Forum Replies Created
Where is your property Tiffany?
If Perth, which suburb?
Really need this information before I can provide any useful information.
Another 'rent to buy' story out of WA.
Purely and simple it is a question of numbers.
What cost will the deposit bond be? Bear in mind it will need to cover the sunset clause date for the contract. The longer the bond is required the more expensive it becomes.
Weight that up with the consequences of using your cash. As Terry said using cash on an IP is not usually the best option, but it does vary from individual to individual.
Hi Henry,
You are well and truly paying overs at that price for a 2 X 1 X 1.
Coomera like much of the Gold Coast and its hinterland is struggling big time.
I'd be thinking $435K for a 2 x 2 x 1 in Coomera is too expensive.
Coomera is struggling a the moment but having said that a longer term point of view is required.
Rough maths.
possible selling price – purchase price = Taxable Capital Gain
If property has been owned for more than 12 months only half the gain is taxed.
Apportion the balance remaining in accordance with ownership ration of property and add this figure to taxable income.
Compare tax payable on taxable income without sale of property with tax payable with property profits.
The difference is what your CGT liability will be.
A more accurate answer will include allowances for purchase and selling costs and depreciation claims made.
Don't have CGT calculator on hand but google reveals all.
Terry won't sleep tonight
HI Chris,
Welcome aboard.
A few random thoughts.
1. Based on the numbers provided you equity available is somewhere between 92% and 83%. If a valuation establishes the property to be valued closer to $380K you would be hard pressed to do anything.
2. Seems you have quite a few financial commitments I would like to see attended to before doing anything else (not sexy I know but sometimes reality is like that).
3. Not sure of the extent and breadth of the renovations and how much 'spare cash' is involved but keep doing these if they are adding value to the property or attending to fundamental flaws in the building.
4. At some stage you will need to start working on your vehicle debts – kill off the motor-bike loan as quickly as possible and then re-direct the current loan repayments towards the car so you get rid of that as soon as possible.
5. Most financial planners are a little biased towards equities and superannuation so any planner you do see will probably steer you in that direction. Is that what you want?Not a broker.
Always use a broker because of their;
1. Knowledge.
2. Tailor made finance package.
3. Loan structuring.
4. Access to multiple lenders.
5. Focus is on customer's needs and not the bank's need for security.Hi Paul,
Unfortunately there will be some people who abuse or mismanage th erent to buy concept. Then there are those who probably really don't understand what they are getting into either as end of line person or even as the middle of the road person. In many ways the wheels would have fallen off at some stage,
To be honest I am a bit surprised rent to buy isn't already covered in NCC. Seems somewhat of an anomally really especially when 'day lenders' (certainly in WA) are regulated.
But I guess the time will come when regulation rears its head.
Give Deppro a call. Check out http://www.deppro.com.au
There is also a QS who posts on this board and has done in recent days. My humblest apologies I cannot recall name. Maybe check out a few recent 'depreciation' questions.
Terryw wrote:very generally.
80% of rental income, and
30% of salary
must be greater than repayments of all loans.You having broker pangs Terry?
Just can't keep the broker out of the lawyer can you
Hi Jac,
100% rented at $240/week = $12480
Less
Notional 10% property management costs = $1248
Notional rates allowance = $2000
Notional insurance allowance = $1000
Interest bill @7% = $16800
Notional Contingencies Allowance = $1000Shortfall = – $9568
Nick's $10K shortfall isn't far off the mark. Gross rent return currently stands at 5.2%
Hi Jac,
At 7% interest only the annual loss is around $9000 – $9500 depending upon costs for property management and rates. I did allow $2000 for rates and 10% of gross rent for property management costs.
To Nick,
If you are a wage earner you can cushion the shortfall through the use of depreciation reports (if relevant) and/or PAYG Income Tax Variation. If you are on top marginal rate you can cushion the shortfall to by around $4500/annum. The amount of tax saved will diminish as your taxable income reduces to such an extent that it you are in the $6K – $37K taxable income bracket your tax savings reduce to $1500.
Either way it is possible to use a tax variation so that any tax saved is returned to you in your fortnightly/monthly pay period rather than at the end of the financial year.
Hi Adam,
Congratulations on getting to step 1 – pre-approved and deposit saved. This is a big feat in itself.
As to whether or not to buy – the answer to that question really boils down to your plans, timelines and personal circumstances.
For every statistic supporting the 'buyers market' theory there will be a statistic supporting 'potential bubble' theory. For what it is worth some of the disparity in positions has a lot to do with the two speed nature of our economy at the moment. Indicies for non-mining related industries such as retail etc are at all time lows, whereas those indicies in mining related industries are at all times highs.
On a related matter the imposition of the responsible lending legislation has had a marked effect on non-bank lenders. This along with the GFC and company and government responses to the GFC now means that some lending products up to GFC are no longer available. Banks & mortgage insurers are a little more circumspect with lending policies today. Having said that I also believe some of the big four are starting to relax some conditions slightly in an effort to increase their share of loans. Not that this should be seen to be a signal or even more relaxed lending to come. ASIC and legislation have put an end to that.
I am sure some of these people are now struggling due to excess borrowings through lax lo-doc and no-doc policies in existence at the time. Combine this with a high across the boards LVR and there is little wriggle room left for these people.
Similarly the Government's FHOG Boost scheme has created a number of households (read FHO who took advantage of the boost) who are under mortgage stress. These people largely did not have to save a deposit of any substance and were qualified when interest rates were as low as they have been for eons. Even with the bank's serviceability margins the rate used to determine serviceability was awfully low. Given these people had minimal deposit they have no behind them and any surplus cash they had on previous calculations is being consumed to meet loan obligations.
Now all of this sounds like doom and gloom but rememember for every 'bad' signal there is an equally positive one.
Yes stock on the national property list is at high figures – certainly here in Perth current stock levels are at higher than average levels. RP Data recently reported a slight decline in stock available levels and a reduction in vendor discounting to effect a sale. So maybe the corner has been turned here in WA. Housing Industry and other luminary organisations like ANZ Bank etc continue to report a significant underlying shortage of property stocks and have projected for this underlying shortfall to continue.
Also countering the doom and gloom merchants is our national unemployment figures are below 5% and in WA just over 4% – now when I studied economics many years ago 5% was considered full employment. So, from an employment position, we are in a great position. About 3 months ago statisticians also reported an increase in the number of people employed full-time whereas up until then the unemployment figures were a little fuzzy as people took on fractional work to retain some salary in preference to being laid off.
Some of the dooms day merchants are making relationships between house prices and income levels. Both the ANZ and CBA banks and our very own RBA have largely debunked this relationship as the study underpining it is reportedly very simplistic.
The outlook for short term growth in many markets is questionnable but investors with long time frames will go OK – you may need to consider something different to simply buying an off the shelf property – maybe consider something different. I believe Steve refers to these properties as those having a twist.
Be aware we (the general we) seem to pay greater credence to merchants of doom than we do of others, equally qualified, often citing vested interests.
Ulltimately – indviduals need to make up their own minds, check your goals timelines etc and make a decision on what suits you.
Certainly not trying to diminish the efforts of other posters here at all but to me it seems as if your accountant is the one you are speaking too. The three posters have each raised concerns with respect to your proposed structure and it would seem to me that it is time for your accountant to start earning some bucks.
Here it is early August and you're not due to see your accountant until November.
My advice would be top bring this appointment forward and get full and total clarification from your accountant who should know your situation intimately. If you cannot bring this appointment forward or get the required advice in a timely manner then maybe it is time to seek someone else's services.
For what it is worth splitting off your redraw would seem to be the best solution.
Heed what Terry is saying.
Hi Squirrel,
Seems you have enough 'don't use these people' messages here. You may have to look at Plan B.
Even though there are advantages to using one property manager for all properties (I assume this was a goal you were seeking) it would appear as if you may need to look for recommended property managers in the areas you have your properties.
Hi Luke,
I assume you are referring to strata management rather than property management. On this basis.
Having seen this sort of 'arrangement' before whereby the developer often sells the strata management rights off the plan with a long term contract in place.
I am sure the strata management contract is pretty much water tight and you may well be clutching at straws. My advice is to learn the strata management regs in Qld and use this knowledge to support your case.
You may even find your frustrations are echoed by other investors in the complex so you will need to attend strata meetings, get to know other investors and when the time is right get a place on BC management committee. If there is a swell of numbers legal advice should be sought as getting it wrong may be expensive. Good legal advice should be sought.
Hi Tweaka,
Not classifying myself as wise but without knowing the ins and outs of the deal there are some key issues and answers you will need to find.
1. Check your capacity to finance this property. As it sounds like dedicated student accomodation the bank may be reluctant to leand at 80% or more LVR. If you were relying on is not available it may throw your plans into chaos. Given bank lending polcies are in a state of permanent flux I am not sure how they currently view student acc.
2. You indicate this property hasn't gone up in value over the past 10 yrs – does the same apply for the area. If a lack of growth is confined to this property then you need to really consider whether or not this property is the right one for you.
3. Check your costs figures are ALL inclusive. Some student accomodation sees landlords contributing to power, internet, water and other utility costs. Is this the case with this property?
4. Student accomodation = o/seas students only? I seem to be reading a lot of commentary stating o/seas student numbers are in decline. Is this property, and others like it in the area, targetting o/seas students. Is the rental income sustainable.Be aware you will need some growth, or heavy savings, to be abale to purchase the CG property you allude to in your post.
For what it is worth – you should be able to do better. Having said that – the property may suit precisely what you are trying to do. Be aware
