Forum Replies Created
- Terryw wrote:After 6 months one will have CGT applied to it. From memory it is s118-140 ITAA 1997.
You are one sick puppy Terry – who else knows sections of the tax act?
Wow – that is not a good reflection on the accountants you have spoken to. CGT should be bread and butter to them.
The ATO produce a booklet for Landlords http://www.ato.gov.au/content/00270214.htm
They also have a CGT section available here http://www.ato.gov.au/corporate/pathway.aspx?sid=42&pc=001/001/038
I can also recommend a Perth accountant who can assist.
My reading of CGT matters would suggest your tax liability is close to nil unless you were were charging your partner rent.
The period until you moved out is CGT free (see note about partners rent above) – the period when you owned the second property is taxable. But given the gain has been negligible your tax payable, if any is negligible. A valuation can confirm the value of the property at time of departure. The documents linked above should clarify the nature of teh valuation – it is likely an experienced agent in the area could do this for you.
With all due respect to Catalyst and Crj as they have taken the time to answer your query and provided a detailed response but have you asked your accoutant these questions?
Tax matters should be run past your accountant for confirmation.
Do you intend living in your current home forever?
If you don't then you may be backing yourself into a corner with limited options.
For example if you choose to move out of this place and buy another home and rent out your existing property you'll create a situation where most of your debt is non-deductible. An offset account may be a better option if a house move is a possibility.
You north or south of the river – does it make a difference to you?
Terryw wrote:And then these friends will also talk about you behind your back saying how 'lucky' you were because you invested in xxxAs Terry says often there is very little luck involved – it is all about education, planning, commitment and having the courage to make a decision.
So many times I hear you were lucky because you bought at the right time – bulldust – the trust is someone had the courage to make a decison based on sound fundamentals. Luck has very little to do with it.
If property is in WA the ownership ratio will need to be included on the contract offer and acceptance.
Hi Booge,
Being rural – it is possible the banks may only lend to a maximum of 80% of the new purchase. Some postcodes and zonings are considered a greater lending risk and therefore banks will cap their exposure to any one property.
The location of your existign property will also impact on your capacity to leverage beyond 80%.
Hi Booge,
Not a broker so information only.
Based on numbers provided your equity is $150,000 – but not all of this is available from a lending perspective.
Available equity is a different kettle of fish entirely and the formula to calculate what is available to you is
Value of property X lending ratio – existing debt = available equity for further investing.
Assume the bank was happy to lend you 80% of the value of the property the calculation is.
$320K X 80% – $170K = $86K
If you can go to 90% the figures change enormously
$320K X 90% – $170K = $118K
If it is possible to go to 95% available equity increases again..
$320K X 95% – $170K = $134K
N.B. In the last two calculations you will lose some of your available equity to Lenders Mortgage Insurance.
As a real rough calaculation assume around 2% of total borrowings. At 90% lend LMI payable would be in the very rough vicinity of $5800 – the actual figure will vary depending upon a range of factors.
Depending upon your circumstances the equity available and released can be used as deposits for other property. How much you can borrow will be determined by the bank after they consider your security and income position.
Looking at you figures your security position looks pretty good – don't know about income.
Hi MM,
Mentor – I'll leave this blank at the risk of being accusind of spam
Accoutants/CPA – Shreeve and Carslake in Herdsman Business Park
Lawyers/Legal Counsel – Give me a couple of days and I can give you some names.
Home Inspector –
Real Estate Agent/Broker – I'll leave this blank at the risk of being accused of spam
Mortgage Broker/Company/Lender – Notwithstandign Richard's comments above I have a couple in Perth who I could recommend
Insurance Agent – I use Westcourt Insurance Brokers for my stuff
Property Manager/Company – Emppire Estate Agents in Vic Park
Tax Strategists/Estate Planner – Tax = Shreeve & Carslake above. Got a couple of estate planner people I can suggest too.Qlds007 wrote:Heh DerekBrisbane is also SE Qld and we certainly are not in the doldrums.
Brissie and the GC are 2 different markets at the moment.
Not wrong about the two cities being different markets.
Keep forgetting you guys have just about merged into one big city.
Good to hear about the Brissy market going OK. Gold Coast has taken a big hit (as a broad brushed statement) and I do wonder when the corner will be turned. For me there needs to be a lot more water flow under that bridge yet.
Hi Daniel,
In asnwer to your question – $200K could be done in 10 yrs with four properties (using todays figures) and allowing for mortgages to be paid off by excess renatl income.
The point of the comment was to highlight that $200K passive can also be done through residential property too.
But as to which is right for you?
Would really need to know all sorts of things about you before any sort of realistic strategy could be developed.
There are so many variables and considerations that come into play and which need to be placed on the table so informed conversations could be had.
Canberra for mine.
GC is in the doldrums (you could always argue you're buying low) and things need to change a fair bit for it to get moving again.
Hi Daniel,
$200K/annum passive income can be done in residential property with four properties and ten years. The key is to get the initial steps right and be prepared to take some developers risks. We are doing this with some clients atm.
Commercial property will through a few curve balls at you in terms of financing (lower LVRs) and potential for periods of time without a tenant. Vacancies can be minimised with good property selection – getting your first leg into commercial will probably be a signifciant hurdle given the lower lvrs banks offer and thsi is where getting the initial high levels of saving/equity up will be to your advantage.
It is a big aspiration you have but you have to start somewhere and if you are truly committed to achieving your goal it will be done.
Make sure all of the steps you take are measured and carefully considered.
Best of luck with it. .
I would also add not increasing your wealth while it isn't as good as increasing your wealth is much better than reducing your wealth. On that note you should be reasonably happy – sometimes your situations causes teh handbrake to go on.
Being a small business owner also throws a curve ball into the overall picture – many small businesses are doing it pretty tough at the moment. Your comments lead me to believe you are a careful manager of your finances – this appraoch will put you in a good position over time.
Just remember 'A fool and his money are soon parted' – you don't seem to be foolish.
Stick to what you are doing and understand it is not always onwards and upwards – sometimes you need to take a breath.
Jpcashflow wrote:I'm only 27 so i still have allot to learn but since i have moved out which has been two years know i have always felt that i have been the same and never actually increased my overall wealthThe last two years have also seen lending rules tighten signifciantly and property prices flatten (with a few exceptions)
Anyone with a simple buy and hold strategy would probably experienced a similar situation to you in the same time frame.
Dreaming Big wrote:Richard, the $80k is (house worth $420K – $450K but we owe $350K) so its not the usuable equity.
We were thinking maybe we could renovate our bathroom (its the only room in the house that is dated) to create some more equity. My husband is very good with that kind of work and we think we could improve it relatively cheaply so we dont over-capitalise.As for the IP, we wouldnt be looking at buying anything too expensive and would be looking at regional areas over the capital cities at this stage.
The other thing we need to do is work out our long term investment goals and what strategy we need to implement to achieve this. Do the companies that provide this service cost a fortune?
A few comments based on your follow-up information.
1. Your available equity is extremely limited and I would suggest the is very little room to move if the valuation comes in at $420K. On a 95% lend the amount of equity released would be largely consumed by LMI premiums. Thus making the whole exercise somewhat a waste of time.
2. You will need to improve the value of your home or wait for the market to move before you are really in a position to go again. A bathroom renovation may do some of this for you – just beware of over-capitalisation.
3. Just be aware that cheap is often cheap for a reason (limited growth, poorly maintained, white ant riddled and so on) – if you are going down the cheaper line make sure you choose very wisely and don't purchase 'just because you can afford it' – sometimes waiting can be a great move too.
4. As you state the key is to work out your strategy – this is the most important decision of all. Any strategies you consider must take into account your personal situation such as finances, goals, risk aversion levels, family situation, career security and so on. Having said that while having a long term strategy in place is strongly recommended you also need to allow for a degree of tweaking. I have seen a number of people who have put their blinkers on and failed to see the wood for the trees.
Good luck with it.
Agree with Richard – no personal loan here.
Need to bite the bullet and get your financial house in order first. No simple fix other than to change your habits and pay the bloody things off.
First cut all credit cards up except for one 'essential' card – this should also be the card with the lowest interest rate..
Get that cc debt under control. Start with the smallest debt and throw as much as you possibly can (I'm tallking serious money here not an extra $5/month) at the smallest debt amount first. Then when that is out of the way throw the same amount of serious money + what you were previously paying on the first debt at your next target (next smallest debt) and continue to repeat the process.
Chuck it all in a fixed term deposit for 6/12 months and then spend the time learning as much as you possibly can about the options available to you.
