Forum Replies Created
Hi Dennis,
Which state is the property in and is there a lease in place on the property? Answers to both of these will determine what you can, and cannot, do.
Make sure you refer to Department of Consumer Affairs (or similar) of the state you are in and grab a copy of legislation to guide your actions moving forward from here.
As an interim comment – while the PM does the grunt work for the property the owners need to actively engage with the whole process too. Monitor monthly statements, check inspection reports, monitor asking rents in the area and so on. After all property investment is a business.
Given the rent has been allowed to slip behind market rates it is possible there are some maintenance issues requiring owner's attention. It is time for the owners (your folks?) to get in the game too.
Hi Waz,
I know a number of property investors who use Chih Wah (Chee) at Davlin Finance. All speak highly of her.
They are based in Harris Park and can be contacted on 02 8843 8999
There was a very convoluted question there.
Hi Dsenior,
Just did some rough numbers for you assuming an 80% loan of $336K
Interest cost at 6% = $20K
Ongoing property costs at 1% of purchase price = $4K
Property Management Fees @10% = $2K
Income
Rent @ $400/wk = $21K
At current interest rates your shortfall = $6K/annum or $115/week. N.B. I have not factored any negative gearing benefits into the calculations nor have I considered rate increases and these will come.
Only you can work out whether or not you'll be ahead.
Your desire to make this your own home in about 12 months does muddy the waters a little. Sometimes factors we use to select a home are different to the factors we use to select an investment.
Hi Peter,
The key point from Terry's link is that you can only have one PPOR at a time. Certainly the legislation allows "(4) If you make the choice, you cannot treat any other * dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies." you to maintain your original property with CGT free status but you cannot also, at the same time have CGT free status on your new place.
Hence why I suggested you speak to an accountant about which property is best being declared as your PPOR.
Cheers
Paul B. wrote:Michael, being a mortgage broker, how would you suggest I approach this with my bank (NAB)?Don't! Use a broker to help you through the process.
Banks are more interested in mitigation of their risks – often this is detrimental to your goals. I suggest you give Michael a call.
Being in the property investment sphere myself (we do JVs in Perth) I don't use buyers agents but there are three main BA players in Perth.
In no particular order.
Hegneys – http://www.hegney.com.au
Momentum – http://www.momentumwealth.com.au
Property Wizards – http://www.propertywizards.com.au
While I haven't used any of them it would pay you to give them a call to see what they offer, how much they cost etc.
I am sure they all have customer referrals they are willing to share.
Hi Peter,
Certainly would not recommend another property (new IP) in Harvey as you would be over capitalised in a smallish community.
With a population of 2,500 and a dependence on dairy industry (when I last looked) it would be very susceptible to small hiccups.
Hi Brian,
The ATO does not look at the security attached to a loan when determining whether or not the interest is deductible. Their primary consideration is the purpose of the borrowings.
If I read your comments correctly you are suggesting Peter redraw from his old PPOR (now IP) loan to pay down his new PPOR to make the redraw loan deductible.
If this is correct the redraw is NOT deductible as the funds have been used to pay down the new home (the purpose test).
Cheers
Which SW town are you in? I assume you are more in the Bunbury area.
I know Deppro do head down south from time to time and are due in (Mount Barker, Albany & Denmark) in the next few weeks. Give them a call on 61026920. Ask for Claire.
Your old PPOR will start incurring CGT liabilities as soon as you move into your new PPOR apart from a brief period (about 6 months from memory) when you may be trying to sell it after moving into your new PPOR.
Now it may be possible to delay declaring your new PPOR as your new home but that would depend on advice from your accountant and the general market at the time.
The 6 year rule only applies when you have one PPOR.
Hi Peter,
Certainly the additional income from your old PPOR will add to your taxable income so you will need to factor that into calculations.
How old is your old PPOR? Getting a depreciation report done may be to your advantage in terms of tax minimisation as this can be used to reduce (on paper) your net profits. There are depreciation companies that travel to the south west and will undertake a depreciation report on your property.
Speak to your accountant about establishing a new base/cost price for your old PPOR. Now that it has become an IP you will be liable for CGT from here onwards. A formal valuation, for tax purposes, will be required at some stage,
Your original post asked if it would be worth borrowing again for another investment – ostensibly to save tax.
Certainly this is a strategy you can employ but negative gearing is more effective at the higher income levels. Your taxable income level will determine whether or not negative gearing is valid, or not. Having said that as a property investor you need to be making money so don;t be overly focussed on tax saving – rather look to make profitable property decisions. This can be achieved through capital growth or cashflow or, if you hit the sweet spot, a combination of both.
Hi Pvasi,
You have a couple of options available to you and it is difficult to give some definitive and constructive feedback without more detail. I'll throw a few options at you to get your mind started.
1. Sell old PPOR and use funds to reduce mortgage on your new home. Then leverage off increased equity in your new home to re-start your investment journey.
2. Use rental income of $400/week to reduce your PPOR mortgage. Not sure how much of an effect $400/week will have on your new mortgage. Combine this with your desire to leverage off your old PPOR to start your investment journey.
Suggest you do some maths with these two options on the table to see which one suits you best. You'll also need to consider your income level, spare cash levels and so on before formulating a strategy moving forwards from here.
Anecdotal comment from the weekend press reports suggest the investor market in Perth has really picked up in recent months with instances of multiple offers being reported. Deppro also recently reported a 30% increase in investor activity in Perth in January 2013 when compared to January 2012.
I suspect both of your properties are located in the SW area – if this is the case you may wish to diversify into the Perth metro areas so you are exposed to a wider (some would say more stable market). I am not sure having all of your property eggs in the SW market is a good idea. When the SW goes well it goes well – when it doesn't it certainly doesn't.
Hi Lila,
$10K in approx 6 months (?) – you need to get to the bottom of this sooner rather than later as it may be an early warning sign of something not being right.
Things to look for.
1. I would go back through each account separately to see if any have seen an overall increase in debt. It could be one of your loans (LOC) is capitalising without any contribution from yourself. If you do this on an account by account basis then any oversights will be easier to detect.
2. Check your initial loan statements with mortgage documents. You may have incurred lenders mortgage, additional fees, establishment fees, valuation fees which you haven't considered.
3. You say 'rent should cover this' – is that gross or net rent. Sometimes management, leasing, letting fees can erode your gross fairly significantly.
As stated earlier start with one account at a time and work out whether it balances. If it doesn't then get onto the lender – I have seen instances in the past where banks have made errors. It took my book keeper (who helped a friend out) sometime to work out where the money was.
Hope this helps.
Not sure where and why you are looking in Qld.
There are opportunities under your nose in WA. Just gotta know where to look.
Deppro reporting 30% increase in investor activity in WA compared to 12 months ago.
Current listings in Perth below 9000 properties (normally 12,000+)
Vacancy rate at 1.9%
Rents for units rose 14% last year (as reported by APM)
Rents for houses rose 17% last year (as reported by APM)
Sometimes the grass is not always greener on the other side.
PS Cold called not a good start as far as I am concerned.
I would start by asking what your accountant invests in. You may/may not be surprised that not all people including accountants are created equal.
Ask what their opinion of property investment is. If they say 'no' then you may be wasting your time.
Ask about deductibility of interest on land purchase when you buy a house and land package. You may be surprised at how many accountants think this interest is not deductible.
Add 'why' to all of your questions too. Get some depth in the answers you receive.
Hi Ladyhawk,
In the main 'Retirement Villages' are not a good investment. They have certainly been peddled as great investments largely due to their, often, high gross rent return. If you are seriously pursuing this as an investment make sure you have a clear handle on the ongoing costs before you make a decision to invest.
Your parent's situation does complicate matters somewhat and I can understand your thinking.
How far from "moving into a village' are they. If it is sometime then you/they may be better of considering an entirely different property to invest in. Depending on the performance of the property and whether or not it is cashflow positive at the time of retirement your parents can then make a sell/hold decision based on what the property has done at the time they retire, what their overall situation is and so on.
You/they may have more success and an easier decision making process considering the two issues separately rather than jointly.
raj.lover82 wrote:Personally, I want to attend the presentation and see how it will go. But based on peoples' comment and bad experience, I will make sure that will not sign any paper or commitment for buying property through MA.
Appreciate if any one share their experience
Hi Raj,
You have already had a few people cite their experiences with MA. Suggest you re-read those comments.
As for your assertion that you wont sign anything let me share an experience I had many years ago with Stamford Lyon.
We live in an out of the way place and get cold called from time to time by various companies so wife and I figured we would go along. The teaser was a copy of one of Jan Somers books (IMO a good read & worth the attendance on the night) which we received if we booked a private consult.
Presentation was standard fare; most die poor, you need lots to live the lifestyle you want, we all pay too much tax, use your tax dollars to buy property, property will set you up, we'll provide all of the services you need and we even have the property for you. We''l even fly you to the GC so you can look around. Interestingly at the seminar we weren't allowed to ask questions – they will be addresses at the home visit.
Home visit comes around and we get down to some details. I give home & mortgage value and income levels and guess what we qualify. Yippee on the road to riches………
Then the salesperson starts crunching some numbers for us. She was pretty quick at numbers – but my strength is numbers and flaws in her numbers became quickly evident so me being me starting asking questions and pointing out the errors of her logic. The response – "That is the we we have been taught to do it."
Anyway we didn't sign up for trip to GC – wanted more time.
For days we got rung up to see if we were flying to GC and you could tell by the change in callers we were getting past up the line and more and more pressue applied as we went. Clearly we were a hard case and some management level (AKA more successful salespeople) were involved.
The pressue was enormous.
Now I don't know anything about MA – this was my experience with Stamford Lyon. Thought you may appreciate what we went through in order to help you make an informed decision.
Hi Freckle,
A few things really stood out for me.
1. The excessively large amount of wealth held by a few.
2. The negligible difference in wealth between middle and lower class groups.
3. How small in numbers & declining the US middle class is.
4. The seismic shift in wealth distribution that has occurred in the 20 (?) yrs of the study.
Now I know we cannot judge the whole of the US on media reports etc but this study does make me wonder about the breakdown in US society. Fact or fiction? I don't know but it doesn't stop me wondering.
Caught this article on the distribution of wealth in the US.
Thought it may be of interest to some.
Know what you mean.
I would still encourage you step back and look at the bigger picture. After all the 'bigger picture' is more important that the short term hurdle you are having trouble stepping over.
As they say in the classics 'one swallow does not make a summer'
