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we really need to know a lot more information in order to give you a decent answer.
For example what are you trying to achieve in property investment? What is your goal? Your timeline? Your investment preference/s? Your skills? and so on.
I would ask one key question – have you explored the possibility of using the equity from the existing property (rather than selling it) as a deposit for something else?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Nik,
Unfortunately the process as you have outlined will not provide your parents with deductible interest. The ATO will look at the purpose of the new borrowings (to buy the new home) and this will determine that the refinance money is not deductible.
I assume your parent own the first property as joint tenants and have equal shares in the property. It is possible for the higher income earner to buy out the others share.
The funds realised through this process will be deductible and the funds from the sale can be used towards the new house. Throug this process you will get two ‘half debts’ and not the all and nothing arrangement you were hoping for in your explanation.
Another option may be to sell the first house (it is CGT free) take the agent’s fees hit and stamp duty and buy the new home. Use the funds from the sale of the first property to buy the new home and then leverage off the home into other investments.
As per my first option there are costs involved here (agent’s fees and stamp duty) but the deductibility of the new borrowings will be confirmed.
If your parents are ‘downsizing’ then this option may be valid. If they are upsizing then they need to be wary of not trying to keep up with the neighbours and take on too much non-deductible debt.
Non-deductible debt is the hardest of all to manage and pay off.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Didi,
Don’t go to a bank – see a broker with access to a variety of lenders.
Be up front with the broker so they can best place your loan application with an institution that will assist.
Bad credit ratings are not unusual and provided the reasons are valid then there will be a lender out there to help.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Housemender:The problem is that my in-laws believe that I’m totally mad and am leading my husband astray and that interest rates will go back up the the 17% rates seen in the 80’s and that we will “lose everything” though our being so greedy! They are desparate to make us see the light.
Hi Housemender,
I would suggest you look at their ‘balance sheet’ to determine whether or not their comments have credibility.
You will be surprised how many people ‘out there’ have a negative viewpoint. Forums such as this are the exception to the rule and should be milked for all they are worth.
I would also add that a lot of negativity comes from supposed ‘qualified people’
Enjoy the ride, have faith in your decision making process and congratulations on your achievements.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Skyreacher,
Try this link https://www.propertyinvesting.com/forum/topic/6845.html
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by suelever:I do not wish to sell it as its in a lovely location with lots more potential for capital growth as it has now been valued by estate agent at $420,000.
You have given enough reasons NOT to sell this property. It has obviously performed well for you and with further upside in the pipeline it sounds like it is a ‘hold’ and not sell property.
As I need to build up more money as deposits for other properties
You do not need to sell this property to access the deposits for other investments.
If the property values at $420K lenders will recognise and lend you $336K (80% of the vaue of the property) less any existing mortgage ($70K).
Using these figures you have a potential $266K for use as deposits on other purchases – this will allow you very simply to purchase $1m of property. (Very rough maths).
The key message here is you do not have to sell to release your equity. In fact half of the gains will capital gains taxed even if you sell this property to your SMSF.
If you wanted you could extend your ‘deposit money’ by using a 90% or even 95% lend on this property. At these rates of borrowing your deposit money extends to $308K and $329K (less LMI).
As you can see extending out into LMI territory can be very productive.
is it possible for me to sell this property to my own super fund for say $160,000.(a lot less than its really worth)
If you do sell (I recommend don’t) then you will need to ensure the transaction is at market price.
I will also point out the placing this property in your SMSF will mean that you cannot access the equity as a SMSF cannot borrow money. Whereas keeping the property in your name enables you to do this.
I am not a financial advisor but it seems to me you may be better off using your SMSF for continued share purchases and focus on leveraging off this property in your own name or that of a trust
Hope this helps
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Not sure if they do but http://www.seqrents.com.au seem to accept ‘private’ type rentals. Might be worth a contact.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Nigel Kibel – now moved to the desired location – Derek.
Firstly you need to look at the history of the property? What is trhe average income per year?
The other important thing is that on these type of deals in many cases the banks will deem this a commercial venture and they may only lend you around 60-65%. I would suggest that you phone Alistar Perry on 0407787313. He is a mortgage broker but is part of a large town planning company so he knows his stuff. I am also in the process of purchasing apartment complexes in the United States. However a number of us are doing this so the risk is reduced.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand The United States Property Researcher and education
One Day property investment research workshop The United States. Please register your interest
http://www.changingplaces.com.au Buyers advocate.I use a very simple, no frills, free excel spreadsheet I developed for each property.
In my opinion the simpler the system the better but the critical details is regular data entry and information management.
I get a little anal with paperwork and will make data entries as the income or invoice statement crosses my desk. Each paper reference is then filed immediately into the appropriate lever arch file.
At tax time I gather the appropriate file (a central accounts one) and print off the spreadsheets and toodle off to my accountant.
I find if I stay on top of the paperwork it is not a hassle.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Ella,
It seems to me your focus is all wrong.
Taxation benefits are great but they should not be the sole for purpose of an investment. I suspect that you have met your FP and unwittingly mentioned the lack of tax benefits and he/she is using this as leverage against you.
Let’s consider what you have – an asset worth $180K that is ‘costing’ you approximately $2.5K per year (allowing $1400 for rates, $260 net difference between rent and interest and a further $840 for insurance) I appreciate that the numbers are not correct but bear with me for a moment.
So you are effectively holding this $180K asset for $48/week.
Assume the asset doubles in 10 years it is now worth $360K and for this you have outlayed $25K with no additional rent or costs.
Now lets consider the options sell the property and walk away with a ‘profit’ of $55K (less CGT and agent’s fees – assume $10K) leaving $45K to put into a super account.
If this super fund doubles in the same 10 year time frame and you include the $2500 ‘lost’ each year the ASIC super calculator suggest you will realise $101K in the same 10 year time frame.
Now let is consider Amanda’s suggestion.
Refinance this property to 95% and you will release $37K (less LMI) which could assist you to purchase another property using a 97% lend with LMI valued at over $200K (a broker will come along and give a figure).
Using the power of leverage you are able to hold considerably more assets thus enhancing your overall position. And if tax is still an issue make this one a newer property – provided it also has good fundamentals.
Now obviously you would need to check this scenario with someone appropriately qualified – just go to someone different to the one you are seeing now.
And finally as Amanda said Ipswich was teh fastes growing area in SEQ in 2004/05 period and there is a looming undersupply of the market and as a consequence rental vacancy rates are at 17 year low in Brisbane.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Rexilla99:What they do is buy blocks of land in sought after location and build turn key homes that include plasma TV and furntiture. They also have other developments ongoing all around Australia.
As per the other comments – if in fact these guys are ‘that big’ I am surprised they need to rely on mums and dads for their funding. If they have developed Australia wide then me wonders why they cannot use their ‘track record’ for finance purposes.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Derek,
my parents want to stick with the property, no matter what.
They are very family oriented.
You mentioned leverage, what options are available without getting rid of the land?Hi Redspida,
Leveraging off property is very easy.
Banks will typically lend up to 80% (without mortgage insurance and depending upon zoning issues – if any) on residential property.
Assuming a debt free property the banks (assuming no zoning issues) could lend up to $800K on this property.
These funds could then be used in conjunction with other borrowings to further leverage the $800K or for an outright purchase of an asset class that they are comfortable (and educated about).
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Stamp is always payable when the name on the title changes. Capital gains tax isn’t payable though if it’s a PPOR.In this case there may be – from the depths of my memory there is a size limit on land. From memory land larger than 2 acres could incur CGT. An accountant please?
The rider to this is also the purchase date of the property. Anything purchased prior to september 1985 is CGT exempt.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Don,
It would be interesting to get Michael Yardney’s comment here.
Some recent research I have just completed tends to suggest that the housing industry is undersupplying dwellings in many of the more significant cities around the country. As a result vacancy rates in many of these places have fallen to below 3% (point of market equilibrium) to the point where vacancy rates are at an all time low in some situations.
Consequential to this is upward pressure on rents (in dollar terms)
Much of the ‘popular press’ is based on, and appeals, to the emotions of readers. Many of these articles (electronic included) are not terribly well researched.
In some cases the print media uses statistics that are generated within the confines of their own ownership circle and thus generate their own ‘standing’.
As always individuals need to make decisions based on their information and research and should not rely on the popular press.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Redspida,
Without meaning to sound harsh I think your parents have got this back to front entriely.
They have a million dollar asset that they are wanting to ‘deal with’ in order to get the pension which currently runs at a maximum of $420 each/couple.
It seems to me they would be better off looking at ways to leverage off their asset so that they can continue to live comfortably and also provide something for the kids.
Sure I can appreciate the difference in the thinking process but at the end of the day they need to consider their needs more prominently.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Don,
The difficulty with median prices is that different companies have different data sources and comparisons which can lead to slight variations in percentage change rates.
Having said that the differences seem about right and consistent with the trends in numbers I have seen.
John Edwards (Residex) made a great comment in a recent article I read – everyone has focussed on the recent 9% fall (over two years) and have forgotten to look at the 130 ish% growth in the last cycle in Sydney.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Toolkit,
If you are endeavouring to wrap in WA – (excuse me if I am incorrect, I know bugger all about wrapping and that is my excuse [exhappy]) – but you will need a finance providers licence otherwise you will be operating outside the law in WA.
Check out
http://www.docep.wa.gov.au/media/media/2004/April/Mortga.htmlIf I am on the right path and you are trying to wrap in WA get onto the phone and ring DOCEP.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Giddo,
It was moved yesterday – if my eyes weren’t playing tricks on me.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Just Learning:Quote:they miss out on the rumoured cold beers that are supposed to be in the fridge in Simon’s office.
Tis only a rumour[biggrin]
If you go to Simon’s for the cold beer you will be disappointed.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113I believe Terryw is Sydney based.
Mortgage Hunter is in Newcastle and then there are others who are further afield. In today’s world it is possible to ‘do business’ from afar.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113
