Thanks for your reply Terry,

What I said about the CGT 50% thingy was exactly what you meant but I didn't write it in very clear words.

i'll have a look to see if i can find some ruling or something with details, and the like.

Thanks,
Chris.

Thank you Marc, your perspective has given me something to think about.

If I can get early access to the property I could do minor reno, e.g. paint. Then move in a tenant.
This will make me a buy and hold investor, I don't like the sound of that, but if moving into a house and doing a 6 month reno and not really guaranteeing the returns i'm after its just to much work.
Also I just thought that if I buy the house and reno it then all the buying costs are non-tax deductable.
With an IP(Buy and tenant straightaway) are all the associated costs tax deductable so my 6% allowed for closing costs I get all(6%) of part(tax rate) of it back via tax deductions.

So lower LMI, no added costs for reno(and risk of reno), no added costs for holding, tax deductability of loan.

I'm really swaying over to this side of things now, The reno is just not making financial sense. I will have to re-research the market rents, and crunch some further numbers to compare.

Thanks again,
Chris.

Hmm, thanks Marc for your reply I didn't see your message.

Ok Marc in my number crunching I have revised it a little but not yet to what you mentioned. I did not allow for holding costs during the 6 months, which turns out to be 7K(just like the FHOG). Now as it will be my PPOR(for the 6months) would the 6% on top of purchase price hold, I don't think I pay stamp duty as first home owner and its relatively cheap, can you please clarify the actual things that I have to pay, this area has always been so grey to me.

The LMI, I cannot believe I didn't think of that, hmm, i remember I had some sheet of paper which had like a matrix table that is averages of LMI for certain %'s and loan amounts, i'll find it.

Hmm, the reno costs added on to the loan, how would this work, a line of credit??
How inclined would they be to giving me this considering my high LVR?

Thank you Marc and others for your help I do appreciate all the help from everyone, it is nice to think that people come on here and genuinely want to help out.

Chris.

Well I know certain numbers just by experience on this forum. As I am currently at uni and am not going to buy an IP until late 2009-early 2010, I have just been looking/posting on this forum and checking out sites like realestate.com, I've just been researching I guess.

Well when you buy an IP you have the purchase price, but then there are also associated costs such as stamp duty, bank fees(finance), solicitors, etc. When you get the IP you can take some sort of strategy, if you want to buy and hold, then you look for a tenant, you could get a property manager(which usually charges 6-8% of rent) to manage your tenants and search for new ones when desired. This of course eats into your cashflow.

You will have council rates, insurance(i'm not exactly sure about insurance, like the technicalities thats something else i'll have to find out), etc I have asked around and most people say 2-2.5K per annum for those kind of things.
Also initially you may have to pay a certain insurance called LMI(Lenders Mortgage Insurance), I don't know if you are familiar with it, but it is generally an insurance for the bank(no benefit to you) if you don't pay your repayments, You have to pay LMI if your LVR is quite high(80+), that can eat up alot of money if you let your LVR get really high(95+).

You borrowed money off the bank, so you gotta pay it back, your loan repayments will be your dominant outgoing(by far).
Rent, your big income.

The figures with selling are say for example;
You buy a house for 200K, then 5 yrs later it is worth 350K.
The value of the house has gone up 150K, so this gain is taxed(capital gains tax), there are certain rules, if you hold the IP for over 12 months(in this case yes, 5yrs) you only pay CG tax on 50% the gain, so you pay tax on 75K not 150K, which is pretty good. Then you work out form the 75K how much actual tax you pay, say your tax bracket was 50% then you would have to pay $37,500 in tax out of your 150K profit.
You have selling costs(this is also an area where I don't know the figures, there are agents fees, some other fees), ive been told about 5% of selling price.

There is depreciation, this is where your belongings(the house, the fixtures, the carpet, paint, sinks, etc, etc) lose value, you can claim a tax deduction for these. You can also set up with the tax office to get paid this depreciation on a weekly basis(just like how your employer might withhold tax before you even get paid) this is good as it helps cashflow. The value of depreciation depends very much on the age of the property, the building state and recent renovations.

I hope this cleared something up, if you need anymore help with anything or if anything didn't make sense just post back, i'm more than happy to help out.

Chris.

Thanks Marc and Joel. I can't believe I didn't look at comparative sales, that should enable me to keep an eye on the value and keep those formulas in check.

Thanks again,
Chris.