[elkamMember@elkamJoin Date: 2006Post Count: 722]

June 23, 2009 - 3:50 pm

Hello Mel

The best way to answer your question for yourself is to do the maths.

Firstly find out what you could rent your unit out for.
Then you can either work out the outgoings ( council rates, water, house insurance, landlords insurance and expected maintenance costs)  or just use 20% of the rent as an estimate.

Rental income – expenses – interest on mortgage – depreciation = loss on property 

Depreciation is the tricky bit and depends on the age of the unit. Maybe someone else can help if you post the age of the unit. If it's over 40 years old I think you can pretty much discount the depreciation for the purpose of this exercise.

By deducting this loss from your other income you can work out how much tax you will save. Don't forget if you own the property 50/50 with your partner then each of you need to declare half the loss.

Compare this saving against what you would be paying in rent and you will see if it's worth your while.
Remember to consider non cash things like tenants never look after your property as well as you will and having to give up the emotional security of living in your own place.
  
You can rent out the unit for up to 6 years without effecting its CGT free status.

Hope this helps
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

June 23, 2009 - 11:29 am

Hello Emma

Have you been to a bank to try for a normal mortgage loan?
 
I'm sorry for my ignorance but if what gibb01 posted is correct than you may be able to get a bank loan which will be better interest than vendor finance. Of cause you will most probably need your mother to guarantee the loan but you said in your first post that she is willing to.

Alternatively, if your mother was willing to take out a loan of around $25K – $30K on her house and lend it to you for the deposit and costs a bank may be more willing to lend you +/-$80K. 

A $30K loan over say 5 years at 6.5% will cost you about $590 per month
A $90K loan over 25 years at 6% will cost you about $580 per month 

Your loan repayments for both loans will then be about $270 per week.

I don't know if banks are still lending for 30 years but that would help the repayment figures for the loan of $80K- $90K.
Also you may consider fixing the interest for the 5 year loan ( or a longer term if your mother and the bank where willing) and maybe even the first years of your house loan. Sooner or later interest rates will go up.

Even if you don't manage to get your house straight away remember that saving $200 per week gives you $10,400 per year  towards your house.
Do you believe that houses in the area will have capital growth in the next year or two?

At $125 per week rent that's not expensive living.
In your own house, besides the loan repayments, you would still have council rates, water, house insurance and maintenance costs. 

Wishing you all the best. I'm sure you will get there.

Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 15, 2009 - 9:32 am

Hello Mrleumy

I think there are several problems with this idea not the least being that when you transfer the property into the trust you will have to pay stamp duty again, which is an expensive exercise.

Some other problems are:-

If the property is negatively geared the losses will be trapped in the trust.

You lose the advantage of the 6 year rule of being able to rent out your PPOR for up to 6 years without spoiling it's CGT free status. ( Note this only applies if you did not rent out the property before it became your PPOR )

I can't see any advantage of moving this first property into a trust and certainly not so quickly.

If you search this site you will find many posts from people discussing taking advantage of the FHOG and then renting out. Most plan to do some renovations to add capital and rental value while they are living there.

Hope this helps
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 14, 2009 - 9:10 am

If the property was bought in 1981 then it's pre capital gains tax.
If it was mine, I wouldn't sell it unless I had a pressing reason.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 12, 2009 - 9:47 am

Thank you Terry.
I wasn't aware of that. I thought you actually had to have income.
Good to know

If it's easy for you to find the case that would be great.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 10, 2009 - 5:53 pm

Hello sushiboy

I think it's worth your while to go to an accountant to sort this out for you.
If you only made $5K profit without taking into account all costs, interest etc. you probably have a very nice capital loss which you need the ATO to know about so that you can use it to wipe out part of a future capital gain.

Sorry to disagree Terry but surely unless the block of land was rented out to earn income it's not possible to claim expenses…including interest… on your tax return ?.

However, judging by Rellie's post after seeing their accountant, interest and other costs can be used for CG or loss calculation.

Best see an accountant
Elka

   

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 5, 2009 - 11:10 am

PTW wrote:

Obviously the only advice/opinion worth taking is from a qualified accountant who is familiar with this area…. which I definitely am not. 

However

If I was to purchase a property and positive gear it, am I correct in believing that tax would only be need to be paid on the rent I get & that it would be at the top marginal rate, as my foreign income would dictate that. Also that the foreign income would not be taxed here as it has already been o/s?

I believe that's exactly how it works.

Could I negative gear it and just work the rent recieved against the interest while still putting my own cash into the loan?

I assume you mean you want the property to be neutral. If you just use an offset account tied to the IP loan this should work fine.

Could I pay the loan and have the rent go into a new seperate account for my wife only to do as she pleases so that she would enjoy tax free thresholds and rates as per yearly income recieved?

The property would have to be in your wifes name only.  Again, use an offset account to deposit your wages to reduce interest expense for the IP ( but first finish "paying off" your home loan )

Or is there a better option?

I would look into the pros and cons of  a discretionary trust.

Hope this helps
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 3, 2009 - 2:21 pm

I love it when the figures used to support huge house price falls are all for properties in the $ 2 / 3 / 4 M bracket.
Even in the suburbs mentioned there are properties for more "normal" people. What has happened to those?

 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

May 1, 2009 - 1:25 am

Using the 6 year rule you are allowed to rent out your PPOR for up to 6 years without affecting it's CGT free status.

So, if you sell after renting it out for 2/3 years and have no other property that you want to treat as your PPOR you should have no CGT to pay.  

Cheers
Elka  

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 30, 2009 - 1:24 pm

Hello hsingh10

This may be a useful place to start reading about deductible expenses for an IP. It's the ATO site.

http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/002/010/005

Hope this helps
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 30, 2009 - 12:31 pm

Hello 93561

Have I understood you correctly.

During the approximately 84 days you have been able to occupy the unit ( 42 days to settlement and 3 x 14 days extensions ) you will have been able to live rent free and loan interest free for 39 days ( thanks to your good negotiation of the terms of the last extension naturally ) and you're not happy ?

Actually your vendor sounds neither nice nor fair but you will be rid of him soon.

Let us know when you've finally settled.

Good luck
Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 24, 2009 - 11:52 am

Totally agree with Terry on both points.

My opinion is that 100% offset accounts are the best thing since sliced bread, if one is financially disciplined.

In your position I would even make the new loan for your 1 bedroom apartment IO with a 100% offset account and deposit all your income into this. That way you get maximum interest savings and leave all options open for the future.

Cheers
Elka

  

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 24, 2009 - 11:36 am

Hello dotoh

Actually your situation is pretty much the same as that described by KIZ in the post above except your numbers are different.

BTW the two items you described as maintenance are in fact not fully tax deductible as repairs. They are both capital expenses and you will only be able to depreciate them while the place is a rental. Also when you sell the property this depreciation will be taken into account for the purpose of working out the capital gain. 

In the scenario you describe, if you expect to make a substantial capital gain you may find that the CGT you will pay will far outweigh any benefit of being able to deduct interest and repairs in the first year.

If you were to genuinly live in the property as your PPOR for the first 3 months you would avoid all CGT problems.     

If I were you I would go to an accountant and get some advice about this before I signed any contracts.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 24, 2009 - 10:12 am

Your parents can just leave you the property in their will; first to each other and then to you.
You need to get some professional advice on this if you or your parents have a reason why this is not suitable.

If it's because you want to be able to get some equity out of the house for investing, this may be possible even if they are the owners but you will need to check this. Maybe a good MB can give you some options. 

Don't forget, irrespective of whose name the house is in you will need to be careful using this property as collateral because if your investments go bottom up your parents could lose their home.  

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 23, 2009 - 11:12 am

Hello Daniel

Have you and your parents discussed this with an accountant versed in estate planning to make sure this is a good idea?

To my thinking, if your parents gift you the house while alive you will have to pay at least stamp duty on the transfer which won't happen if you inherit. It depends on the state you are in but this could be +/- $20K 
 
Also, unless you are planning to use it as your PPOR as well, the property will start to attract CGT from the date you become the owner. If it remains your parents property it will continue to be CGT free until you inherit.  

While the impluse from your parents is really nice, financially it may be better to do it differently unless there is another overriding reason to do the transfer now.
 
Best to get some advice first.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 23, 2009 - 10:45 am

Hello theplatypus

That's a hard question to answer with the information given.

We have no idea of your income; what price range you are thinking of buying a PPOR; is your IP negitively geared and by how much per month (i.e. how much it costs you out of pocket per month ); how much equity do you have in your IP; has the area that you are thinking of buying your PPOR in a good capital growth history.

And most importantly ….. are you really interested in property as an investment tool.

BTW  I do hope you have that $56K in a 100% offset account coupled to the loan on you IP. 

Cheers
Elka

  

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 15, 2009 - 9:25 am

skuz wrote:

Gold or even silver on the other hand is straight forward. You just have to weight it and you know the value.

Hello skuz

I wouldn't be too sure of that.  True story.
 
Without going into great details the basic facts are that my girl friends husband thought he was being careful ( and clever ) when he accepted about 30,000 euros in gold bars ( marked as issued by a Swiss bank ) . He had 6 of them ( randomly chosen by him from a suitcase full of bars ) cut in half and tested professionally while everyone waited, watching the suitcase.

After the deal was concluded and the people had left the only real gold bars were the 6 that he had had tested. The rest were just gilded.

As I told him when I tried to disuade him from entering into this "profitible" transaction, if the bars were real and also not stolen then they could be sold in any bank.

An expensive lesson.   
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 13, 2009 - 1:24 am

Hello Plant

I believe that if you deposit the $30K into your investment loan and then redraw it for personal use ( own home improvements) you will lose the ability to deduct the interest on that $30K on your tax. Not a good idea.

An offset account is the answer, as has already been suggested, but if your loan does not support this facility then you have to work out whether it's really worth changing to save interest for only 3 months.

Best check with your accountant.

Cheers
Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 3, 2009 - 1:35 pm

Hello neilvs

You seem to forget that not all the rent is availible to service a mortgage.
Generally 20% is already earmarked for expenses, excluding interest payments.
Council rates, water rates, insurance, repairs, agents commission/letting expenses, vacancy periods and possibly land tax also neeed to be paid. 

I guess the banks realise this.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

April 2, 2009 - 10:39 am

Hello 93561

Sounds very frustrating!!!. Which state are you in?

I saw in your 1st post that you listed land tax. Why would you need to pay land tax?.
As you intend to live in the house you are not liable for land tax. 

If this was an investment property for the vendor, the land tax is his problem ……..  unless you agreed to pay it in the sales contract.

Do not pay for the furniture until settlement. If the sale falls through for any reason you will be stuck with the furniture anyway.  
Next time the vendor rings tell them sweetly that you are very happy to pay for the furniture immediately……as part of the settlement. 

Good luck
Elka