Forum Replies Created
Hi Kariba,
First Question – Do you own investment properties?
Second Question – I buy a block of land and build and investment property on it – can I claim the interest on the block and also on the loan drawdowns used to pay construction costs?
Third Question – Is is worth claiming depreciation?
Fourth Question – What are the benefits and negatives outcomes from claiming depreciation?
Fifth Question – What service (between tax returns) do you provide?
Sixth Question – Can I call you if I want to clarify something? How much will it cost?
Seventh Question – How do you stay abreast of changes in the tax act as they relate to Investment Property?
Eightth Question – What qualification do you hold?Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113MF = Line of Credit?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113And that is why they love locking you into fixed term property management agreements.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi IAS,
I would always recommend you see a broker first. Banks are normally hamstrung by their lending policies whereas a good broker has a wide range of lenders, with their various policies at their finger tips.
You will need to make sure that the broker you use is fully aware of your long term investment plans and if he/she suggests refinancing etc then ask why. Unfortunately like all industries there are some who do not necessarily have your best interest at heart.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Lisa,
The ATO can make adjustments, in their favour, for property built or was purchased after after May 13, 1997 or 30 June, 1999 as detailed below.
This little gem escapes some accountants – just don’t ask how the ATO will calculate the depreciation that you should have claimed but didn’t.
From ATO CGT Guide.
You must exclude from the cost base of a CGT asset including a building, structure or other capital improvement to land that is treated as a separate asset for CGT purposes) the amount of capital works deductions you claimed or were entitled to claim in respect of the asset if: you acquired the asset after 7.30pm (by legal time in the ACT) on 13 May 1997, or you acquired the asset before that time and the expenditure that gave rise to the capital works deductions was incurred after 30 June 1999.
Additionally plant and equipment claims do not come into CGT calculations any CGT offset is based on capital depreciation only.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by iamsooty:Just one thing – the housing market is climbing rapidly here – like every couple of weeks the properties appear to be on the rise. Is there a place for purchasing another property before we completeely pay out the debt – or that just a big no-no. We have held off – but know that we are missing out on some significant IP’s along the way.
Hi IAS,
Hmmmm – was hoping someone else would jump in and add some comments.
OK – here goes.
The Darwin market is currently performing very well and John Edwards (Residex) believes it will continue to do so for a while longer. However, even in saying that, there will come a point in time when the market will slow.
The reason I say that is you need to adopt a longer term view when considering investment decisions (In My Opinion) and therefore need not believe that ‘you must get in now, otherwise the opportunity will be lost forever’ – time is always on your side. However (which seems a little contradictory) yesterday is usually the best time to buy property.
Now to the next part of your question – pay off consumable debt first or reinvest.
The critical issue is whether or not you can service your existing commitments. This, for me, determines whether or not you can safely afford to invest again at the moment. This is where a conversation with a broker can be invaluable.
We do our sums with each property and work out whether or not it is affordable and then work from their. At the moment we have some non-deductible and some consumable debt (wife has a new car) but are still investing.
As an aside – and I do not mean to be rude here.
I would strongly suggest that you do not go to the workshop in Brisbane.
I sense a level of naivety that may leave you very vulnerable to a bells and whistles seminer. In saying that i have no reason to believe PFS are unprofessional or anything of the sort however methinks there are valuable learning steps to initially take before engaging in such a learning activity.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113When banks assess someone as a potential borrower they will look at your asset compared to debt level (LVR) and also your serviceability (DSR) levels.
Loan Value Ratio is simply the value of your loans as a percentage of the value of your assets. So someone with $600K of property and $400K of loans – has a LVR of 66%.
Your DSR consider all income sources (sometimes only parts of rental income) and looks at the commitments you have in meeting those obligations (living costs, homes loans, personal loans, credit cards, store loans etc) and whether or not you can safely (as determined by their policies) afford the repayments.
If, at the end of the day, you have enough assets behind you and you can service the loans the bank will lend you money.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by iamsooty:I know we are doing RIGHT things – paying off needless debt, buying houses that have fantastic growth. But we think we need to restructure the IP from an interest only.
I would suggest that you maintain your IP loan as interest only, particularly while you have (it seems) non-deductible (and/or consumable) debt.
Once this has been paid off then you could reconsider the P and I versus I/O debate.
In short most serious investors will prefer to take interest only loans so they can stretch their serviceability as far as possible. Obviously this is a personal choice but the difference between P and I and I/O can be significant.
Notwithstanding my earlier comments and ss an aside even if the loan is I/O there is nothing to prevent you from making additional repayments so that you eat into the loan principal.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by iamsooty:an agent has just recommended that the other one would go on the market for 70k more than purchase price 18months ago
I am not sure whether or not you are considering selling this property but just in case you are, remember that you do not have to sell to access your profits.
I will also add that PFS seems very focussed on financing strategies (looking at the website) and I am sure that most of the brokers here will be able to provide you with the same (or similar) service without you needing to leave home.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Housing Industry Authority
You could also try QBSA – Queensland Building Services Authority.
If these people cannot help they may be able to direct you elsewhere.
Unfortunately both organisations will be hamstrung by the vagaries of construction.
I am curious as to why you want a construction cost.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by proper property:I am desperate to buy something already i have been searching for six months but have not come up with some thing
Hi PP,
I am not sure if your comments are an accurate reflection of your level of ‘enthusiasm’ or not but it is important you maintain a business like approach to decision making.
A vendor may sense your enthusiasm and you could end up buying something for the wrong reasons or with minimal research.
While you may be sensing frustration (desperation?) at the moment just remember you will find yourself a property – it just may take a while.
On a related matter I wonder if part of the reason you are yet to find a property is because you are looking for a perfect property. They rarely (do not?) exist.
A possible alternative is for you to create a list of ‘must have’ property features and a second list of ‘like to have’ feature and focus on the must have list initially. Use this as your primary sifter and the ‘like to have’ can be the final determiner.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi NWM,
It is all relative – while some people only feel ‘safe’ with a low LVR others are quite happy pushing the envelope as far and as fast as they can.
Bear in mind some banks will lend up to 100% (with restrictions) and LMI. Obviously if you constantly rely on LMI to get your loans it is highly likely they will say no sooner or later anyway.
There is nothing wrong with using equity in your properties as deposits for subsequent purchases. However for this to work effectively you need good growth or the capacity to add value or to buy undervalue.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Iamsooty,
Don’t do it – too many alarm bells going off for me.
It seems to me that everything is moving too quickly, you are being ‘educated’ away from home, on a short timeline, little chance to do your own checks and balances and you also indicate that they are a ‘new’ company.
To me forget the airfare costs (if you have already paid) and hang around here a little more.
Does PFS have a website?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Kel,
I cannot speak for the others but I am not an accountant (I don’t think Ani is either – she is ‘just’ an experienced investor)
Different states have different calculation rates and thresholds for land tax and NT is still land tax exempt. I suggest that you log onto the OSR website for the state/s in which you hold property and that will give you an idea of your likely bill.
Just remember land tax is determined by the total value of unimproved land of all land holdings held by each entity. Land tax is not calculated on the number of properties.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Kel,
PPOR = Principal Place of Residence which is ATO speak for your home.
In broad terms your PPOR (home) will remain CGT free for a period of up to six years provided you do not buy another home in the meantime. By attending to a couple of details you are able to lock in your gains on this property such that any gains made while the property is PPOR remain CGT free.
Whether or not you sell now (or later or ever) will also be dependent upon your feelings about leaving your ‘home’ to tenants and where you think growth in Healesville will go in the period while you are away.
If you are thinking that you need to sell the property to access some capital to be used as deposits for investments properties then you can think again. It may be possible for you to release equity that you have in your existing PPOR as a starting point for your investment journey. You do not need the cash – equity is as good as cash.
More than happy to take a call – best time is during the day. No strings attached.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Dave,
As the property was built (commenced) after 16th Sept 1987 you will be able to claim 2.5% of the CONSTRUCTION COSTS/annum for 40 years from this date. So based on the information provided you have approximately 23 years of capital costs to be claimed.
In addition the property may also have undergone significant renovations and upgrades. These too, will enable you to use the same basis for capital depreciation claims.
Furthermore the property would include a number of items that are considered plant and equipment. Each of these has it’s own depreciable opening value and life and would be claimable.
Scott (AKA Depreciator) is/was a regular poster here and he will be able to provide you with some more accurate information. Suggest you do a search and his post will reveal his contact details.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113If in fact it is land tax your account is referring to then you will need to compare tax savings with trust establishment and compliance costs.
While tax savings and/or redirection can be achieved through trusts the bigger issue revolves around asset protection.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Steve,
I can only suggest you try the HIA (or similar) in Brisbane.
Another alternative may be one of the Quantity SUrveying Firms who operate in Brisbane.
The difficulty you may have is that buildings do have different specification levels and construction materials so any figure you do get will be very ‘rough’
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958While your home is CGT tax free if you do sell it is also possible to retain this as your only PPOR for a period of up to 6 years without incurring CGT.
I believe that you do need to establish where you are going in the long term – the tenor of the questions indicates to me that there are lots of short term objectives in mind but I do not get a sense of what your long term goals are.
In the end it is your long term goals that will determine what you should od with your house.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Kel,
Is your accountant talking stamp duty or land tax?
Stamp duty is levied on the purchasing entity at time of purchase and I cannot see how having a new trust would reduce the SD bill. Land tax, on the other hand, is determined by the value of the landholdings and could be reduced or offset with different ownership entities.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
