Forum Replies Created
Thank you Elka
You are correct in saying that i'm determined to figure lots out before I get to buying.
Your post sort of helped me and that link helped me understand, but not so much in relation to my question.
Most people think in pictures, my thoughts are in numbers, so i guess i'll plug in some values to see what happens.
Ok. I buy a prop for 200K, with 2.5K selling costs and the FHOG, so I actually fork out 195K. I don't think the size of my deposit matters here(but we'll just say 40K, or about 20%).
Ok, i move right in and start renovating, I spend 15K on renovations in the 6 months, Correct Elka I stay in the property as my PPOR long enough to qualify for the FHOG then after the 6 months I am back in my parents house. over the next 4.5years(5 years from purchase) i decide to sell and use my capital growth to buy a real PPOR.
So I have bought and kept for more than 12 months, so I get the 50% CG discount.
I lived in there for 6 months, does this actual 6 months mean anything?? What if i was 7 months or 8 months(would that make a difference?).I'm getting from what your saying is that I lived in my IP(former reno "PPOR") and now as I lived in there can get complete CG exemption for up to 6 years or so(or whatever time the gov says so), so that if i buy my IP(former reno PPOR) in 2010 and sell in 2015, with 4.5 years or renting out, I can then sell and not pay any CG tax.
If all of this is true and I don't pay any CG, then what happens with the situation where I get tax deductions while owning the IP. like building and fixtures deductions that actually reduce the amount my property is worth. Will they have any impact on my CG or any impact if at all???
I'm sorry Elka if my posts are extremely hard to reply to as I pretty much spend the whole time asking many many questions.
Atleast I have realised that the only stupid question is one not asked, so i'm all fine there.I look forward to your reply or anyone else's reply. I'm sorry pasandbec if I have hijacked your thread, I seem to just move in and start putting up my tent so to speak.
Thank you,
Best Regards,
Christopher 'inquisition' Fife.So if i renovated an IP, i buy it then live in it as my PPOR for 6 months while im reno-ing it(to get FHOG) then i move out after 6 months back into parents then some years later i buy my PPOR and want to sell that first IP, say 5 years, so i lived in it as my PPOR for 6 months. how would the CG work out on that?
I'm very confused how the actual buying and selling costs get calculated in this figure, are they included(e.g. i bought for 200K with 10K selling costs on top to make 210K, but when they calculate for CG what figure do they use) whats the situation with selling costs aswell?Hmm, that kinda changes things… ok … I could live inthe first reno, but to be able to take advantage of the full 6months i could buy a much more run down house(structurals still fine), and do a much bigger reno, also this will make my initial mortgage for the reno a little smaller as i will be buying a more crappy house and my budget for reno will only be a little bit more.
Also I looked at the renovation toolbox last night on the web, im not going to get it yet but it looks fantastic, 500 bucks thats alot of money for me when im only on about 200 per week and saving about 100-120 a week. I will probably be getting that kind of reno education in a year or so mabye a birthday or a christmas or something.
Also anotehr quesiton, is 6 months too long of a time to do a reno, i will be losing money through mortgage repayments., say i buy a 250k house and have a 40k deposit, im looking at about 300 per week interest costs.
And i have another dying question, over the last few weeks i have been thinking about this reno. i have always been buy 1 reno o it up and get CF+ and then save up for secnod reno(2 years later) do reno and get CF+ then 3 years after that buy PPOR and poay that off as fast i can and then continue my journey with IPS.
But if i do such a large reno, should i keep the reno-ed up IP and get CF+ if i can(which i should if my calcualtations are half decent) or should i sell and get teh equity then do another reno. Hmm, im sounding like a renovator and not an investor. what does everyone think about the reno and rent' or the 'reno and sell' issue.Steve Generally says that Problem + Solution = Profit.
What are you purchasing here is the solution, not a problem. maybe a some sort of renovation is a problem and you solve it somehow. I generally would steer clear of brand new houses they are just solutions.
Also would a brand new house be like a brand new car? The house is all perfect not used at all, then someone goes in and it is second hand, does this drop the value. If so then you would be paying a premium for something that will instantly drop in value the minute you own it.
Chris.
So if you write up in the contract at the start that the tenants will be paying for the water on top of their usual weekly rent. Then does that mean your covered, i know they can refuse, but you could take this to the tribunal and win(could you??).
Yes but when you change the IP back to the PPOR you will have a low undeductable loan and a big tax-deductable loan(in the IP that you redrew from).
Chris.
Thanks Elkam, also you just mentioned that they assume they have one months worth of rent as a bond. Is it only one months rent as a bond, whats the usual amount($ or time), would the tenant be scared away if the bond was slightly higher as I would like to protect myself as much as I can.
The whole positive cashflow after tax idea many people seem to believe that you are saving tax.
YOU ARE NOT SAVING TAX, YOU ARE DEFFERING IT.There is an example in Steve's first book which I am re-reading right now, where you buy a property for 190K and you depriciate it at $6,700 a year for 5 years. This produces +ve CF(turns -ve to +ve). NOw in this tiem the property have increased to 240K, so you think you have made a 50K profit. well you bought your property for 190K but you have written off $6,700 a year on tax making the overall written down value at the end(190K-33.5K) $156,500. So you now have to pay tax on the difference between the 240K and the now written down value. Most people that can turn the -ve into a +ve by the tax defferal idea would have a high tax rate, so your CGT would be high and your profit from CG would be much smaller than you originally thought.
So the idea that I am trying to get across that Steve got across to me it that YOU ARE NOT SAVING TAX, ONLY DEFFERING IT.
You have to pay it later, *paying the tax later* may be the only advantage of claiming it and having +ve cashflow for that time(though a measly CG at the end).Chris.
Hmm, I have had this question for a long time but it has never been that important, but seeing as it looks proper in this thread.
Ok, so you draw up in the lease, the tenant pays for their water consumption, they have 5hr showers they pay for it. what about electricity, is it the same deal?? they use, they pay?? Also with all the water restrictions, what happens if the tenants get caught spraying water say on the driveway, when they are not supposed to and incur a fine, who pays for this fine, them/you?? does it have to be written up all of this for it to go your way.Also all of these questions are for houses, not appartments.
So the expenses that we as landlords have are interest, management fees(if we have em) and rates. Is this it??
Out of the 3 IPs(1,2,3IP), you could try selling one of those to free up some cash, uaing this free cash you can build on both the blocks of land. Once they are built you could sell one and reduce your PPOR debt. I also like the idea of the super when selling properties, its just logical.
I feel your key here is building on those blocks of land, as that will sky rocket their value and thus your equity that you can grab and use to reduce PPOR.
You can still have a few IP's, but the real concern is that PPOR, once that is more manageable then it'll all turn around.Thanks everyone, that gave me lots of perspectives, I didn't know reno kings had a book, maybe i'll look into it.
Thank you everyone
Also feel free to continue this thread.
Think about the baby boomers in some years time. A two-story house won’t appeal to them as they will not like stairs.
The market is ageing and 2story houses are not very friendly to old people, they tend to steer clear. Thats just a thought for you to ponder over.I don’t know about equity wise how the reno would perform.
Positive Cashflow, that why the Country.
Thats all…..Thanks trajik that helped clear it up.
whats a HDT?
Hmm, Im confused here, I know with a refinance you cant use it for private and still obtain tax deductability. But if you are cancelling the class of the property as an IP to a PPOR for a little bit(a week, how ever long) and then changing back to IP, then you get the increased loan. Hmm? is this still wrong. If it is oh well.Thanks alot trajik that was a very fast reply.
If this quantity surveyor person will cost you $600(or whatever) can you claim that as a deduction in the next financial year. Like how my parents claim the money they pay the accountant in the next financial year.
So its like a discount.
Hmmm???whats an OOcc? I have only heard this term here on this thread and have no idea what it is.
Can someone shed some light on this please?Thanks Christopher Fife.
No, the tenant can’t buy the property in 3 years time. That would come under the lease-option thing, where they have an option. And by the way you would increase the price so that if they did buy you out(somehow?) then you would stand to make a profit and still be CF+.
Having a property that is not CF+ defeats the purpose for investing. I don’t know exactly but im guessing that you want to invest so you dont have to work aqnd can be financially independent. Well Its CF+. For 3 years, still its CF+ for those 3 years better than 10 or so years of CF-(even though you would get more capital appreciation, you would not have acheived the objective).
CF- defeats the purpose of investing(if thats financial independence).
With a 5% deposit. I have read Steve’s book and have become very attached to wraps and lease-options, but wraps in particular.
If you wrap a property and you get a deposit from your tenant then that can help your deposit, and they pay more interest than you pay as you cahrge a premium. So why can’t it be CF+?
Or is everyon talking about buy-hold, where you own 5% and charge normal rent?A large deposit defeats the purpose of the investment as you are trying to get as much back from what you invest.
The real deals are ones which you use low deposit(5-10%) and get +ve. If you have to put in 20% to get positive then you will tie all of your capital up for one positive.
