Forum Replies Created
ask if they are using the LIBOR rate for their wholesale rate
If yes then search on LIBOR in GoogleI think that is correct but check it with this web site
http://www.firb.gov.au/content/default.aspForeign investment review board will have the information for non resident investment rules in Australia
CGU have treated me well and when I needed insurance fast for a settlement because another insurance company stalled getting a new property insured CGU when out of their way to help me achieve settlement.
You need to check if they have flood coverage as CGU may not have it I am not sure on this part of my insurnace.employ a quantity surveyor
They will work out a depreciation schedule you can then hand to your accountant.You can claim the items but you have to proportion it.
Say if curtains have a life as an example of say 5 years. Then 12 months of straight depreciation has to be private unclaimable and straight depreciated by 1/5 for the next 4 years you claim 20% each year. the 12 months is 1 july to 30th of june.
If you are not at 1 july then you have to work out the days by using x days past in past financial year/365 * 20% depreciation at on the last year remaining days left in financial year / 365 * 20% of value.
If diminishing depreciation you have to work out diminished value at start of rental.
You said you have equity in existing property so you can either borrow against this lifting the LVR to 80% via a line of credit loan for 25,000 – 30,000 and use this as a deposit plus stamp duty.
Or secure some of your existing property with the new property and reduce the lvr over both properties to 80% more risky as you can lose all the property.Another thing you have to be careful of is buying in a town where half the population has left – thus property prices are cheap but there is no employment for half the houses in the city. Thus tenants are hard to find .
It is hard to imagine a place where half the population has left but this is how bad the economy is , in the USA at the moment.The professional package comes to an advantage if you have multiple bank accounts. You pay one yearly fee rather than having multiple monthly bank fees.
As far as the offset account – this depends on if you decide to live in it as a PPOR.The PPOR interest amount is not claimable. However having an offset account linked means the balance is taken off your home loan balance when the interest is calculated on the home loan each day.(see note below) If you earn interest (low amount usually) on your savings account it would be taxed without any consideration of the CPI (real terms decrease of your savings).
The saving on your loan interest helps over a long period of time to reduce the time you are paying off your home loan.If it is an investment rental property any saving in interest reduces your negative gearing and thus decreases your tax deduction claim.
Note – there are two types of offset accounts – one takes the balance off the home loan for the interest calculation
– the other takes off the interest earned on the offset account balance.
Make sure it really is a full offset account that reduces the loan balance for the interest calculation. – trap for new borrowersWhen the interest rate drop occurred to your loan did your repayment amount drop?
At the start of a 20 year mortgage you will be paying a very small amount off your loan principle but as time passes your loan principle reduces and you pay more off the principle due to less interest being charged and the same repayment being made.
As an example lets take a 400,000 loan over 30 years at a interest rate of 7.74%
At 30 years Repayment is 660.25 a week and interest is 595.38 a week .
travel 2 years into the future and interest is 585 and principal is 75 a week
Take a .90 % reduction and
At 30 years Repayment is 660.25 a week and interest is 526 a week .principal = $133 a` week
travel 2 years into the future and interest is 506 and principal is 153 a week
You really need to forecast the longer term effect in your calculations also and try to make repayments more frequent like take monthly payment * 12 / 52 to get weekly payment and pay it weekly if possible.
Your mortgage is most likely calculated daily and interest is added each day to get monthly charge.
I used an excel template caleld the amortisation template.
daily interest = daily balance * yearly interest rate/360
they use 360 or 365 depending on what standard they are using.
Even though you are paying the same repayment , if the interest rate increases then you lose the extra repayment on the priniciple you are currently gaining on due to the lower interest rate.It has to be on the cost of the building five years ago. A quantity surveyor could estimate what this would be.
You may wish to reduce your PPOR interest costs by putting money into an offset account linked to your PPOR loan. This gives you flexibility to either pay a chunk off the PPOR loan with the saved offset account balance or use the money as a deposit for another investment property in the future.
I have to be honest I haven't done sub-division projects or borrowing money but from what I have picked up from attending the Melbourne investor meetings run in Blackburn you probably need to investigate a lending product known as a construction loan.
might find that your current lender has a product for this situation.
Do a search on google for construction loans or development loans for some examples of types of loans available.
You may find a line of credit loan gives you separation from the main home loan making it easier at tax time.
http://www.propertyupdate.com.au/articles/183/1/11-questions-to-ask-your-property-manager/Page1.html
http://www.housesunderfiftythousand.com/rental-property-management.htmlJust a few I can think of.
Do they ask for references from prospective tenants?
How do they handle tenants who do not pay rent on time and when does eviction occur ?
How do they ensure smoke detectors are working and have fresh batteries ?
(warning – if tenant dies from non functioning smoke detectors then the landlord is liable)
Do they use a tenants database to cross check tenants?
Do they automatically increase the rent at the end of a lease?
(tip check /note renewal date of lease as landlord insurance needs house to be on a lease to cover lost rental payments)
Do they renew the lease at the end of the lease?
How often do they do property inspections?
(tip have landlords insurance to cover public liability, malicious damage, loss of rent, ect )A rather radical approach is to pretend you are a prospective tenant and make enquiries with the property manager as someone looking to rent and seeing how thorough they are at checking you out as a prospective tenant
.
If you are unfortunate to get a bad one you can move the property management to someone else once the lease is expired.(warning – do not enter your property if tenanted without tenants permission) – as tenant has a quiet enjoyment requirement
under law that includes tradespeople doing work on your premises – permission must be sought for entry)
How do they arrange this permission if work needs to be done on your property?Be careful
when demolishing fibro houses.
Get houses' fibro sheet cladding tested for asbestos as if it is asbestos you will have to employ an asbestos removal company to dispose and remove the asbestos due to the health risk.Look at how much it costs to fill in the pool with soil as an option.
Downpipes that go now where put in a water tank.There is an interesting case in January's API magazine. Where a guy bought and sold for small profit and kept no properties and ended up with no assets at the end of his working life.
For your amusement – http://www.reece.com.au/disasters/runnerup
– http://www.reece.com.au/disasters/winnerWhat not to do with plumbing !
The ATO can sometimes remove an allowable tax deduction and back date it if it rules it not to be allowable and sees it as a scheme to avoid tax. Meaning you could end up having to pay it back 5 years of deductions in 2014 when they change their mind and change the ruling.
Ask your broker for their financial advice license number before accepting any financial advice.
Also you are using the dark side of the force. Compound loan interest !
As your investment loan increases so to does the force of compounding interest work against you.If you could get a line of credit loan you probably could borrow 22,000 for a deposit on the ppor as line of credit is usually up to 80% of the value of the house. existing loan + 22,000 = 80% of $240,000. Still would not be able to claim LOC as tax deduction as use for private purposes.
Another point of interest is that you may require a valuation on the rental property for 12 months ago as if you are renting it out for a long time period say 10 years as an example and you decided to sell it, it is going to be messy trying to work out what the house was worth between when you purchased it 27 months ago and what it was worth in 2008 when you changed it to a rental now that it is 2018. (you jumped in your time machine)
You need to isolate the period of time and value of the house that is capital gains tax exempt due to PPOR and the part that is not exempt 2009 – 2018 capital gain due to renting it out and keep records of it for 2018 or longer.
