Forum Replies Created
Hi Francis,
Assume you own a house worth $300K with a current mortgage of $100K.
A lender will recognise 80% of the value of the property = $240K.
As you already have a mortgage debt of $100K the bank will allow you to set up a line of credit/equity loan etc for $240K – $100K = $140K
In this scenario both the mortgage and equity loan are secured against your home.
The $140K in equity/loc allows you to draw these funds and use them as a deposit on other properties. The balance of these funds can be sourced from anywhere – you are not restricted to your home lender.
As an aside the bank may not be the best person to speak to – their lending policies may not suit your particular set of circumstances.
The only other point I would add is that do not mix your private and investment expenditure in a single equity loan/loc – the tax matters become quite onerous. If you do want to use some of your equity/loc for personal matters then split the $140K into two accounts – your accountant will love you [exhappy]
If you need enaything else clarified feel free to PM.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by brahms:somewhere between Number Plates and French Clocks
Well that counts shares and property out – neither fit in the alphabetical range permitted.
As others have said most FA/FP have an aversion to property.
Assuming you have a preference to stay in property then a basic plan would be use the equity available to create LOCs and then use these funds to secure additional property that suits your preferred ‘retirement’ strategy and that is within your budget constraints.
Structure all investment loans as interest only while you have non-deductible debt and then investigate options as non-deductible debt is paid out.
Another option would be to go and see someone at http://www.navrainvest.com.au or http://www.navra.com.au they do have a Brisbane office.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi Sharkster,
You will need to provide a great more information about your previous post. Without this the post will be seen by many, me included, to be nothing more than an advertisement.
Please elaborate.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi PA,
Are you sure your ‘niche’ isn’t already occupied?
If it is you may be able to sound out others for some specific guidance and advice as it relates to your plans.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Every three years
http://www.osr.nsw.gov.au/pls/portal/docs/page/downloads/other/landtax_factsheet_2005.pdf
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by ajayayyar:I am going into this property 1/2, 1/2 with another family member…
Hi Ajay,
Is 50/50 the best ownership arrangement?
Just asking questions and providing information that may help you get it right at the beginning.
Cheers
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi David,
There is no correct answer as individuals have different goals, means and timelines.
If you do use cash you will be either fully or partially immune from interest rate rises depending upon the leveraging you apply.
On the flip side saving for a deposit can slow down the accumulation process given that the money you save is the bit left after the ATO and you have taken what they need first.
Consider setting your cash in an offset account so that it is still available to you and at the same time it has the effect of proportionally reducing you interest bill.
The future movement of interest rates is problematic and even the tea leaves don’t give the same answer. So whether or not they go up and by how much is an unknown entity at the moment.
Factor in a rise (or two) and ensure you do not over extend yourself.
Also be aware that interest charges are a cost of doing business and investment related interest rises are partially offset by increased deductions – the net effect for investors is not as significant as for owner occupiers.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Try google search ‘Land Tax Queensland’ and you get
http://www.osr.qld.gov.au/taxes/land/
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by ajayayyar:I am thinking of keepingit for 3-4 yrs…and making capital gain.. thinking of investing in a townhouse somewhere in Castle Hill or Kellyville area…
Hi Ajay,
Like Anubis – I don’t believe your property and timeframe match each other.
Property is generally considered a long term investment and as such buying with a view of making significant gains at the moment is likely to lead to frustration and a goal unrealised.
Without knowing the final details of the property nor your income this property is likely to cost you a great deal of money on a weekly basis.
The numbers I get are quite significant using what you have provided so far and an annual income of $50K (average income in Aus)
Even increasing income to $80K the after tax refund figures are duanting.
At income of $120K the after tax refund figures are still a little scarey.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi Tass,
Not an accountant so take what I say with a grain of salt.
CG will be apportioned over the time of ownership. For example 10% of the property’s life is as an IP then the CGT will be levied on 10% of the total gains.
There was also some discussion about getting a valuation done at the time a property changes from PPOR to IP.
Suggest you search the ATO website – or if you want to PM me your email address I can forward you a copy of the CGT guide.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by Terryw:If the portions are not equal it will be hard to calculate the interest owing on each portion.
Hi Terry,
While splitting loans is by far and away the better option apportioning costs can still be undertaken even if amounts within the loan are different.
For example assume $75K (deductible) and $25K (non-deductible) are in a single loan.
In this instance 75% of the interest costs are deductible and 25% are not.
Now assume a $20K windfall comes along and is paid into the loan account so that total debt is now $80K.
The ATO will not allow you to say the $20K went to my non-deductible debt (unless it was split off of course). The ATO will say that the repayment is apportioned across both parts of the loan – notwithstanding this the proportion (ie 75%/25%) remains the same, it is just that the total interest bill has reduced by a factor of $20K.
Now a LOC, on the other hand, os nowhere near as simple and I for one would not even consider using a LOC with mix incomings and outgoings as the paper trail is horrendous.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Any costs incurred (included apportioning of rates etc) will be deductible expenses.
Any rental income earned must be declared as income on your tax return.
You can have two PPOR for a six month period of time while you try to sell one property. If the property sells within this timeframe then the sale will be CGT free – assuming it was your PPOR for the whole time you owned it.
You may have difficulties finding a tenant who is willing to move in for a period of time yet to be determined. Many tenants like having a definite time in residence period – the sting in the tail being that having a tenant in situ and on a lease can make your property less appealing to people looking to buy a home on normal settlement periods.
Good luck with it.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Certainly not a place I would be throwing my hard earned into;
http://www.abs.gov.au/Ausstats/abs@.nsf/0/04c2cf10fac92ff3ca256ae2007d1c83?OpenDocument
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi Jenny,
One of our previous PMs tried to bill us for a missing flywire. I got all of my previous reports out and at no stage had the flywire been reported missing.
I politely pointed out to then that at no stage in the past had their inspections identified the missing flyscreen nor had they billed a previous tenant.
I also pointed out that it was their fault the righful ‘offender’ hadn’t had their bond docked and as such they would have to pay for the screen.
I would suggest you have a similar situation on your hands and I would trail through other inspection reports to try and find out when the ‘patch’ appeared. And if there is no mention of a patch then you have reasonable cause to pursue your refund from the agent.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.My three Perth properties are pegged at 6.7% + GST, 7.7% inc GST and 7.5% + GST.
Petties and inspections additional.
All are with different agents. Bear in mind I also have the advantage of weight of numbers.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.I have deleted and/or edited a couple of inappropriate posts here.
Personal slanging of anyone is out of order – full stop.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Stamp duty on the purchase of the property is not a deductible expense – it is used to offset any CGT liabilities incurred when you sell.
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Hi Maria,
Even if the loan is I/O there is usually no difficulties making additional repayments if ‘paying off’ an investment is your goal.
By paying I/O it does also give you the option of havig more cashflow to support other investments. It does come back to what are your goals? And, equally as important, how do you intend using the property in ‘retirement’?
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by Maria0911:I own an IP in NSW worth $270,000 with $90,000 to pay off. I am contemplating buying another IP in QLD & the bank has approved a loan for $440,000 if required. The property I am looking at buying is $350,000 & not currently cashflow positive however will be if I sell my existing IP & put money towards the new purchase. The QLD property will offer me a greater return than my IP & possibly capital gains down the track as it is in a good suburb near the CBD on a large block of land.
As Eric indicated you lose a lot of your profit in buying and selling costs and CGT. I would prefer to hang onto your existing property and buy this one too so that you are accumulating a property portfolio.
This will increase your asset base and improve your chance of meeting your goal within the timeframe stated.
In the grand scheme of things $90K of debt is not a lot. By your own admission you are on a relatively good income and any contribution you make through negative gearing and/or increased debt levels could be considered as ‘savings’ towards your ‘retirement’ at 40.
Reasons for selling current investment are
1. Too many new units built in the area over the years and fear that my unit would not be very appealing in a years to come. Therefore won’t be in demandIs this likely? If you structure your sale price correctly then you should always be able to find a buyer.
2. Unit very small, no garage no seperate dining room etc, not to mention that it is not currently Cash Flow Positive.
I am surprised that this property isn’t paying for itself and am assuming you are using P & I repayments as part of the calculation.
If so, have you considered converting to I/O which should make this cashflow positive. SUre it eans you won’t own the property but you already own 66% of it. This will increase with any future growth.
3. Saving of strata levy approx $1200 paid every year and feel this can also be put towards another IP. I.e dead money
Strata fees shouldn’t be seen as ‘dead money’ – they are used to help pay for your building insurance (something you would have topay anyway) and other costs of running your property business.
Sure house and land do not incur strata costs but there are insurance costs, gardening costs, maintenance costs etc that can come into play depending upon the natureof the property.
I’d be interested to hear your thoughts and ideas on whether it is wise to sell one to put towards another IP.
See above
PS I’m on a relavitely good income & have no kids, am 33 and hope to replace my current income through property by 40. Is this achievebale and has anyone out there done it in less time?
No kids – is this likely to change at any stage in the near/far future?
Thanks
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.Originally posted by Jenny1:I asked PM about this and he said patchup job has always been there, (had 2 lots of diff tenants prev and same PM throughout).
Hi Jenny,
Your initial property condition report would have identified this patch as ‘always being there’.
I would also go back through all of your inspection reports to see if this patch had previously been mentioned.
When you did your initial inspection (prior to purchase) was the patch there then?
Derek
derekjones1@bigpond.com
0409 882 958
Property investment advice and researched property in quality locations available.
