Forum Replies Created
Based on liimited information and given you are 'saving' for a deposit – in general terms I would go for the term deposit option if your target is achieveable.
If you are looking long term and bigger amounts you may need to consider something more aggressive in addition to the moderate approach of a term deposit.
C.F. wrote:newer, higher density places seem to have higher strata costs but also better rental returns.
This is in comparison to the medium density apartments which have lower strata and lower rent returns.
Are you comparing gross or net rent returns?
When looking at rent returns gross only provide a ball park figure – net returns are more definitive and informing.
Certainly a time for independent legal advice.
Low val by $100K is trigger to do everything possible to get out. Havign said that contracts are often water tight but it is a case of nothing ventured nothing gained.
Catalyst wrote:You're kidding right? You're thinking of buying a property that "may" have to self fund $1million in faults.And that is only the defects.
Check out the other identified issues and your getting one parcel of problems IMO.
Hi Dodo,
Assume your mate is on the highest income bracket and let's play a game.
For every dollar he gives me I'll give him 50c back. Ask him long he'll keep that game up for if he isn't getting growth on the property.
Tell your mate he needs to balance his portfolio not turn it on his head for a negatively geared portfolio. As someone else has said keep the property he has and grab a negatively geared property if he wants to save some tax but don't throw the baby out with the bath water unless there are signifcant costs just around the corner, or the property is under 'threat' by zoning changes, open pit mine, railway line etc.
starsoid wrote:Thanks Kate – yes, that is another point to consider, and one of the reasons we're planning the reno (oh, and because the existing kitchen is woeful!).We're very much heading towards the idea of accumulating a number of smaller properties that are CF+ or nearly so, rather than being negatively geared on something larger. Instinctively I feel that strategy gives us more freedom in the future, whether we decide to buy a new PPOR in the metro area, or in a regional area, or even if we want to move overseas for a while. And it helps to diversify more easily, in terms of location.
Is there a downside to this that I haven't thought of yet?
A key issue you'll need to consider if you intend focussing on a cashflow strategy is where does your equity come from to buy each property. Borrowing money is all about how much security and income you bring to the borrowing table.
Equity can come from buy well below value, natural price increases, created price increases, paying off the loan etc.
For me it is not all about cashflow – there needs to be some balance in the portfolio. The trouble is each persons right point of balance is different.
Hi Adzlea,
Will be brief as I am heading off on holidays in Sydney for a week.
Information I need is.
Current value, purchase price & date and location of current properties.
Also need before tax cashflow figures for each property.Should be enough for me. Happy to receive a PM.
Might be a couple of days before you get a response. Happy to take a phone call if that is easier 0409 882 958.
Maybe a buyers agent otr similar.
If you are going down this line – work out you rmust haves and get them to do the job for you.
Maybe a buyers agent otr similar.
If you are going down this line – work out you rmust haves and get them to do the job for you.
Best thing to do is to talk to the relevant council.
Sometimes lines can be redrawn – particularly at the moment with the focus on in-fill and densification.
Hi Matt,
To un-entangle your finances you should speak to a broker who can manage the process for you.
In essence you'll need sufficient value in each property so that they provide enough security for each loan attached to the property.
Quick rule of thumb, and assuming 80% LVR all round, work out the values of each property and multiply this by 80%. If this number is greater than the loan then it may be possible to do security substitutions.
In some cases you may need to look at loan values above 80% and incur Lenders Mortgage Insurance.
To sell or not.
Once again check with your broker. It may be a lack of security rather than income that is holding you back. To build a portfolio you do need equity/growth and income. It isn't a case of one or the other.
Hi Adzlea,
You haven't indicated current values so I will make a few assumptions for you. SOme numebrs would be useful though.
You will need at least one capital growth property to allow you to buy your motorhome. I would also suggest a second one because you'll be replacing an appreciatign asset (one property with a depreciating one). In effect you'll go backwards (financially) from this transaction – at the same benefit enormously through opportunity to see our great country.
While these properties are increasing in value I would suggest looking at cashflow properties to get you to your $100K mark.
I assume you don't want to have a huge property portfolio to manage while you are on the road so make sure the properties you get are high cashflow to provide the income you want. For this reason you may be looking at commercial property or property in mining towns.
To allow for inflation simply work the numbers based on todays figures. While inflation will increase costs it generally has a similar effect on property prices and rents. Another oprion would be to use your two benchmarks $200K and $100K/annum and compound the figures by 3% which is the top of the RBA's inflation band. Given the RBA has been very active in trying to keep inflation in this band I expect they will, on average, maintain an inflation figure thereabouts into the future.
I cannot comment on the Qld localities you have identified.
While I do note your initial comments about not wanting someone to sell you 'their property' my current focus area is the WA mining communities of Port Hedland and Karratha which are both communities which exhibit the features you are looking for.
Hope this helps.
PS – having done the big lap I can recommend some 'must go' places for your trip too. Seriously look at some sort of 4WD ancillary vehicle to get off the track. Some great country out there.
Hi Stars,
If you are moving out of your current PPOR then do not pay extra off your mortgage. Plough the surplus funds into an offset account linked to your mortgage. Maybe even convert the loan to interest only.
The reason I make these comments is that when you buy you rnew home you will need to borrow a signifciant percentage of the new loan or sell your existing home so you minimise your non-deductible debt. This will be more of an issue if you are on one wage with family plans in the air.
You simply cannot take the additional payments from your existing PPOR and transfer the debt across to your new home and expect to claim the full loan amount against your existing home as deductible debt. The ATO will coonsider the redraw as non-deductible because you used the funds to buy a new home.
If you are looking to raise a family in the not too distant future then investment and cashflow considerations should be made on the basis of there only being one wage. Do numbers on this basis. The additional cashflow will help meet the outgoings when you reduce to one wage.
Having said that there is not a lot wrong with selling your existing PPOR to buy into a new home. Sure you lose some porfits in agents fees but there is no CGT payable.
For me keep doing what you are (albeit with a change ot loan structure) an dkeep asking questiosn of yourselves to really work out what you want to do and what is viable.
lulu1 wrote:I swear I must be the biggest procrastinator out therelooking and looking reading and more reading all the wonderful stories of people moving forward .
I always try to watch Your Money Your Call every week, I read the forums weekly , I buy the property magazines monthly and I still cant move forward with 2nd investment property
I obviously am to picky
Hi Lulu,
I have picked out what I consider were your key revelations.
Seems to me you are overanalysing and trying to get the 'perfect property'
Maybe relax a little, recognise there is no perfect property (coz there will always be a better deal out there somewhere), work out your 'big ticket' items, revisit your goals and objectives, set a deadline and go for it.
Forget reading & viewing all of the information sources you have been. Sit back, make some decisions and have a life.
You odn't say how old you are – but time can erode very quickly if you are not decisive.
PS – not a lot of point coming back in 12 months time and vitually writing the same thing.
Hi Peo,
No probs – sorry I cannot make a recommend to give substance to my post.
Terry Rydet's summarised Hot Spotting report for 2012.
HI Belinda,
Normally when you add someone's name to a title you are changing the ownership structure.
In your case you (hubby) may incur stamp duty (I understand some states have allowances when a spouse is involved)
Given the property is an IP it is possible you may incur some CGT on the part sale of your property..
Do the numbers as the cost of making the change may not be worth it. On a related matter if the property is only just negative then you could potentially be looking at a situation where the property is positive and it is better it remains in your name.
Be worth speaking to a good accountant.
In Victoria you will also need a section 32 – solicitors can/will draw these up for you.
adzlea wrote:Thanks Jamie,
Its financial advice I'm after on how to properly structure my portfolio and what to do next.
Then I will start looking for that particular property.There seems to be alot of hype around the Bown Basin mines as CF+ are easy to find with promises of still 20 -30yrs work.
One of my properties is neutral the other negative, should I be looking for a CF+ to balance it out?
If I do should i set up a trust as we are already paying tax and trying to reduce it not pay more.
Or should I be lookin at something like a NRAS and sit on Capital growth with less risk?It's all well and good to get deductions but at the end of the day its still costing money, at some point you need to have the tables turn and historically you give up capital growth for cash flow, they are getting both at the moment, areas like Moranbah Dysart Middlemount., although I wouldn't expect too much more as prices have been going up $1k a day for months, so then your back to counting cashflow, but how sustainable are the rents @$2-3k a week?
Is it the old saying of the bigger they are the harder they fall?
I need a crystal ball……………..anyone?……..a time machine will do if you can't find one………..Thanks
No time machine or crystal ball – sorry.
Looking at your post it would seem as if you are aware of the issues of building a portfolio and getting the balance right. Too much negatively geared property and you'll save alot of tax but, as you rightly point out, you are spending a lot to save tax. As a property investor it is important to see tax saving as the icing and not the cake.
Without knowing your long term goals (have you worked these out?) it is hard to provide some advice that suits your long term plans, in particular how you will use your properties for your 'financial future'
if your strategy is more a buy and eventually sell strategy then capital growth, notwithstanding my previous comments, is probably more suited.
If your strategy is a more live off the rent type strategy then a cashflow strategy is probably more suited.
Obvioulsy someone on a higher income can probably afford to weight their portfolio more towards capital growth whereas someone on a lower income probably needs to focus more on cashflow.
Consider working a strategy that sees your cashflow properties funding your growth properties – this means you are genuinely cashflow neutral with depreciation on your growth propertuies proving tax savings and making your portfolio slightly cashflow positive (after allowing for tax savings). This seems to be the best of both worlds to me.
My thoughts only.
Off topic.
Sometimes the power of the headline over rules the text.
Your subject line asks for an accountant.
