Forum Replies Created
Hey Coxy86,
Often time, the ruling from ATO looks at the purpose of the property. If the townhouse is purchased solely for the purpose of investment property, any gain on that property is subject to CGT if its sold. If the townhouse is purchased for your own PPOR, then decided to rent it out, after 12 months or so, then sold it 12 months later, it is still your PPOR hence any gain will not be subject to CGT.
Remember, if you incur capital gain to a property which is purchased solely as IP, you will pay tax if it sold in the future.
Hey Mark,
I would engage two parties, that is, your qualified quantity surveyor & your accountant. Note, ATO only accepts a qaulified quantity surveryor hence accountants don't fit this category. Ask your qualified quantity surveryor about your recent reno to prepare an amended schedule of depreciation because since you have added some value to increase its value. Your accountant should be able to use the new schedule of depreciation to prepare your FYE tax return.
Cheers Leo
Why not do the following:
- Let your PPOR since costs linked to servicesiblity of the loan are tax deductable
- Go back to renting
- Use your PPOR equity to form a deposit for another IP.
- Hold on to these IPs after 18 months (at max), if sufficient growth in their equities, duplicate.
Cheers Leo
Hey GetRichorDie Trying,
To build on TerryW comment, your rental income exceeds your outgoing costs such as interest on loan, property management cost, strata levy etc.
There are two forms of positive cashflow and these are as follow:
* Positive geared cashflow
* Cash flow positivePositive geared cashflow = your rental income is greater than your outgoingcost (taken into considering your "on paper deduction". What is "on paper deduction"? This is the cost of depreciation of the building primarily which is not really cash expense more like a phantom loss. Also, it is an incentives by the government.
Cash flow positive = your rental income is less than your outgoing costs BUT through "On paper deduction"claim from ATO, it sufficient to wipe out your loss (negative geared) turning it into cash flow positive.
What is negative geared you might ask? Negative means, you are making a loss (i.e., your outgoing costs outweight your rental income). Whereas, gear(ing) is simply means borrowing hence you are borrowing to make a loss (Negative gearing).
If you have any other question feel free to post it here and someone who has knowledge will certainly help you out.
Hope this helps.
Cheers Leo
" Victory belongs to the most persevering"
House Call wrote:DHCP wrote:I like the theory of being mentored, I also like the theory of having a goal, but as you read and educate yourself the goal keeps changing and I don't really know what the goal is, most of the time. Is it really so neccessary?
What is wrong with buying some property with as close to CF+ as you can (so it doesn't hurt you to keep it) and then just hold it for a lot of years? Why will I not make money on that? Historical numbers suggest that should work.
Does one really need such a well defined goal? Or a deadline?
I often read that best thing you can do is start. So I started. Since starting, my goals have changed. Should I not have started? Should I have read and educated etc etc until I had ultra-clearly defined goals? ( I think not, because here we are a year after starting to educate myself with several IPs and no clear goal. A bit of a goal, but nothing too concrete (beyond let's borrow as much as we can and buy as many as we can so we can make as much as we can in the long term) Had I waited for the goals to crystalise I would be stuck still figuring that bit out)
The other issue is mentors. Where does one find these elusive gems? I would like one too.
(BTW Leo, not criticising, just being devil's advocate with genuine questions)
I don't know about you House Call, it appears you are new to goal setting? As said, goal must be clearly define, measurable and has deadline. To educate you about goal setting technique (BTW House Call, not criticising, but it appears you are lacking on this area, so don't take this personally), here's how you approach the property investing using:
Goal: Financial Independent
Measurable: 10 properties
Deadline: 10 years.Why I say education is the most important? As you learn and learn more about real estate investing, you become good investor (i.e., you use the figures rather than emotion when making decision). Further, part of learning is to have EXIT STRATEGY? Why you ask? Well, what happening if something goes horribly wrong, if you don't have a back up plan, you could potential lose even your house (e.g., cross collateral loan). I'm sure you have heard of tenent from hell ? How do you protect yourself IP for this kind of event? What happened if you bought a CF IP which is leased by a particular entity and if the lease was not renew after it expires, then you found out, your IP giving you CF turns out to be negative gearing if it lease on the market because the previous entity who leased your IP paid above the market price? What happened if your IP turned into negative equity, so how do you about such think from occuring? Do you want me to go on……….???????
THAT IS WHY EDUCATION HELP TO MAKE YOU BETTER AND WISE INVESTOR PLUS IT MITIGATE YOUR RISK IN REAL ESTATE INVESTING.
The premise of sorounding yourself with smarter people (e.g., mentor) they could accellerate your wealth creation hence guide you to the right path hence avoiding buying a lemon.
Learned from Robert Kiyosaki which he often say (BTW if you read all his books), investing is about planning, start only if you have a plan because if you don't it is sure way to lose your money. Losing money is easy but making it is hard.
Lastly, why reinvent the wheel when someone else has already shown you the successful way of investing in real estate investment.
BTW, House Call, if you haven't heard yet, 80-90% of wealth creation is Psychology, the rest is only Strategy. What this means? Well it goes back to the fundamental of education again…the more you learn, the easier it gets.
Eventually, applied education is the key to wealth creation.
Ciao, Leo
Property investing is personal preference hence a personal choice and Derek is classic example on how he demonstrated this.
Thanks mate for sharing your experienced.
Cheers Leo
Hello Blind67
I encourage you get some education first (e.g. attend seminars, read books, get mentoring etc). You need to define EXACTLY what you are trying to achieve. Therefore, you need to have a GOAL and that goal must be precise, measurable and has DEADLINE.
For instance, first define precisely your goal is then work backwards. For example, you buy 10 properites in 10 years; 5 of those are negatively gear then 5 of those are positively geare hence they become self sustaining IPs.
Without a definite GOAL, you are flying like blind (pardon my harsh comment). Once you decide exactly what you need to achieve, get your education and most importantly, your mentor will help you shape your strategies.
Therefore, define your goal, have an education, get a plan and be mentored to guide you and success will be around the corner.
Good luck and all the best.
Cheers, Leo
Hi johann22
I would like to help but you are a bit short defining your goal exactly. You wanted to unwind from full time to part time within 9 years.
The key to successfully achieving your goal is exactness or precision.
I got some questions for you and here they are:
- At what exact year you want to move from full time to part time?
- How much cash flow you wanted to achieve or let go?
- How are you going to structure running your business etc.
The more you become precisely you wanted to achieve, the clearly the path of choses you will take.
The more specific you are, you will find, the more people will try to help you in this forum……..exactness.
Cheers Leo
There is no right or wrong answer just comes down to personal preference…..hence personally, after all investing is a personal journey towards wealth creation. Of course, if you sorround your self with people smart people, it will help accellerate your wealth creation quickly.
All the best.
Cheers Leo
Hello BelleStar
The best tip I can provide you in real estate investment is invest first in yourself.
Once you gained your education first, the flood gate of real estate investment property will open up.
As you gain more and more knowledge you become better, better investor.
But, remember true wealth comes from applied knowledge.
Good luck in your education.
Cheers Leo
Thanks Jamie M….keep us posted (i'm sure other posters will be keen to hear about your future progress).
Hello Airstrike,
I fully appreciates your input…thank you.
I was listening to Robert Kiyosaki Real Estate investment Audio book on the way to work this morning. He advises new investors to manage their first IP. Since this is business, it is like having a go lodging your corporate tax return yourself, balancing your P&L and handling your payroll system to pay your staff salary etc. My point is, there are things can go right, BUT there are so much things can go wrong also managing your IP (e.g., tenant from hell).
The advised I got from successful real estate investors, managing your IP yourself, if not done correctly, could have an adverse impact. Further, the advised I received (from reading tons of real estate investment books , almost all of them said that get a professional property manager to manage your IP particularly to minimise the risks.
The idea for me planning to rent my PPOR (considering there are so much tax advantages) is to grow my asset based quickly since the tenant will help to pay for the mortgage plus the increased in CG help to fund another IP in the future after having purchased my first one few months ago.
The idea renting your PPOR is not an easy concept for my wife since she has strong emotional attachment to our house.
I'll will interview 4 different property managers and pick up the best one to manage my PPOR.
Thank you all for your feedback.
Cheers Leo
What do most investors purchase? They mainly purchased established properties so they can manufactured their growth on their IP. In new properties, you can cosmetically renovate but it is insufficient to manufacture enough growth for deposit for next IP. So stick with established properties if you want to fabricate your CG in this kind of market.
Hey Mick807,
You often find, investors do change their accountant (e.g., not happy with the advised given etc). What I can recommend is use google.com.au to search for tax accountant who specialised in real estate and make sure he/or she investment in the real estate that way he or she knows what you are trying to achieve.
But most importantly, since you have many years ahead of you in the employment market, I encourage you to invest first in your self before you jump into real estate investing (e.g., read real estate books, attend seminars, get a mentor). Why is this necessary? It is simply prevents you from loosing your money by purchasing a lemon etc. The more you learn the rules of the real estate, you will use factual figures rather than guestimate more like gambling.
Good luck and all the best in your future investing.
Cheers Leo
Hi Lulu1,
I'm assuming these figures are CG of certain areas for the past 10 yrs? If so, I've crunched the numbers in Excel, what
you should be looking at is to invest in areas that have at least an average of 8% of CG or above over the 10 yr period.
I wouldn't invest in any of these areas because the highest CG you get is only 5% because you won't get back
your deposit within 18 months to refinance to fund for deposit for 2nd after purchased due to poor CG; Consider only investing in areas where the 10yr average of CG is 8% or above:
10 y 5 y 4y 3y 2 y 1 y Avg
6.02% -1.7% 1.64% 4.25% -0.03% 1.61% 2%8.40% 8.49% 4.06% -2.72% -0.82% 7.89% 4%
6.02% 6.3% 7.2% -3.2% -2.4% -0.4% 2%
6.0% 5.69% 9.65% -3.4% -3.6% -3.2% 2%
6.1% 5.8% 4.2% 4.1% 3.6% 5.6% 5%
What's important about CG? Without it, you cannot build your asset based hence your IP don't grow. If you desires to build your portfolio, CG will help you achieve this.
Good luck
Cheers Leo
Hello Jess,
Very interesting………..
You can always get your FHOG later if you opted to purchase your PPOR in the future? But, its a lot to do with your investment strategy. For instance if you intend to invest for Growth (provided you invested in area where the CG for average of 10 years is 8% or above), then it makes good business decision to apply for FHOG towards your PPOR then hold on to it until you are ready to move back rent market (at least 12 months). That way, the increased of CG will help to fund your deposit towards your 2nd IP in the future (revalue the PPOR, then if sufficient refinance to draw down the increased of equity to fund for deposit). That way, you can have your cake and eat it too.
Good luck
Cheers Leo
Well that depends how far the amenities are (e.g. shops, schools, public transport). It is better to buy the property which has more desirability to the tenant because you rather have your IP tenanted all the time particularly if its closer to amenities.
No point buying a larger block of land if the IP is not desirable to tenant (e.g. difficult access to public transports etc, further from the schools or shopping).
You need to understand your target market well then tailor your buying strategy to fit with it; you are the best person to gauge this.
Home Occupier (e.g family with kids) is attracted with large yard. With extra lounge, I would convert it to another bed room because tenant particular couple or family is more attracted with extra bed room (e.g. study room)..hence you can push the rent higher with extra bed room. If the IP has three bed rooms, then convert the lounge room to another bed room, then you are competing in totally different market because of increased in bed rooms.
But you need to understand and precisely knows who your target market is (e.g. family, Student (rented by the room), couple with no kids etc).
See my responses below:
1. Take advantage of FHOG and buy 1 property in my son's name.
[DHCP] Since you earned good money, you probably pay good tax too, hence why not buy the IP under your name so you get tax break?
2. Have my son do most of the renovation work.
[DHCP] Since you can afford to purchase 2 IP, put aside some fund to budget for the reno then get it professional done. The logic is, get the prof comes in do the reno; once the reno is completed, advertise the IP for rent and once the lease is signed while the tenant hasn't move in yet, get it revalue while the place is spot less so you can draw down your deposit in the form of rising equity. In addition, getting the prof , you have more time to look for your 2 IP.3. Pay my son a weekly wage (this is the area which I am unsure of, so if anyone has any ideas on how I can structure this it would be greatly appreciated).
[DHCP] Needless if you take the step two above.
Hello Macca12,
The best person to speak to about TRUST is your qualified tax accountant. There are different type of TRUST accounts and they have their pros and cons.
Given the seriousness of your venture, get the expert advise so you understand clearly the advantages and disadvantages of using TRUST account.
Just to give you some idea about TRUST (e.g. discretionary trust), provides asset protection and minimise tax payment particularly if u are on high tax bracket. In addition, you control of your assets (e.g. investment properties) but you don't own them hence if you get sued personally since you don't own your assets they are pretty safe but in divorce discretionary trust such as family trust is meaning less since all assets get divided up by party involved (e.g mum and dad).
Dis-advantage of discretionary trust, if your IP is negatively geared, the loss income get trap in it hence you wont get tax breaks unlike if you purchased the IP in your personal name.
As said, get some expert advice, for a fraction of fee you pay, such expert advise is invaluable.
DON'T UNDER ESTIMATE ON HOW YOU STRUCTURE YOUR IP…TAKE IT SERIOUSLY.
All the best and good luck mate.
Cheers Leo
Hi Duckman
The bank has refused you to lend more because they see you as becoming more riskier, most likely, you're IP is negatively geared and having to pay for your PPOR, you are spreading your self too thin financially hence the bank don't like you when you becoming riskier.
I'm glad no one has mentioned about balancing your portpolio because that's exactly what you need to do.
You need to find a POSITIVELY geared IP or cashflow positive IP. Having a positively geared IP or cashflow positive IP provides you casflow after all outgoings where deducted hence it will help to service your negatively geared IP.
For instance, if you have one negatively geared IP which is costing you $200 per month, you need to balance your portfolio by acquiring a positvely geared or cashflow positive IP which gives you $200 net cashflow hence your two IPs will cancel each other so your bank will continue to give your a loan…hence this will avoid you from hitting the financial BRICK WALL….It is all about balancing your portfolio.
By balancing your portfolio (i.e. for one negatively geared IP, acquire a cashflow positive IP) the sky is the limit because your IPs are paying for themselves…hence self sustaining IP.
Also, I recommend, you need to invest in your self (e.g. atten seminars, read book etc) because wealth is about 80% Psychology and 20% strategies…that is the more you learned, the more easiers it becomes investing in property.
Good luck and all the best mate!
Cheers Leo
