Forum Replies Created
You have to be careful using median price as a high priced sale can change the median price.
If say a 4 million dollar property sold the previous year or month and then you look at the median price the next year or 12 month period and there wasn't a 4 million dollar sale the median price could drop by 19.2%
Also is the data from the same provider as API does change data providers and this can change the median price between different data providers.
What you really need to do is take a 12 month average and get yourself a Metropolitan Map and a pin board and go out and buy some different coloured map pins and use different colours for each growth rate. Then put the pins into the map and you will see patterns.
What you want to look for is 10% to about 12% growth in a suburb that borders a suburb or suburbs that are at 20% plus growth.
Suburbs next to high growth suburbs will become the next high growth suburb when buyers can no longer afford the high prices in the higher growth suburb and then they buy in the next neighbouring suburb.
You may also see trends that follow infrastructure as well.
Once you see what suburb looks good then check it against longer 3 to ten year growth rates to confirm what the map is telling you.Beware However you need to be in a high growth property market cycle which may not be the case at the moment with interest rates increases being the trend.
From memory Peter does warn about that this method is not an exact science but more of a crystal ball method.No you can pro rata the interest you will need the total yearly interest charged amount it may be on your internet banking after june 30 depends on bank you might have to ask for it if it is not on June bank statement.
1/12/2009 to 30/06/2010 work out the number of days
so 31 days has december so 30 days
31 days has january so 31 days
27 days has February so 27 days
31 days has March so 31 days
30 days has April 30 days
31 days has May 31 days
30 days has June 30 days
total 210 days.
now you take 210 divide it by 365 and multiply it by total interest charged for the year
you also need to do the same for expenses incurred like Council Rates, Water Rates, insurance, as these are part claimable.
See
http://www.ato.gov.au/download.asp?file=/content/downloads/IND00191817n17290609.pdf
example 5 document page 7 or page 11 of page 44 if going by adobe reader referencingDepreciation is not easy to work out as you need to work out effective life of items and if you are not quite up for the challenge you could employ a quantity surveyor who will issue you with a depreciation schedule that makes depreciation a lot easier to work out for the tax return form.
If it is building writeoff it is 2.5% of the cost of building the building p/a for 40 years.
but depreciation of building is subtracted off the cost base of the building .
which increases capital gain tax .
Also keep a copy of rates notice to work out value of your property for capital gains tax reasons.Make sure you also do staging when you sell as it will increase the selling price.
I have not done this yet myself but this is what I know about development !
I am doing a rookie developer course on Sunday 19 June to learn more
http://www.rookiedeveloper.com.auDesign – getting land surveyed – you need a surveyor
– getting dwelling plans – architect or designer neededneed to show how connections lik water, electricty, gas and phone are going to be connected also !
submitting plans – may wish to employ a private town planner it will make it easier !
waiting for approval
find a builder to build dwellings
You may wish to pre sell off the plan
get dwelling built
get connections connected
you should have all this costed before you purchase to work out profit margin
I recommend you at least read a book on development
as it can be easy to make a loss if you do not have good knowledge what you are doing .here is some books you may wish to read
http://www.businessmall.com.au/property-investing/property-development.htmlI think you may encounter a quarantine problem with the company /trust income losses that they can only be offset against future income in the company structure.
Check with your accountant on this
as I am not 100 percent certain.The more interested you are in a property the more you will pay. Being prepared to walk away from the deal and find another is important also.
A friend of mine waited 12 months to have an offer acccepted.
A sun set clause in your offer can also a good thing.With the new credit reforms the government is doing – ASIC they may need a credit provider license.
As your objective with investing is to reduce your tax liability you need to work out what is your marginal tax rate.
http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htmIf you earn over $80,000 then you are losing 60% of your money unless you are utilising building write off depreciation and capital depreciation.
If you earn over $34,000 then you are losing 70% of your money unless you are utilising building write off depreciation and capital depreciation.
If you pay say 40% tax and had a net property income of minus $1000 you spend $1000 to get back $400 but you have made a loss of $600
If your parents kick in $100,000 and say as an example you make a net property income of $1000 you are taxed $400 but you have $600 left as profit.Having a property with positively cash flow is not such a bad thing.
That extra cash could be used to help pay off the mortgage.Agree with number 8 .. As you are twenty you have time on your side. As the value goes up on your unit so to will the rent. It is hard at the start but it gets easier over time. If you can't afford the $320 you don't want to be suffering financially as you won't be able to sustain the payments long term. Maybe you could lower it to $300 a week to give you a breather.
Put the rent up every 12 months when you renew the lease. If it is put up $5 a week or $10 a week every twelve months it is better than having to increase the rent after 5 years by 25 to 50 dollars a week to catch up. Plus the tenant gets use to and can budget for a rental increase every twelve months that is a reasonable amount.
There is also a tax law that covers purposely avoiding tax and what you have proposed could be seen as a tax avoidance purpose.
CGT would be on 25% as 50% discount would apply on capital gain as well as 50% ownership.I think you will find that the exemption will relate only to the family home rather than investment property.
see
http://www.dtf.wa.gov.au/cms/uploadedFiles/sd_conyeyance_or_transfer_residential_property_factsheet_0304.pdf
see top of page 5
where it mentions family home (it is what is not mentioned that makes me think it doesn't cover investment houses)
You need to check with the revenue office if this is the requirement for the exemptionNot sure on the tax side,
I am guessing a transaction would have to be at arms length which the ATO may not think your transaction is at arms length.You may need to take out warranty builders insurance on the workmanship.
http://ownerbuilderadvice.com/home-warranty-insurance/Ideas –
- Advertise for a money partner in gum tree web site or newspaper..
- Advertise for a joint venture Partner
- Try Igrin web site but $30,000 is too high as smaller loans are usually granted.
- Ask vender if they can provide you with $30,000 Vendor loan. It is worth asking vendor as they may only need enough money to get out of trouble and may be willing to help you .
- This one takes risk tolerance. You get a long settlement like 12 months on the condition you can subdivide and get an approved DA and then on sell the back property at the time of settlement with a DA and make a profit. See this months API magazine it has an article about it.
- Maybe the vendor would go into a joint venture with you.
You would have trouble with a no doc loan also as ato cross checks what you state to bank you earn with what you report to ato you earn.
jan1234 wrote:I have one investment property (DHA) that I owe $120000 (worth about $300000);Line of credit loan against this property at LVR of 80% = 240,000 so borrow 120,000
jan1234 wrote:my own home that I owe $146000 (worth $300000)Line of credit loan against this property at LVR of 80% = 240,000 so borrow 94,000
So if line of credit facilities are ok on both loans then the bank doesn't care if you use it for retirement property purchase
Total funds $120,000 + 94,000 + 70,000 = $284,000
You would need to find $16,000 from somewhere plus stamp duty costs.
Maybe borrow it from other family members or vendor finance.If you are a developer you may prefer weatherboard as it is easier to demolish or move.
Depends on how you want to use the equity.
Check with the bank if you can organise a $80,000 line of credit loan against the first block of land.to fund the deposits you most likely need $20,000 as a deposit.
So $80,000 line of credit loan
$60,000 land loan 2 $20,000 deposit
$60,000 land loan 3 $20,000 deposit
Need to cover stamp duty so you have $40,000 left of line of credit to use to cover this after paying deposits.
So total loan amount would be $200,000 can you service this loan amount is the question the bank will ask.
Line of credit usually 80% LVR
80,000/ 100,000 = 80%The other method is cross co laterisation
Bank adds all properties as security into one loan
$100,000 + $80,000 + $60,000 = $240,000 Value
Loans = 0 + 80,000 + $60,000 = $140,000
So loan / Value = $140,000 / 240,000 = 58.3% LVR
Need to add stamp duty to loans and you will still be within 80% LVR
Draw back is bank can sell all three properties to pay back a default by you.
As time passes values could increase in land
I am not sure if bank will lend against land
You may be able to achieve a higher LVR than 80% with mortgage insurance.Ask a mortgage broker what is achievable
The book can be got a his web site.
http://gordonku.com/get_the_book.htmlSean,
I went to the Active Property Investing Meeting last night
and listened to a guest speaker who does these sort of deals all the time.He has a book called Prescription to Escape the 9 to 5 and a web site
by Gordon Ku cost $29.95
Knowledge is the key !.
Never stop LearningIf I was you I would insure myself for this risk.
Check out having landlords insurance that covers you for public legal liability.You can even get sued by a trade person , if you request them to attend to fix something on your property and they fall over or get injured on your property you will be liable.
In Victoria there is a stupid legal requirement to get a permit for works over $12,000 not sure if you are in the nanny state of Victoria or some other State.
see
http://www.buildingcommission.com.au/resources/documents/Practice_Notes_2006-56.pdf
Also builders insurance is needed for the work to be guaranteed.
There is also a time period required to wait till you can apply for another one for the next property.If the hot water service is a gas hot water instantaneous service and it is installed inside the house it may need to be moved to the outside of the house by requirement of law .
