Forum Replies Created
Hello Micman
Here is a link to the email you want.
https://www.propertyinvesting.com/newsletter/newsletter068
Cheers
ElkaBy loans I meant the amount still owing,not the original loan.
Sorry, I didn't understand your original post correctly so maybe foundation didn't either. If you meant that you have $100K sitting in an offset account and you have an outstanding loan of $200K than your more than covered using Steves 30% recommendaton.
Cheers
ElkaHello tch
I thought Steve meant money in the bank.
So if you have loans totalling $200K then he recommends having $60K cash available.I hope someone will correct me if I have misunderstood.
ElkaHello Kenzel
Yes. You also need to tell them that you have vacated your last property if you were paying water bills there.
Enjoy your new property
ElkaHello zizzuu
Do I understand your post correctly. You have a fixed IO loan for 3 years with a 100% offset account and at a good rate?
Can you tell me who with please?Thank you
ElkaHello Dave
When I see a house being built this is my favourit part. It goes so fast that it always looks as if it will be all ready in a couple of weeks.
Looking good.
Thanks for the photos.
ElkaYes, I agree too. Pay off the $20K as the interest is high and not tax deductible and then both continue to save in the offset account until you have the deposit you need.
Then, when you find an IP you want to buy do not use the money you have saved as a deposit but instead use it to pay down your PPOR loan (non tax deductible debt). Then, by means of a split loan, borrow this same amount against the equity in your PPOR and use as deposit for your IP. The interest on this new loan is now tax deductible as it is being used for investing.
A great system called debt recycling which I learned by reading this and a couple of other forums.
Hope this helps
ElkaHello J
The rule is … up to 6 years. Before this time you can even move in again for a few months and start the 6 year rule again.
This all assumes that you haven't bought another PPOR in the mean time. If that's the case then up to 6 years you are CGT free.Here is a link to a good explination by Terry if you have bought another home in the mean time.
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4322421
Hope this helps
ElkaGee I thought I answered that.
Building and content, public liability and I recommend landlords insurance though it's not compulsory.
Actually if you don't have a mortgage none of it is compulsory but it would be a foolish person who didn't insure their property against a disaster or themselves against public liability.You should organise the building and content insurance from the time you sign the sales contract.
Sorry I neglected to read the title properly the first time.
Congratulations on your first IP.Elka
Hello Floyd
You didn't say whether you were buying a property to live in or to rent out.
Either way you need building and content insurance and public liability. If you are renting it out you should also take out landlords insurance. CGU does have a policy that covers all the above in one policy but it's also possible to get them separately so shop around for features and price.Cheers
ElkaHello Dave
This may be a stupid question, but did the slabs need all this time to dry? Is that the reason that the frames have only just arrived?
Cheers
Elkahttp://www.invested.com.au/2/advice-best-direction-here-16862/
This is the thread I meant which I found explained debt recycling clearly (for me). Obviously you don't need to buy shares to use this strategy. You just need to use the funds for investing.
Hello Michael
As I said I am no expert and only have a bit of experience with an industrial CIP.
You didn't say what sort of commercial property it is. I believe different types of commercial properties have different lease conditions normally. What I would do before I bought anything is take the lease to my solicitor who is experienced in this area and ask him to give me his comments on the lease. What is good, what is bad and what is missing.
However you are buying the premises and not the tenant so you need to research how easily the property will rent if the tenant leaves and if the current rent is fair market price. What to look for is obviously different if it is a shop as opposed to an industrial property.
I am a little puzzled though. You say the property is new (3 years old…good depreciation deductions) yet you also say that it's got a long term tenant. The way I read it, by what you have said, is that this tenant is the first after the IP was built and took, for commercial understanding, a fairly short term lease (2 years) with a 3 year option.
How much longer before the lease expires? With a lease option it's normal that the tenant needs to declare, on paper, their intention to extend or vacate several months before the termination. This is to give you time to re-market the property if he is leaving.This time period should be stated in the lease and what usually happens is that the agent writes the tenant a letter X months before the lease expires and asks them their intentions. Check if this has happened and if they have received a reply yet.
You might like to get a book entitled "How investing in commercial property really works" by Martin Roth and Chris Lang. ISBN 0 – 7314-0293-6. I found it a good read.
Cheers
Elka
Here are links to 2 sites for more information. The first is a thread on Somersoft to discuss CIP's
http://www.somersoft.com/forums/showthread.php?t=29333
This second one is to a site which also sells commercial property as well as acts as buyers agents but has some good information there. Also if you join (free) they will send you some more educational reading.
Hello Michael
I am no expert in this area but since no one has answered you I will tell you the little I know.
I have 1 commercial property and the return is better than residential. It also has the advantage that normally (check the lease) the tenant pays all outgoings (rates,water,insurance,maybe some repairs, land tax at single holding rate naturally) and may even be required to paint your property every so many years. Again, all agreed on via the lease. I am talking about industrial commercial property which is what mine is, but I believe that the rules are different for offices or retail commercial property. Any commercial REA will be able to give you this information.
The thing to remember about the CG on a commercial property is that it's sometimes positive and sometimes negative. The value of a CIP is based on it's return and in bad economic conditions, when rents usually drop, so does the value of the property. However this rectifies itself when the economy improves.
Getting a tenant is also quite a different story than for residential property. Generally it takes much longer, again depending on the location and the economic conditions. On the plus side once you have a tenant they usually stay a long time and most leases have in built yearly rent adjustments. Mine has, thank goodness, just asked to renew the lease for a further 3 years. They have been there 6 years now and unless they go broke or outgrow the premises, should stay for many years to come hopefully. However, it took me 9 months to get them when my old tenant left. Something to consider when calculating how much reserve you need to hold.
What sort of CIP is it that you are looking at?. You say they have a lease for 2 years and will extend the lease for another 3 years. Maybe you mean they have an option for 3 more years? If so then they are not committed to extend the lease. You are committed to give them an extension (subject to any rent review agreements in the lease) but they are not committed so don't take that to the bank yet.
Hope this is a start
ElkaHello Carol
Just coincidentally I was reading an old copy of API and came across an article about Binding Financial Agreements. Apparently this is something new from 2000 and unlike a pre- nuptial agreement bids more certainty. It's possible to make such an agreement even after you are in a relationship. Maybe you should speak to a lawyer specialising in family law about it.
The thing that the article does state is that one of the limited number of circumstances when the family court will not enforce such an agreement is non full disclosure.
Hope this helps
ElkaHello ChrisACT
You are in a fabulous position as not only are you young, earning a great income between you but have also started on your wealth building and based on the information you have provided, doing well. In your position I would certainly not be worried at all.
As others have already said, the first priority now should be to eliminate your non deductible debt. This means paying off your PPOR and on your salaries this should be a breeze. If you never intend to convert this property into an IP you can pay it off directly via the loan but if you are not sure than a 100% offset account coupled to this loan will do the same thing and still give you the flexibility to decide later. This offset account is also the best place to have your salaries paid into.
A very good read is a thread on InvestEd about debt recycling. Here is a link to the site. I wanted to give you a link to the thread but the site is down for maintenance and rather than risk losing all that I have already typed I will let you search for the thread yourself. If I get a chance later I will post the direct link.
I suggest a talk with a good MB (there are several on the forum that would get my vote) about your loan structure and a talk with a property savvy accountant about ownership structure (trusts etc.) would be a wise thing to do at this stage if you haven't already done that.
Cheers
ElkaHello Mark
Rather than repeat it here is a link to a similar thread which is worth your reading.
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4322421
Even though the time element is different I believe that for up to 6 years from the time you started renting out your old PPOR, the principle is the same but naturally check with your accountant.
Hope this helps
ElkaHello Bez
There is nothing magical about rental income. It's just added to your other income and all deductions are subtracted.
Since you're losing $4000 on the property you will be saving yourself tax on this amount, at your top bracket, from your other income.
Hope this helps
ElkaHello Catherine
There is one solution that some investors on the forum use to solve that problem but it's very much dependent on your personal circumstances and feelings.
If you move out of your PPOR and rent it out for a while then not only the interest becomes deductible but all other expenses as well. Depending on the age of the property you may also have some good depreciation to deduct and being a non out pf pocket expense, this is very helpful for cash flow.
You can rent out your home for up to 6 years without losing its CGT free status.I assume your IP loans are IO. If not, this can be changed.
Do you have an offset account linked to your PPOR loan ?.The accounting firm Ban Tacs has a booklet about how to pay off your PPOR sooner. The link is below but it says it's being updated and will be back soon.
http://www.bantacs.com.au/booklets/How_To_Pay_Off_Your_Home_Sooner_Booklet.pdf
Hope this helps
Elka
