Forum Replies Created
- Originally posted by ptn:
To answer your question, I believe the conveyancer normally contact the water authority to see if there is any outstanding bill rather than a direct check to see any easement unless instructed to.
That does seem strange.
When we purchased our current block which we have since built on we were required to sign a clause indicating that there is a power authority easement on our block.
When we refinanced to a different lender 5 years ago we were asked about the easement and whether we were aware of it.
From this experience it clearly indicates that there is facility for easements to be highlighted in property transactions. Which goes back to my main point – did your conveyancer do all searches?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Jon,
Have been meaning to come back to you with a comprehensive answer. However someone has provided some specific deatils which made it easier to explain (partially).
See this thread https://www.propertyinvesting.com/forum/topic/23083.html
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by carpe_diem:Quote:Originally posted by Derek:I thought I was in a position of not being able to borrow with no employment but you seem to be saying this is not an issue. Lots of stuff in your note that I’ll have to digest as its different thinking. It may well work out that I can’t go back to work while at the same time you’re saying I think that I could live off equity of these properties until the time is right to sell the properties that are particularly of high interest to developers.
Yes, it is different thinking and the approach does create some debate. It would certainly pay you to do a little more research.
Note this approach really requires that you don’t sell the properties as it is dependent upon achieving growth a consistent basis. It also requires that you maintain debt at safe lending levels and this is where a good broker can come into their own. But you will see from the table I sent you that at a compounding $37K per year you are drawing funds at a level that is largely sustainable. In all likelihood you could drawn more and very safely so too.
Having all of your properties in one city may negate the living off equity approach as Australian cities move in different cycles fro one another.
I’ll get hold of the book you suggest and have a read.
Good choice.
If you were me who would you arrange an appointment with to discuss the use of equity to get me out of my current cash flow problem before I lose more of my savings. Alternatively should I spend the savings first before going for living off equity in the event I do go back to work?
There is a financial planner who specilaises in a living off equity approach. He is based in Sydney and it would be worth catching his next workshop.
The only advice I would provide is to set this up earlier rather than later. This will relieve a great deal of tension from your life and make things a little easier.
Check out his website at http://www.navra.com.au and more specifically the link to http://www.navra.com.au/index.asp?content=courses#topics where you will be able to register for the next course.
As indicated earlier I am a shareholder in Navra so take that comment with a grain of salt. In saying that Steve has received wide acclaim for his course but does ‘cop a bit’ from people who do not believe that Living Off Equity can (and does) work.
Steve also has an added extra in the equation which is a ‘cashbond’ – put simplistically it operates similar to an annuity.
The living off equity approach is something I am currently work towards and would be more than happy to answer further questions.
Derek, I appreciate very much your efforts in responding to my cry for help. I don’t know how the star system works but I gather you didn’t earn 4 easily overnight.
Been a while gathering them [biggrin]
In fact as a new member on this site as of yesterday I’m impressed by the response that other members are making to their property mates on all sorts of questions.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by michael76:Anyway i have managed to convince him if i can find us a 100-200k investment which is +CP i will use my savings (25k) for the deposit and use his investment as equity
At $200K you father will only need to provide a further $25K (assume 80% lend and you provide all of your savings)
I would also suggest very strongly that your father establishes a line of credit secured against one of his existing properties rather than providing titles as security for this venture.
If this arrangement transpires your father will probably be asked to be guarantor (brokers?).
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi CD,
Thanks for the offline details.
I’ll post an approach here that will. in all likelihood, provide some debate.
As it currently stands you are asset rich and cashflow poor so an option may be a reverse mortgage or modification thereof.
Currently your debt level is 23% of your overall property portfolio – own home included.
Breakdown each of the three properties and you have 100% ownership of your home, 59% of your first investment property and 29% of investment property 2. Some ‘experts’ would say you almost have enough equity to adopt a living off equity approach.
Using such an approach you have accessible equity in each of your three properties which will (with a good broker) enable you to go to a no-doc lender and borrow up to 70% (with Macquarie @ 6.98%) or 80% (with RAMS @ 7.24%) on each of these properties.
If you really wanted to you could conceivably access additional lines of credit valued at $630K (against own home through Mac), $56K (against IP1 & with Mac) and $145K against IP2 (also with Mac).
You could conceivably push the envelope even further if you used RAMS by a further total of $174K if all loans were placed with RAMS.
During this process you would also be able to unlink loans if in fact they are linked or cross collateralised.
Given it is one year before you return to work and you only require a further $37K (above exising cashflow) it would be possible to live off the IP2 line of credit very easily indeed for almost 3.5 years even allowing for some capitalisation of interest within this line of credit and not allowing for any further growth in your properties.
In effect IP2 will provide you with your income for the ‘off work period’ with time to spare.
As an aside if you do pursue this approach ensure you set up at least two lines of credit. This will allow you to clearly establish what is deductible and what isn’t.
Use one line of credit for personal expenses (clothes, groceries, home bills, travel, car etc)
Use another for all investment related expenses including loan interest and all of this interest will be deductible.
If you really wanted to, you could use some of the available funds in a managed share fund.
I would suggest something like Navra (note I am shareholder – so do you rchecks and balances).
Based on a track record of 20% the previous (04/05) financial year and currently tracking at 15% at this stage of the 05/06 financial year.
Assume you invest $200K in this fund taken from your home line of credit.
At 7% this will cost ~$14K in borrowing costs.
At 10% returns this will realise $20K less costs and realise a net return of $6K.
At 20% return the net gain increases to $26K.
Obviously this is not something for the feint hearted but it will certainly tie you over. You may also want to grab a copy of Michael Yardney’s new book – it explains the living off equity set up very well.
Please note that this should not be construed as advice – it is the ravings of a mad man and needs to be considered in this light.
Hope this helps.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Carpe Diem,
Not a guru but will have a crack at answering your question.
Couple of details will be useful.
Loan debt on IP no 1? 530K value.
Expected years before an income will be coming in again.
How much per annum do you want now?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Teedee,
I wonder why you are selling this property when by your admission it has performed very well and you have an underperforming St Kilda property.
It seems to me that you are selling the wrong property.
You also indicate that you are experiencing some cashflow issues. Have you taken steps to minimise your outgoings and maximise your incomings? Have you restrutured your loans to ensure minimum costs? Can you use a line of credit to pay outgoings?
All of these strategies may enable you to hold the existing properties without the need to incur CGT and agent’s fees.
Have you done a ITWV?
Maybe there is a solution within your grasp that does not need for an amputation.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by mja:The goal is to reduce non-deductable debt.
My wife and I currently live in our apartment, which has a mortgage of 72.8% LVR and is our primary place of residence. We’re building a house that should be ready in the May-June time period this year, that we will be moving into. Thus, our apartment will then be rented out and become an income producing asset.
It is for this sort of reason that a good broker will recommend an interest only loan with offset account.
This way should an individual ever move out of ‘home’ and turn it into an IP then they can either take their cash into the deal or change the offset link so the interest savings are transferred over to their new home.
Not a broker so take what I say with a grain of salt.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by ptn:The bank has granted us the funds to build the 2 units BUT the water (Melbourne water) authority rejected our building request and refused to grant us a PIC. The reason being is that there is an EASEMENT running across our property. This easement is NOT shown on our certificate of title. According to the water authority, we (the owner) must contact the water authority as well as the title office to see if there is any easement on the land. Unfortunately we have no case but ourselves to blame.
Did your solicitor do a full search of all titles and agencies when you were purchasing this property?
I am not in Victoria but I would imagine that this detail would have been revealed with a full and comprehensive search by them.
Have you been back to the solicitors and asked if their searches reveal such matters. You may need to be a little sneaky here as they may have some degree of liability. It could also be that they are in the clear too.
You can always try and see if the MWA will rescind the easement. This success (or not) could well depend on the reason for the easement and also your willingness to find a solution rather than apportion blame.
Have you tried to approach MWA with how can I solve this problem? type of contact.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by nellandtony:We are considering buying our first investment property – the house next door! The vendor will sell privately. What traps should we look out for in regards to private sales?
First potential trap – don’t be seduced by the need to see your property. Make sure this decision to buy (or not) this property is on sound investment grounds and not emotional grounds.
Make sure you can afford it.
Make sure the sale is ‘supervised’ by a legal beagle. While handshake deals can be great sometimes misunderstandings can cause a great deal of distress down the line. A solicitor (conveyancer) will help manage this eventuality.
Get pest and buidling inspection done. You may think you know the property inside out – but do you really?
When tenanting the property use a property manager. It is best to keep the tenant relationship at arm’s length. Even though they may seem ‘nice’……………………..Fulfil your obligations as a landlord and let them fulfil their obligations as a tenant.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Steve,
I have a simple spreadsheet which does the basic calculations (totals interest over 12 months etc) but to all intents and purposes is really only a recording tool.
It serves me well and my aco<edited>ant is happy with it.
You (and anyone else) is welcome to a copy.
Just email me with subject spreadsheet and I’ll send one back by return email.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by AmandaBS:I think Derek was putting together a list of books
Eeek – hey Amanda I enjoy a read and read widely (just finished ATO legal database reports on Harts case and related matters) but not making a list. [biggrin]
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Sarah,
Bugger the FBT thing.
As for ITWV – keep your eyes peeled on the ATO website from late April when they will post the forms for the 06/07 financial year.
I try to get my ITWV in as soon as possible after they are posted on the website and generally do all of the preparatory work beforehand.
An accountant will generally do these for a typical fee – the ITWV can be done by anyone if they are a little number savvy.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Sarah,
I don’t believe this is correct.
As I understand it there is capacity for an individual to declare that the vehicle was not used (repairs etc) for an extended period of time and that this is taken into consideration when determining FBT liability.
However, in saying all of that, I would suggest that you contact the group who manages the salary packaging or the ATO.
Please note the information I have provided will need to be cross checked.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113All capital costs and are depreciable but not deductible.
Deductibility exists if the work is repair.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI GBV,
As part of your learning process you could do well to visit
http://www.chrisbatten.com.au/
A good starting place but SMSF do come with lots of rules and regs and as such setting one up does require a good knowledge of the relevant laws.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Teedee,
Creek Rd?
As Harley has asked why sell?
This property is in an area that is easily accessible to the city, you have a good on-site manager who actively increases rent & has next to no vacancies, and the complex has good access to the motorway and central business district.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by bennido:However, I was always procastinated and mainly becoz of fear. Fear of going to a qualified accountant and finding out all the bad / wrong things I have done in the past. And having spoken to some of my pals who lodge tax returns themselves, its surprisingly not that uncommon !
– Was it a really tough experience finding out all the wrong things you have been doing and now having to fix it ?
– Disappointed in losing all the “invalid” deductions you have been giving yourselves ?Hi Bennido,
Don’t disillusion yourself – just because the ATO has paid the refund it does not mean that all your claimed deductions have been approved.
In effect the ATO currently uses a process whereby they pay out refunds as per a lodgement and then the returns goes to the back room where some are perused (and some a little more closely).
I would suggest that making erroneous claims is fine until……….
And that is why I always use a good accountant. They know what I am doing, where I am going and can assist me to maximise my legal deductions while still fulfilling my obligations to the community.
Tax minimisation is fine – tax avoidance is not.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by crusher:Consider this… 1 Mil x 10% (which you should be able to get fairly safely on that amount)= $100,000pa (or $1923pw) Obviously 1 Mil would not be the full useable amount after the sale because of CGT tax but it just goes to show to me that this option requires some more thought.
Hi Todd – are you saying sell or not? This wasn’t clear to me.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by john_preacher:Just on the topic of IO loans. I understand the tax benefits of this type of loan but what happens when you get to the point in your life where you want to retire off the equity in your portfolio where the bank says it’s time to pay off the loan. Do you sell 2 of your 10 property portfolio to pay off the rest?
And if the loans are all gone now and your system is to never sell your properties how do you draw on the equity?
This is something unfimiliar to me so please bare with me.It sounds like John is asking about a living off equity approach. Is this correct John?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113
