second valuation – $585,000 (different valuer)
Third valuation – $550,000All 3 valuers came off the Valex system.
And they will all say they are right and the others are wrong. Amazing!
That;s strange as I have heard on the grapevine that 'Your Property' (?) magazine is in the process of releasing their top 100 hotspots and Hedland (as an example only) is in their top 10. Got this from a magazine insider who was trying to convince us to buy some advertising space from them.
I wonder if the problem is more related to availability of stock – could be wrong.
Hi Kristy,
Methinks you also need to look beyond the property.
As matters stand at the moment it would appear as if your focus is on grabbing a property without any due consideration to the long term picture.
Some points for you to consider.
1. How will you and your brother's partnership develop?
2. What exit plans do you have? – it is highly unlikely you'll be able to remain as 'partners' for an extended period of time. New relationships will be formed, you'll probably want your own home at some stage and so on. All of these factors can weigh heavily on your partnership.
3. What is your partnership strategy over the short, medium and long term?
4. How will this first property help/hinder this strategy?While some of these questions may be a little hard to answer at this point in time they are important as you do need an 'investment road map' to work towards.
For what it is worth – you may be better off spending some time working through these questions, adding to the 2 x $20K and then getting to work on your strategy.
