Forum Replies Created
Hi Carmen,
In addition to the ‘hidden costs’ mentioned previously you will also need to check to see whether or not you can secure finance at 80%. Lenders tend to treat ‘retirement villages’ as a riskier proposition and you may find you need to contribute more equity or cash than would otherwise be the case.
The capital growth market is as yet largely untested and may be somewhat problematic.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Bigfella,
As Simon has indicated the purpose of the loan is to buy an income producing investment and as such the interest on your deposit is deductible even though, at this point in time, the property is not earning an income.
The Steele case is a good reference point in instance like this when the taxpayer (Steele) won the right to claim interest on a house and land package under similar circumstances as yours.
An elongated timeline may negate this principle.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Smithy,
I would suggest that Chan Naylor will charge for their advice time – I would be surprised if Nick didn’t also charge for their time.
I would also offer Coasty Mike as a possibility – his posts indicate a depth of knowledge.
Of greater concern is the quality of the advice – cheap doesn’t necessarily equate to good. You will probably find that an annual review will suffice and thereafter the process just happens in between annual visitations.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958A couple of quick points – yes The Investors Club has been around for 10+ years now with over 6500 purchases made.
Yes The Investors Club does market researched properties in major areas – but there is no pressure applied.
Fees earned through purchases are used to provide the fabric of support that exists for members before, during and after the purchase is completed and continues ad infinitum through enhanced property management processes that result much lower vacancy rate than that existing in the wider market.
Note disclaimer applies.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi John,
I believe the difference here is that the property was initially an IP.
As I understand it when a property first exists as a PPOR and then becomes an IP the process you describe is undertaken.
Now we will have to wait for an expert to come along and clarify this for us all.
Mark where are you?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Jules,
As Terry said borrowing 40% will make it easier to secure finance.
Given the uncertainty of your plans post, 12 months, I ownder if you wouldn’t be better off using the 40$ difference between an 80% and 40% and placing these funds in an offset account (note I assume you have this in cash).
This will enable you to reduce your interest bill by this amount while still being able to use the funds at the end of 12 months if your plans change.
At the same time this cash is readily accessible if your world goes pear shaped.
Using this approach will also enable you to maintin full deductibility of the 80% – if this is in fact consistent with your plans.
Hope this helps.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Originally posted by Kevy:His advice is to keep paying the loan but I want to go buy the next 1.
I keep getting you have the deposit but serviceability is an issue. I have $200k in equity and earn $78k.
Hi Kevy,
It sounds as if your FA has chosen to direct you into a very safe investment strategy – is this because he/she doesn’t know of your frustrations and/or intentions or is it that his/her licensing requirements restrict them from advising a riskier approach? Note – I am not advocating a foolhardy approach but a measured more strategic approach.
In the main – one IP, by itself, is generally not going to provide most people with sufficient needs in their post working life, irrespective of a cashflow or growth focus.
As for the I have a deposit but not enough serviceability message – I would suggest that you get a second opinion as there are a whole range of financial products for most situations which enable people to get a loan.
Hope this helps
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Lei,
As Terry indicated rolling over CGT is not an option with property investment (see comment below).
The capacity to rollover gains is something that exists for business owners provided they meet the necessary guidelines.
Property investors who rent out a property and receive an income (rent) are not entitled to rollover their CG. However someone who is in the business of developing and selling without earning rent can have their properties determined as active assets and as such are entitled to rollover their gains.
On the surface this may sound attractive – but these gains (by a developer) are treated as income and taxed at the appropriate rate anyway. In effect he/she is in a similar situation.
Disclaimer applies – only someone with a passion for Property – no qualification held beyond year 12 economics.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Newstart,
Buying and selling a PPOR is a little different to buuying and selling IPs – primarily because the tax issues and purposes of the purchase are different.
I would counsel someone against taking on ‘large’ (relative to your circumstanes) PPOR debt as it is all paid for with after tax dollars.
In your circumstances sell your current PPOR (no CGT), buy a new PPOR without overstretching yourself (buy what you need rather than trying to keep up with the neighbours) and if the situation provides itself leverage off the equity to buy investment properties that are consistent with your goals.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Chockey,
Read page 52 of the CGT guide in the bottom corner there is an example of how to work your gains out.
In a nutshell the total gain is multiplied by the number of days it was rented and divided by the total length of time the property was owned.
Eh $100000 gain – rented for 60 days – owned for 300
100000 X 60/300 = $20000 taxable gain.
The $20K is added to your other taxable income and taxed at the appropriate rate – which is why selling assets should preferrably be undertaken in no/low income years.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Scotty,
Certainly not claiming to be an expert but before we can answer your question Scotty – we need to know what you would hope to achieve through property investment.
It is certainly a case of ‘different strokes for different folks’ and as such your preferences etc could create a different plan of attack.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Matt,
Certainly one for the accountant.
In a nutshell as a business/company you will not be eligible for any CGT discount which, if you choose wisely and sell, could be a large impost.
If asset protection (and there are tax benefits too) is a concern I would recommend so research on ‘trusts’ – this structure may be your best option from all angles.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958H JG,
If you mean your CGT question it has not been deleted – just moved to where it belongs in ‘Legal and Accounting’
https://www.propertyinvesting.com/forum/topic/16948.html
Lost count of the number of times I move people’s posts as they were originally placed in the wrong section.
I used to provide a PM to let them know but very few people got back to me so I figured – I got better things to do with my time.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Originally posted by Torachan:In the last real crash it was possible to buy a house for 10% of it’s bubble price.
Hi Torachan,
That is a big call – buying property at 10% of its value.
I would like to hear where the property was and when the crash occured – can you enlighten me please?
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Veronica,
Ditto Terry’s comments. If cashflow is an issue have you considered some/all of the following?
1) Convert your loan to I/O. This will save some of the outgoings.
2) Check you current rent to ensure it is at market rate. Some PMs and/or owners lose touch with what the rest of the market is doing and this could be costing you money.
3) Is it possible to add value to the property while at the same time increasing the rent even further. For example some tenants are happy to pay rent + for items such as airconditioning and security. new carpets maybe, the list is endless and your individual circumstance will determine what can and can’t be done.
4) You haven’t indicated the age of the property but it may be possible to depreciate all/or parts of the property.
5) Have you considered the advantages of a ITWV that can assist with your pay period cashflow?
Equity is equally as important to your investment journey – while this property may be sucking some cash from you it may be an active contributor if it provides you with additional equity enabling other investments.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Greg,
Worked for mine. It is a 33 page pdf file with lots of photos – total size 2.95mb
Thanks for the heads up Michael.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Aside from the tenant or not to tenant question there is also the question that needs to be asked “Why sell?”
Entry and exit costs in real estate are significant and as such selling, without good reason, will see you throw away some of your hard earned gains.
Peter Spann has three reasons for selling – bought a dud, you get an offer to good to refuse or you have better use for the money.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Originally posted by JenD:Is it possible that the 10% deposit is the real estate agents’ policy, or are they just trying to bluff us?
Office policy or not – the law says the size of the deposit is negotiable. Put down what you want.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Jen,
As Eric has indicated there is no requirement to pay a deposit of 10% – your agent is looking after his/her own interests.
Have a look at page 52 which clearly state a deposit of 10% is normal but it is negotiable.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Dan,
Just adding to previous comments.
Borrowing costs are deductible and apportioned over five years or the life of the loan, whichever is the less. As such if you buy and sell the property within a five year timeframe you could claim more than the 20%/annum.
Charges listed as borrowing expenses are loan establishment fees, title searches, fees & costs for preparing and filing documents, mortgage broker fees, mortgage stamp duty. Lenders mortgage insurance and valuation fees are also considered borrowing expenses.
In addition if the total of the borrowing expenses are less than $100 (how likely is that?) then these charges are fully deductible in the first year.
The trip to buy the property is not deductible, rather it is considered an acquisition cost and will be used to offset capital gains liabilities.
(The ATO is now on the lookout for Redwing’s dodgy tax return[exhappy])
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
