Forum Replies Created
landlords insurance covers
Negligent damage to property ( the tenant bond doesn't cover all the damage)
loss of rent if property damaged and can't be rented.
public liability insurance usually up to 10 million dollars.
(in some states like Victoria (the nanny state) if you hire a trades person and they get injured on your property they can sue you )see
http://www.allianz.com.au/allianz/Landlord+Insurance.html
as an example of what is covered not a recommendation as flood is not covered or carpets in this particular policy.kimc wrote:Hi Everyone,
I'm at a fork in the road. I read all your fantastic info but have never posted until now so here goes….Our situation is
Double income (no kids) $110,000 gross (joint) secure jobs
Are you planning on having kids ?
This could affect your Double income or family payments if you own negative geared property.kimc wrote:PPOR value $400,000
NO personal debt
mortgage balance is 270,000 (Required payments are 1,793 (month)…but we pay $4000.00 (month) At this rate we have 6 years left!
We do redraw from time to time for 'must haves' like the recently purchased upgrade… $15,000 car but I stick as close as possible to a budget.Do we keep paying off the mortgage or do we take the investment plunge. My preference would be a unit on the Northern beaches approx 380,000- $420,000. Is this too risky for us?
There can be risk .
No capital gain or a capital loss
Land tax
Tenant damaging your property
You losing job
No rent being paid
Landlords Insurance can reduce some of these risks.
A sudden arrival of a new born baby.kimc wrote:(Not too sure how much we could borrow)You can find this out via a mortgage broker or visit your local bank and have a chat with the lending manager to find out what you can borrow before you plan on buying something.
kimc wrote:or do I lower my expectations and jump in at a lower level …say $250,000-$350,000 somewhere else.Love to hear your thoughts
What you need to look at is expected cash flow.
what is the expected rent for prospective property
what is the expected costs like council rates, water rates, insurance, loan repayment or loan interest
income / loss = expected rent – expected costs
what effect does an increase in interest rates have on expected cash flow ie say 10% p/a as a worse case scenarioYou have to be careful not to start renovations until settlement because if it falls through you could ge giving the vendor a free renovation.
My thoughts
Are you an active investor or a passive investor.
I have been a passive investor for 15 years but now I have one property with 260k of equity and 20k of debt. Once I earn income as I am a house dad and my kids start school in FEB I will be able to generate some form of income and borrow more money hopefully.
I am hoping to move into being an active investor but due to my low borrow capacity I will most likely be looking into joint ventures into the future.What are the likely capital growth rates for where you are buying.
If high then buy and hold can work over the long term.
If low then active investment can work.dreamerQLD wrote:Hi Richard,
Thanks for the advice. We were going to set up our IP loan as variable interest only – but your comment does make sense about down the track when we upgrade our PPOR. How would you avoid this though? should we pay off both properties at the same time so that neither are paid off when we move to a bigger PPOR? Our PPOR is currently under a variable loan with 100% mortgage offset account.Thanks,
MelMel,
You have an offset account. You could put all your money into this account and reduce the interest charges on your PPOR.
If you change your minds later you can just take the cash out of the offset and use it for whatever you need to use it for.Mel you did not mention if you have children and at both your ages this may be a item you need to discuss with each other if you do not have children –you both may need to discuss if this is a factor that may effect your income ability in the future and effect your future investment plans .
shell21 wrote:Hi
Would like some advice as we are about to buy our first investment property.We have completed renovation on our own home and made a nice amount of equity as my husband is a great handyman! I was wondering if you think we should buy renovate and rent
If you rent out a property- be prepared for the tenant not looking after the property or even damaging it.
Can Claim depreciation on some of renovation during rental period.
You will have capital gains tax to pay later when you sellshell21 wrote:or buy renovate and sell.
Are you living in the house as then you could claim it as PPOR / Main residence CGT exemption
You have to be careful you do not do too many over a time period as then you are regarded as a property trader.
If you live in it – you can take your time with the renovations
If you are not living in the house then you have to be aware that time taken = loan interest paid, rates, Insurance , ect (holding costs)
If you are not living in the house and not renting it out – these holding costs can be added to the cost base for reducing CGT.shell21 wrote:I have done a lot of research and still think this would be a great idea because we can do most of it our-self. Rental vacancy are very rare around here and i already have a good team of people, accountant, property manager mortgage broker and financial adviser to help me with advice.
Would like to get some opinions of people that are property investors that renovate and use this system now. Also what do you think about property coaching programs? ThanksBe careful with property coaching programs that require you to travel interstate and then buy one of their properties.
You still have to borrow money to buy a DHA house and they are in the 600,000 to 780,000 price range.
These are longer term investments.
Have you looked at the benefits on there web site
http://www.invest.dha.gov.au/dha/home/info/leasebenefits.sok?ID=
The cheapest house was $440,000They do have an option where you can lease a house to them also .
They have properties in QLD !
see
http://www.invest.dha.gov.au/dha/home/forsale/mapsearch/qld.sok
http://www.invest.dha.gov.au/dha/home/forsale/search/results.sokhttp://www.owner-builder.net.au/ownerbuilderspermit.htm
Not 100 % sure on this but this web site links below looks a bit like a good starting point !
They open 4th jan 2010 as on holiday at the moment
or call them on the telephone on 03-9285 6400.http://www.buildingcommission.com.au/resources/documents/2005-56_Owner-builder_practice_note.pdf
http://www.buildingcommission.com.au/resources/documents/14765_Owner_Build_App_Kit.pdf
YoungInvestor wrote:Hi again,I have a question about the deductibilty of interest when converting a PPOR to an IP. Please allow me to put forward a scenario:
Purchase PPOR $500,000
P & I Loan $400,000Now let's say I repay $50,000 of principal and the loan balance is now $350,000.
If I was to then move out of the house, and keep it as a rented IP, I could technically claim the interest on the $350,000 loan as 100% deductible right? (This is obviously where the benefit of an initial interest only loan and offset account come in, but assume that I repaid the $50k rather than putting it in the offset).
Is there any way I can re-draw that $50k whilst the property is still a PPOR, and then be able to claim the interest as a tax deduction on the full $400k again once it goes to an IP?
What you have to ask yourself is what marginal tax rate are you on as it is probably 30% max if you earn <$80,000
So you want to lose $100 to get $30 back as a tax deduction.
http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm(Be careful as negative gearing is not as attractive as it used to be due to lower tax rate scales)
YoungInvestor wrote:If not, what about if the funds were used specifically to renovate/improve the property? Would this then make the full loan interest deductible once converted to an IP?
Yes if the improvements can be justified as required for income producing purposes but don't forget to claim depreciation on improvements.
Rather than reinvent read these two postings.https://www.propertyinvesting.com/forums/getting-technical/finance/4328443?highlight=redraw
https://www.propertyinvesting.com/forums/property-investing/help-needed/4327731?highlight=redraw#comment-188660Unreal wrote:I am new here, so please excuse me if this comes under the category of "dumb questions"I know very little about CGT and would love your thoughts on this one.
Me and my husband bought our first home in 2001 and lived in it for over 12mnths. Since Jan 2004 it has been rented out. We bought a block of land
When ?
Unreal wrote:, lived on it and sold it (didn't pay CGT),Why did you not pay CGT was it claimed as PPOR exemption ?
If it was and it was from 2004 to 2009 then you have already claimed PPOR / main residence exemption during the 6 years you rented out your house. You can only claim one residence as your PPOR / main residence at the same period of time.Unreal wrote:, and bought another housewhen ?
Unreal wrote:which has been our primary place of residence since.When ?
Unreal wrote:A couple weeks ago we moved into a rental property and will be shortly renting out our primary place of residence.You may need to get a valuation done to set the cost base for the PPOR and to work out the CGT part.
Unreal wrote:My question is in regards to the first house, next month it will have been rented for 6yrs, and I just read today about not paying CGT if it's rented for less than 6yrs. Does this still apply even though we've owned other property since then?Depends on if there is a clash with PPOR exemption between each property as you can only claim one property as exempt at same time period.
Unreal wrote:And what happens if I sell a property after renting it out for 7yrs? Do I pay CGT on the whole 7yrs or just the last year?http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=3&H3
If you have not already claimed a PPOR / main residence exemption then –
You have to work out how many days past the 6 years you have
then you need to work out the total days over the 7 years.
Part assessable capital gain = capital gain * days over 6 years / total days over 7 yearsMy parents have a strange situation the original real estate agent didn't collect bond and the real estate agents that took over the original real estate business didn't check if their was a bond against each rental property.
So now that the tenants done damage and a runner my parents have no bond money.
I reckon they should claim against the real estate agents as they caused this situation.
What insurance companies are you using for landlords insurance as mine has a excess of $500 which I am not happy about that they introduced after I had been a customer for 15 years.You could borrow if you have equity against the property's as a line of credit and put the money into the trust structure.
Having thought about this question well to be honest while having a call of nature and a think. I think Steve is referring to protecting your assets. If your main residence is owned by the wife and the investment properties are in your name then if you stuff up you still have the main residence as it is not in your name.
If you borrowed for your main residence home then you probably both had to borrow to make the loan requirements.
So ownership is not the issue with borrowing capacity but more to do with what loan commitments you already have.
Referring to setting up a family trust and being a director this is great but it is not cheap and it also effects how capital gains and income from the properties are treated.
To be a director requires you to be a director of a company that owns the trust as these are separate entities to you means that you have to do more tax returns on each entity. One return for the Company and one return for the trust. This comes at a cost if using an accountant. It seems like a great idea ti have a structure set up but can you afford the extra costs plus the setup costs required.
If you can get this book & read it
How to legally Reduce your tax by Tony Melvin & Ed ChanI have read that the management companies can be a problem.
You are remote and then how do you know if they are managing the property?
I have read stories of maintenance tradesmen taking payment and then doing a runner without doing any work.
Not sure on the crime rates and the effect this has on your investment.
High area of unemployment can be also a problem !888Abundance wrote:Hi Forever Student
Go to http://www.888abundance.com and check out the page on the property boardgame. It's a 'business simulation' of the Australian residential property environment. It's not monopoly and it's not an easy 'game' to play. But my view is, if you're serious you would take time to learn the ropes before you invest the big dollars.
Cheers
Make this into a I phone app and you will make a fortune !
If a property is over 50 years old the electrical wiring needs to be checked. As it may need replacing due to fire risk.
When the tenant trashes the house and abandons a property is there a provision for the landlord to sue the tenant via a small claims tribunal for damages to cover the out of pocket expenses incurred like loss of rent , repair costs, ect ?
Mine got evaporitiive cooling and Central heating which is tax deductible through depreciation.
Mister, My parents own an investment house in a country town that has been trashed. I am going there in January to help them repair the inside of the house. It is disheartening. You are better to increase the rent each year than be soft as that is how I got left with a house full of rubbish when one of my Tenants did a runner and the insurance doesn't cover all the costs.
Really feel for your situation and hope it doesn't turn you off as not every tenant is like that.This may all change with the Henry tax review currently being summitted to the ATO .
