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lets say purchase price is 160 k
i got 10% deposit – so loan is 144k repayment over twenty years = $277 a week
interest is 221 a week roughly
weekly rental return of 200 say $3000 a year in expenses so $57 weekly
so short fall of $200 – 57 – 221 = $78 loss a week. lets assume you also pay $77 a week to pay off the loan over 20 years
So lets assume a 10 year period
$160,000 compounded @ 8% over 10 years = $345,000
the calculator shows me total deductions of $4000
Loan would be $100,000
So now after ten years you have $245,000 in equity not taking into account rent increases of $10 a week each year.akes off
Compounding property value takes off when time is experienced.
Rule of 91
take 91 divide it by interest rate and you get 9
every 9 years value should double.
If you stuck money into bank account you have to pay tax each year on the interest
Say $10,000 is saved each year say 6% interest
Year 10 you have tax to pay each year after on roughly $7900 interest
You can borrow against the increased equity of the IP to buy another one but time is the ingredient needed.
No.
But have learned a bit about the fact that you need to have each apartment fire isolated and you may need a structural engineer to certify the strength of the separating floor.
Recommend you visit local council and tell them what you are thinking of doing and they will tell you what is required to strata title a building that is two storeys.Whatever it is get the paper work and take it to a solicitor and get them to explain all the consequences that you may encounter.
Before you sign anything !
The housing commission area of Flemington and Footscray are one of the arrival locations for new Australians so this could be who you would be mist likely be renting to.
A very wealthy Australian who has since passed on was doing this.
You can reduce tax to the rates you suggested by buying fully franked dividend paying shares on the stock exchange.
As these shares have the tax paid at 29% already
so if you were on say a 40% tax rate then you pay 11% tax
as the tax on share earnings has already been taxed at 29%.It may be better to try and work with the bank before going bankrupt.
The bank may let her sell the property and then let her pay off any remaining debt after the proceeds are used to pay off the most of the debt.
You need to know if the other $7000 fee was based on a fixed term bank loan as this will push the exit fees up.
Some people have mentioned that the no exit fee needs to be across all banks and non banks.
Churches like to have modern facilities.
If you can offer an alternative close location with a newly built church building that has a hall,kitchen, meeting rooms, worship chapel and good parking and close by housing for the minister / priest you might have an appealing negotiation offer.Your Lawyer has a point !
You should not risk doing renovations until the settlement occurs.
Unless you have a contract that has terms of wording that any improvements done by you before settlement will be paid for by the vendor in the event that settlement doesn't occur and the Vendor agrees to it.However you could have wording that access be allowed to allow quotes to be done by tradies that will commence work after settlement.
Not sure on the mortgage part as settlement was 10th of November in writing. Insurance has to be in place also for settlement to occur.
ummester wrote:duckster wrote:The rental market is a supply and demand situation. If supply is less than demand the rent price increases.To a point this is true. The rental market is also confined by real wages, unlike buying, which is only confined by credit availability. In some instances around the country, people are paying more than 50% of their gross income on rent, this is not sustainable.
duckster wrote:So if investors were buying lots of properties and then trying to rent them out there would be an over supply of rental properties on the market and the rent charged would decrease.
The increase in rent has been caused by an increase in house prices but the residential rent is not charged as a percentage of the house cost. Only commercial is like that.
If house prices increase and first home buyers can't afford to buy then they rent.
The lack of property investors causes a supply problem for the increased demand for rental properties and the rent increases.
As house prices are high an investor cannot charge rent based on a percentage of the house price.
So a 3 – 4 % rent is most likely achieved before expenses are paid out.3-4% is an incredibly low yield for any investment, without capital gains, housing in Australia becomes a dud place to store money, even with NG.
There are half truths in what you post here duckster.
Over the last 10-15 years, prices of property have increased by much more than the cost of rent. it's really very simple, rent is caught between actual wage growth and property price growth. Rent has increased by more than inflation but not by the same factor that property values have.
More than just house prices act on what can be charged for rent.
duckster wrote:You also have not mentioned the foreign investors that buy Australian Property as an investment and then lock up the property in Australia and do not rent it out.Foreign investors aren't the only ones. Australia's true vacancy rate (not vacant rentals which range from 2 & 6% depending on location) is around 10% in most capitals. This is more local investors sitting on nest-eggs for retirement than it is OS buyers.
duckster wrote:Also the tax breaks you mention are there so that the government doesn't need to invest in massive public housing projects.
If you did not have people investing in property you would not have a place to rent and would have to live in a public housing project instead.It is true that the government uses housing tax breaks to avoid accountability, investment and spending by offloading it onto the PI.
I bet many tenants, however, like those I mentioned who are struggling with rents over 50% of their income, would much prefer public housing accommodation to what they have.
If there is more public housing, it would lower the cost of private rentals as it would take the absolute bottom out.
BTW – how much does the rent too damn high guy look like Samuel L Jackson with a beard.
I just put up the rent because Water Rates have increased by 90% from last quarter and my council rates have increased by 30% since last year.
These increases to my costs are not in line with CPI but I could not increase the rent by the true expenses I am incurring and my rental income after expenses has now decreased even with the rental increase.If you are renting the $435,000 house out then the (interest on $435,000+ council rates + insurance+ water rates) – rent is claimable against other income but pro rata for 6/12 of any yearly costs / income as 6 months.of renting out.
The construction costs and interest on the construction costs get added to the cost base to reduce CGT when you sell the development. The interest on $435,000 would become a capital holding cost once you demolish the house and would be added to the cost base from that point in time of demolishing.Should be ok using same account for repayments as long as you are able to keep a track and keep records on what interest costs are for the development.
If you are doing renovations and not doing what the ATO terms as substantial renovations then CGT will apply only.
If the renovation is deemed substantial then GST is also involved.I am mentioning renovations because you may have meant this form of active investing as a type of development but on a small scale. (it is not really development but some people may think it is )
What I would try if I was buying this is suggesting a payment plan over the twenty years so that they get regular cash flow and possibly a cash down payment to cover their immediate cash requirements.
George, it depends on what you earn. What is your marginal tax rate?
If it is an old house depreciation on the building costs may not be claimable which could have increased the negative gearing without you incurring a cash outlay in expenses.
As Terry pointed out it may not make commercial sense.If you are on say as an example a 30% marginal tax rate and you spend 5000 in net property loss. What are you claiming back?
30% so you spend $5000 and get back $1500. Based on not having building cost depreciation being claimable.you can check the marginal tax rates on http://www.ato.gov.au
Also the CGT exemption have a closer look as you are not renting the whole house out just a room.http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm
Also did you claim a part of your expenses against the income you declared !
If you are going to lose part of your CGT exemption you might as well claim part percentage of the following Council Rates, Insurance, Mortgage interest paid, Water Rates, setting up the loan – borrowing costs over five years.
Get some advice from an accountant on this !
One factor is that a construction loan is lent out in stages. So say for example you had $800,000 in construction costs then the interest is not charged on the total $800,000 for the 12 months of construction time.
Also there is a saying that the profit is made when you purchase the property at a discount.
Some developers buy a block of land and sit on it so it gains value over time. So it is not really a development profit but rather capital gain and developer profit.
AS an example say a 1.3 million layout a 300,000 profit would be good at around 20% mark.You have to be respectful of "oh you need to account for Blah Blah" because if you get it wrong imagine a 20% loss instead.
imagine having a $300,000 short fall cause the figures were not worked out and you had a cost blowout.And I have noticed where I live that some of the local developers are selling their developments straight off the plan before the development is completed.
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Have you thought about using a mortgage broker as an option ?
What you might like to look into is splitting the mortgage up
As an example
10% Variable – this allows you to make extra repayments
30% fixed for 1 year
30% fixed for 2 years
30% fixed for 3 years
This allows you in one years time to fix 30% for one year , two years, three years or have it variable
in two years time you can fix 30% for one year, two years, three years or have it variable.
or
10% Variable – this allows you to make extra repayments
30% fixed for 2 year
30% fixed for 3 years
30% fixed for 4 yearsAre you claiming building costs as depreciation? as it could improve your cash flow !
It really depends on the hidden damage to the house. I have a concrete and steel house and termites. As the structural supports are steel the termites have eaten the timber skirtings around windows and at the base of the concrete walls instead. Termites live in a nest in my case in old tree trunks in the back yard so for $1800 I am getting a termite treatment done that should fix the termites up.
My parents had steel caps placed on the stumps that stop termites getting back to the nest. Apparently they die if they can't get back to the nest.
If you want a termite proof house a steel frame is a help as the structural damage usually hidden from the buyer is a bad thing to have.
There are pipes that can be buried around the outside of a house with a poison liquid that kills termites but it needs to be renewed regularly with poison.http://www.termimesh.com.au/whyChooseTermimesh.cfm
http://www.amalpest.com.au/Termites/YourOptions/TermiteTreatments/TermiteBarriers/Can you build on termite infested land. I never though I would see termites in Cranbourne Victoria .
I do not think you can have absolute certainty but I think you can invest in termite barriers in the hope that it stops termites.
There will be a near by nest that could need treatment.Termites also love to eat polystyrene more than wood and some houses have polystyrene covered with a concrete render walls !
So you really need to know what sort of structural damage has been done to the house.
Structural damage equals an unsafe house and an expensive repair if possible or demolishment.
Weatherboards can be replaced easily but structural timber is more difficult and expensive to fix.
