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To protect against this press the CTRL and the A key and then CTRL and C key on keyboard and then select submit
if you lose it you can then CTRL and V key to paste it back in.Because it is a company the 50% discount doesn't apply for owning it for over twelve months.
As it is owned by a company your company would pay 30% tax on the $280,000 – $185,000 = 95,000 * 30% = $28,500 in the company tax return.
$280,000 – 28,500 tax – 150,000 debt = $ 101,500 proceedsYou need to hold on to some of the proceeds say $30,000 to cover the tax bill owing at the end of the financial year.So you should get your accountant to work this out and then pay the tax bill.
If you take dividends out of the company then the dividends are taxed at your marginal rate.
I would talk to an accountant or Lawyer to get a proper estimate.
Please accept my deepest apologies Tim.
Duck
You may have to pay a congestion tax – Melbourne was considering implementing this for inner CBD car parks.
Being Commercial you probably have to charge GST on the rent.
Also there may be management fees for maintaining staff and toilets, Lifts, ect
Hard to resell is another problem.The investor does receive a tax deduction however the investor may not be eligible for the first home owners grant as they may already own property. Also if the investor sells the investment property they pay capital gains tax which the non investor doesn't pay due to the PPOR exemption. If the investor owns a lot of land in one state they also get hit with land tax.
Talking about that great tax deduction you have to look at the marginal tax rate of the investor.
Say they are on 30% tax then they have to lose 100% to get a 30% tax refund. So they are actually losing 70%.
On a 40% tax rate they have to lose 100% to get a 40% tax refund. So they are actually losing 60%.Also under the credit regulations home owners get certain protections if they can't pay the loan where as investors do not.
To make it more equitable I think that tax payers money should only be lent to first home owners rather than granted freely as some investors purchased property before 1999 and had to save up the 20% deposit themselves. Also capital gains tax should not apply to investors that are trading up to a more expensive house as it is done in the USA.
Usually you have to pay for a marketing campaign – advertising costs – Hiring furniture for open inspections
If you are using a real estate agent you have to pay a certain amount of sales commission as a percentage of the sales price.
Another cost is the holding costs possible incurred – being the loan interest while you are waiting for council approvals and then having to then resubmit the application to the council and having to wait for another period of time.
What Steve is getting at is the following formula
Achievable Market Sales Price = Profit + purchasing cost + Building cost + holding cost + council application costs + architect costs + sales commission + advertising costs+ any other costs.
You cannot force the market to increase the sales price if your development costs increased by more than you planned for.
This can be the difference between a profit and a loss in some cases.I haven't gone into development as I do not have the cash flow to cover the holding costs.
The reason for the LOC is to have a clear separation between your personal use (PPOR) mortgage and your investment loan for the deposit for tax purposes.
Also you can borrow the rest of the loan from another bank and then pay back the LOC and if you need to borrow it again it is easier to access the line of credit already established even if you pay it down to zero dollars.
The other bank is used to provide a seperate security against your investment loan so that if you fail to pay the investment loan you lose the investment property and the $25,000 deposit rather than lose your ppor house as well.
Tims comment on
Also, Glen IS actually using the equity in his own property to get the required funds for the IP.
assumes you will cross co-laterilise the PPOR and the investment loan and thus not need a deposit at all
However there is a risk of having the PPOR sold if the investment house doesn't sell for as much as the investment house if Glen defaults on the investment loan..I would work on the figures
What is rent going to cost , What the likely cost of investment loan each week, what is the cost of rates, insurance, ect each week
What is the likely rental income each week.
Can you get a rental property to rent to live in . This may be a harder task than you are aware of due to low vacancy rates.
Work on the cash flow side of things to see if you can afford to do this. Factor in 3 months a year without a tenant and how you can afford the vacancy.It really is a hard question as it really is personal choice.
A PPOR has the CGT exemption but the interest payments on the mortgage are not deductible as well as any expenses incurred.
An investment property has slight tax benefits with the expenses incurred being refunded by your marginal tax rate. But Capital gains are taxed later.You can use the equity without selling by borrowing against it. 850k * 80% =680,000 value of house approx $550,000
You could borrow via an L.O.C $130,000 as a deposit and borrow what ever else up to $500,000 that is needed for an investment loan with another bank.
What you may need to do is look at the cash flow to see how much a second property could cost you using a line of credit with your first property.
The fact that you say you can't work anymore requires you to not take too many risks with your money.
You need to work out your risk tolerance.
I am assuming it would be a low amount in your circumstances (yes I searched google too).What you might need to consider is spreading your money over many types of investments
As the saying goes do not put all your eggs in one basket.The books you are reading that rely on a wage are using the magic of leverage (borrowing money) and compounding capital growth to build wealth over time.
A good financial planner would find out your circumstances and what your risk tolerance is and hopefully would advise you what to invest in and hopefully give independent advice and be licensed to give you financial advice.
I am not licensed so I cannot give you specific financial advice.
I am qualified by a commerce degree with a major in financial planning but I am not licensed.
Are you claiming building write down depreciation for the new property as for an example $345,000 building costs * 2.5% = $165 a week depreciation benefit plus depreciation for fittings in the house. A good quantity surveyor would work this out for you. The building write off will increase the capital gains tax in the future but it might help you get over the cash flow problems you are forecasting to have in the future.
Property doesn't grow in value in a nice linear fashion so you may be experiencing a flat growthrate at the moment 3-5 years worth and sometime on the future the property market fires up and in a three year period it may grow at 12% to 24% per year . What you will find is over a long period of time 10 year – 15 years the averaged growth figure will come out at approximately 7% p/a .If you sell you will have a harder time getting finance in the future as you are self employed and the lenders are tightening the lending criteria on low doc loans.
I can't advise you to sell or to keep the property but I had the situation where for the past 7 years I have been unemployed and 3 of those years was university so I managed to keep a property that was short falling at $50 a week but when no one would employ me out of university I was forced to sell due to my future impending shortfall cash flow. I have only recently started my own business and I will have trouble getting finance to buy another property even though I own a $240,000 investment property without debt ,my low cash flow is restricting my possible lending amount.
You need to look at what the strata fees will be each year as this might bite into your income stream.
The other worry could be that there is an over supply of serviced apartments in the CBD making it hard to sell in the future.
Lenders can refuse to lend due to the lender lending too much already to this building this is known as over exposure by the lender.
Lenders may refuse to lend to you on the reason of an apartment being too small in floor space.
More bedrooms means more rental income and a higher price at sale but may not equate to a higher capital gain.I do not own an apartment but these ideas/ opinions come from what I have read in books and magazines.
Not an easy question to answer
Are you planning to rent out the property?
(yes to paying CGT) but if you are then you can't claim the cost of the reno , holding costs, borrowing costs on to the cost base and thus reduce cgt.
Are you planning on living in the house?
(maybe no to paying CGT) as CGT ppor /main dewelling exemption could apply
Are you planning on not renting it out and not living in it ?
(Yes to paying CGT but costs can be added to the cost base like interest, insurance, rates, reno costs and reduce the CGT.Next likely question how much
Capital gain over 12 months 50% discount applies
taxable CGT = capital gain /2
If jointly owned property you then split this figure again by 2
Taxable CGT = Capital gain /4 if 50% discount applies.
So now first $4000 of 1/4 of capital gain is taxable at 15% and the next $46,000 of 1/4 of cap gain taxed at 30% ($30,000 wage)
so othert partners share of capital gain up to $80000 of 1/4 of capital gain of 320,000 is taxable at 40% ($100,000 wage)if owned by $30,000 wage earner only
Capital gain over 12 months 50% discount applies
taxable CGT = capital gain /2So now first $4000 of 1/2 of capital gain is taxable at 15% and the next $46,000 of 1/2 of cap gain taxed at 30% ($30,000 wage)
so next $100,000 of 1/2 of capital gain of $200,000 is taxable at 40% ($30,000 wage)
then next amount after this is 45% tax over 150,000 capital gain/2 really is $300,000 and over with 50% discount.
see tax scales
http://www.ato.gov.au/individuals/content.asp?doc=/Content/12333.htmsee next web site links for more info
http://www.ato.gov.au/individuals/content.asp?doc=/Content/00135935.htmhttp://www.ato.gov.au/individuals/content.asp?doc=/Content/00135932.htm
http://www.ato.gov.au/individuals/content.asp?doc=/Content/36557.htm&page=2&H2
http://www.ato.gov.au/individuals/content.asp?doc=/Content/36919.htm
Unfortunately the growth type seminars only occur just before or at the start of a property boom and the market at the moment is not in a growth stage. I did a seminar with Peter Spann that was a growth strategy that didn't require you to buy over inflated priced property from Peter.
For a cheaper option .
You could buy Peter Spann's books
From Broke to Multi-millionaire in Just 7 YearsHow You Could Build a $10 Million Property Portfolio in Just 10 Years
It really depends on your age and financial situation.
Like do you live in your own home ?.
Are you planning on having kids ?
Are you planning on retiring through investment – what is your time frame?
Do you like having lots of debt (negative gearing) or are you happier with less debt (positive gearing)?
Do you like working ?unfortunately the law favors the tenant rather than the landlord. This is why your property manager should have started eviction proceedings as soon as the tenant was behind by 4 weeks to minimize your lost rent.
Hopefully you took out Landlord s insurance to cover this loss of rent and any possible deliberate damage that may be caused by the tenant during this 6 to 8 week period.I did have a share market portfolio but sold it off at a loss in September rather than now in October at a much bigger loss.
I then used the proceeds to reduce my debt down on my investment property
I am expecting the share market to continue falling until the all ordinary index reaches its long term growth trend.
I think people will still lose their houses even with an interest rate drop as some people are so far behind in their repayments that the banks will still be re possessing their homes.If you replace the carpet and repaint, it is an improvement. As long as your property is on the rental market at the time of the improvement you will be able to claim depreciation expenses each year while rented for the deemed life span of the carpet and the deemed life of the paint job. This is because you are bringing the house up to a rentable standard.
This is not really claiming against tax but claiming as an expense the decline in value of the items while the house is rented.
Where there is some confusion is that an improvement is different to a repair.
A grey area exists on what is a repair and what is an improvement.
If you repair something before the house has been rented it is not a repair but an improvement
If you replace an item in its entire form it is an improvement
If you fix a house beyond the state it was in when you bought it it is an improvement.
If it is an improvement you can claim depreciation on the item in some cases. A quantity surveyor would work out what can be depreciated and work out a schedule for your accountant or for your tax return. An accountant would also know the lifespan of each item claimed as depreciation.Your neighbors house returns the same rental yield as your house.
yield = rent per week * 52 / price of house * 100
5.6% rental yield neighbor
5.5% your house yieldSometimes a house can be lower in its selling price by being on the market for a long period of time. Sellers notice that your house hasn't sold and that you have lowered the price. It is a hard time to be selling at the moment as people as being spooked by the share market falls lately.
Also an investor may look at the cheaper property next door with the view that they can add value to it through a reno and add instant equity to the property and later on increase the rent making the yield rise to a higher percentage.
You should keep an eye on how hard a time your neighbor is having trying to sell his run down place as this indicates how cool the property market has become.What you need to consider is can you afford $3 a litre for petrol to drive into the CBD for work. These new suburbs do not have good public transport so if you buy in them you have to assess the likely hood of petrol increasing and what effect that will also have on your neighbours. If all your neighbours are forced to sell all at the same time house values will drop.
I know where you are coming from.
You can get a cover note for the insurance before settlement occurs.
If you get landlords insurance it usually as a public liability insurance component
to cover the incident where a trade person doing a quote trips over and is injured
and decides to sue the owner.
You do not want to do renovations until settlement occurs or you run the risk of providing a free renovation to the vendor if things go wrong.Also as I found out the hard way
the bank lending the money won't give out the funds unless they see you have a certificate of insurance on the property.
