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I suggest you have a read of this
http://www.tenants.org.au/languages/english/repairs.pdf
to know where you standI had a faulty stove in an investment property and had it repaired but when it became faulty again I replaced the whole stove with a new one. Why ? Because I can claim depreciation.
If you do decide to invest in shares you have to be prepared to keep a close eye on how the share price is performing as share prices are more volatile compared with property. If you earn dividends that are fully franked you will get money back known as dividend imputation credits if your tax rate is less than 30%. The advantage of shares is that you do not have to buy a $500,000 dollar parcel in one share like go do with property. You can buy as low as $1000 dollar parcels of shares. This means you can spread the risk over a number of shares rather than put $300,000 in one share.
Another method of share trading is called options trading..
I have mentioned this so you know this trading method exists but can't explain any further
as that would be classified as giving financial advice.
.
If you are interested in this type of options trade you need to research options trading to know the risks and methods involved.Briganti,
The solution could be to have an Offset account linked to your personal home loan. Money is on call. Balance will reduce home loan interest and you can transfer the money back out to business account when you need to. Just something to consider .
Make sure offset balance is subtracted from personal home loan balance for loan interest calculation.
Some offset accounts subtract the interest earned at lower interest rate in offset account from home loan .
Probably you could run business account straight from an offset account in your business name linked to your personal home loan.
Ask your bank about if this feature is available to you.You may need to take into account the Goods and services tax when you sell developed houses and capital gains tax that you may be liable to pay.
you need to join COSL as well. Also you need to have previous experience in writing mortgages to be a broker via MFAA membership. This is where the catch is. You need to have an intermediate, sponsor you so that you can offer more than one banks products and get around the 2 year experience requirement. Also you need to be able to cope with no income for 3 to 6 months depending on settlements of loans.
Then your intermediate will pressure you to write loans.depends on the type of offset account. Some offset accounts only take the interest earned in the offset account and decrease your loan by the lower offset account interest rate. Some offset accounts decrease your loan balance by the offset amount thus the interest rate is effectively the loan interest rate being earned on the offset amount.
rent is determined by supply and demand for rental properties. If investors were to suddenly buy a lot of investment properties and flood the market with available rental properties then the rental vacancy figure would increase which in turn would cause rent to decrease.
This site may have the statistic for rental vacancy
http://www.reinsw.com.au/Rental-situation-at-crisis-point/default.aspx
Maybe the reiv OR reiq (real estate institute of your state) may have stats on rental vacanciesI have spoken to two people who have made a lot of money with property investing and one of them had words of wisdom in that the secret is in the timing of the property cycle. As I have seen property growths of 25% p/a over between 2001 to 2004 when the market was hot and have experienced 1995 to 2001 of no growth myself which averaged out to approximately 7% p/a growth over 10 years. The other person advised me to only look at the ROI (return on investment). However I did purchase a property in 2000 and sold it in 2004 for a 70% profit I would agree with the timing being an important factor.
Your capital growth is compounding while your loan interest payment is staying the same or decreasing.
450,000 with a compounding 5% p/a growth = $262772 after 5 years with a property value of $656509 while the interest payment is a total of $192825
Do not also forget that the property is earning rent that helps to meet some of the interest payments that I have not factored into this calculation.
NEVER under estimate the power of compounding growth
and this is also a compulsory savings scheme so if you can pay down the loan you will eventually have more equity and pay less interest. Would you have the will power to save the money otherwise. Unfortunately the CPI has to be factored in but you can blame Mr Howard for this problem when his government scrapped indexation when the 50% discount on CGT came in.If you have a low disposable income you will be on a low tax rate which means that you get very little benefit doing negative gearing. Why I am mentioning this is that you have to decide what type of investor you are going to be like developer, positive geared investor, negative geared investor, ect.. By reading books as well as magazines like Australian Property Magazine you will know the differences between each typeof investment style.
The best one I heard of was an annual Christmas Hamper for the Tenants not that I have done this myself yet.
It depends on how much you plan to increase the rent by. I increase the rent every year but if a tenant is in the property I might raise the rent from $160 to $165 a week. I did this recently and lost the Tenant but the good news is that rents are $210 per week in the area the house is in so I will be able to get a $40 to $50 a week increase but I have to do some renovation work.You may want to look at using a buyers advocate if you do not have the time to look at properties and do the ground work.
Their aim is to try to get the best price and match the type of house you are after.
It is important to measure the property dimensions and check that a motor cycle gang is not living next door or as I saw on ACA the high voltage power lines that were airbrushed out of the photo that were an eye sore or the train line behind the property, ectSome lenders have a scheme where you can transfer the loan to another property when you sell your development and are buying another same priced property as the loan security at the same time. So you are not closing the loan just changing the security the money is secured against.
This is know as substitution of security
see
http://www.nabcapital.com/downloads/public/22210_0.pdf page 10 and page 24 an example not a recommendation
http://www.ratebusters.com.au/products.asp has this facility as an example not as recommendation
http://www.emortgage.com.au/mortgage_products/LoanFeaturesBenefits.asp see third feature.. as an example not as recommendationHave a look at Landlords insurance with insurance companies. Usually covers loss of rent due to damage, loss of entire house from fire. Check if cyclone, hurricane, flood and malicious tenant damage are included. As an example some insurance companies do not cover floods.
You need to find out what it costs to demolish the burnt out house and then completely rebuild. This is what you want to cover the building for.
I haven't bothered with contents insurance but the contents you might consider are Carpets and Curtains.You own half a property with a brother in-law maybe you could do the same with the other property with your brother in law to half the interest you have to pay. Consider fixing the interest rate if you are going to hold onto the properties.
I purchased a house in 1995 at a honeymoon interest rate of 6.5% which went to a 10.5% interest rate 12 months later.
I am nearly 40 so I remember "the recession we had to have" {ref Paul Keating}
If housing prices keep rising so to will rent. If rent, food, petrol and mortgage interest rates increase then people will want a wage increase. If wages increase then food and services prices increase and people will want a wage increase.If wages increase then food and services prices increase and people will want a wage increase. This is known as uncontrolled inflation and is referred to as a spiralling inflation growth. This is where the RBA steps in and reduces the amount of money in the economy and thus pushes up interest rates to control this inflation growth.
As rents increase people will not be able to afford to rent properties within 16 km of cities. If property investors cannot rent out their properties or have to decrease their rent while at the same time having to pay extra interest they will have a cash flow problem especially if negatively geared.
Nigel is right about built up equity but what happens to the recent first home buyers that are paying $500,000 or more to buy their houses with 106% loans and absolutely no equity?
Or to the Credit card users with over $20,000 borrowed on their credit cards.
What happens to market housing prices when they are forced to either sell or go bankrupt?
I am painting a grim outlook but as Neil Jenman told me in one of his seminars in the year 2000 this is a re-occurring cycle
and people get financially burnt when the economy cycle shifts and it is usually the first time mum and dad investors or first home buyers that are the first victims.Under contact Law a minor (anyone under 18 years of age) cannot enter into a valid contract so I would assume the buying contract could not be signed by a minor.
maybe hubby doesn't want to risk his business on your loan or risk your investment on his business . He might want to seperate his business from your property investments.
If his business gets sued by a little old lady who tripped over a carpet in his business you could lose the investment portfolio if it is in the business name or if you are also a director.
If you have a bad credit rating you could investigate a non conforming home loan and later down the track refinance to a conforming loan. It might be worth discussing with hubby and then talking to a mortgage broker to see if you can borrow money.
Do an internet search on Australian Non conforming Lenders
http://www.google.com.au/search?q=australian+non+conforming+lenders
to get an idea of your optionsJohn
A possible point of fact is that until settlement you have no loan balance thus no interest payments. See if you can get permission for builders, painters , ect to have access to the property before settlement for the purpose of doing quotes so that the workmen can start as soon as settlement occurs (why after settlement – risk factor of providing a free renovation to vender if the deal falls through) . You might add a clause to the contract for this access requirement. As property power says you may gain capital while waiting for settlement. And the house is occupied so you have no worry about vandals or squatters moving into the house. If you have not done it already get the property insured before settlement.If you make a capital loss you should put it on your tax as you can carry forward capital losses into the next tax year.
"If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. It can be carried forward to later income years to be deducted from future capital gains. You cannot deduct capital losses or a net capital loss from your income. There is no time limit on how long you can carry forward a net capital loss. You apply your net capital losses in the order that you make them."
Reference http://www.ato.gov.au/individuals/content.asp?doc=/content/36520.htmSee also
What is the cost base?
http://www.ato.gov.au/individuals/content.asp?doc=/content/36557.htm&page=2&H2
for cost base allowable items
"Under no circumstance can you claim capital loss against Non capital gain income (eg a wage or rental income,ect)"
