Forum Replies Created
Hello L.A. Aussie
Having fun?
I’m waiting for them to ask you for your bank account number so that they can transfer the funds. [smiling]
Cheers
ElkaHello romina
Yes, Richard means that after writing off the buying expenses, a little each year, plus depreciation on the building, fixtures and fittings your tax bill will be lower so that the net cost of your investment may be lower than you think.
Please don’t get insulted but from your questions I really think you need a good mortgage broker and accountant to help you calculate what it will cost you after tax and to set this all up correctly.
For example if you are using the equity in your home for the deposit and buying expenses this should be a seperate loan and not an increase in your current mortgage. You have to be able to isolate this interest for tax deduction purposes.
Since you were living on 1 salary previously I assume now you will be able to save quite a bit. The best place to save it, I think, is in an offset account against your home mortgage. This works the same way as paying off extra on your mortgage, in that it reduces the non tax deductible interest you are paying, but gives you more flexibity if you ever decide to rent out your house or want to use that money for another IP.
If you buy this property it sounds like you should definately invest in a depreciation schedule.
Hope this helps [smiling]
ElkaHello ruroshin
Thank you. [smiling]
Happy 2007 to all. I wish you all that you wish for yourselves.
Elka [party]
I know that in 2 suburbs in Melb. the rule is that over 9 constitutes a boarding house. I don’t actually know if this is a state rule or if each council has a different requirement..
Ringing up your local council would be the easiest way to find out, I think.
Happy new year [party]
ElkaMy money’s on you dare-to-dream. Starting so young your already ahead. [thumbsupanim]
How about giving us progress scores every 10 days Dr Spock. It will be like going to weight watchers and will keep you on the straight and narrow. [smiling]
Cheers
ElkaHello
There was a discussion about these loans on the forum awhile ago.
Here is the link
The following link is to investors direct and an explination of what is called an ” Investors Direct Cash Flow Mortgageâ„¢ “
http://www.investorsdirect.com.au/newsletters/072006/story1.htm
A “rose” by any other name. [smiling]
Cheers
ElkaHello Terry
The trust is just owner of a commercial property. It’s not used for business as such …. except of collecting the rent of cause. [smiling]
Excellent point wanelad. Good to be reminded.
Elka
Well that makes a little more sense Terry.
I have a DT with company trustee which I control. The DT has had an ABN for many years. If I wished to take out a loan for a property which I wanted to be owned by another DT (or HDT) but with the same trustee company would I be able to use this ABN?
Thanks
ElkaThank you bridgebuff.
Smoke and mirrors in other words. [smiling]
Originally posted by CJWentworth:At the moment I don’t think anyone’s considered a legal Carer for my Dad. How would that effect things?
Sorry I must have phrased that very badly.
What I meant was that it sounded as if the plan was for your dad to stay in the house to look after your siblings and your mum to move out. GMH454 scenario I think worked on the assumption that it would be your mother that was staying in the house with the kids.
Good luck
ElkaHello CJWentworth
Maybe I’m wrong but from your original post I get the idea that you and your brothers and sister are now living with your father in the house as the carer and not your mother.
The only reason I am asking is that if this is the case I am not sure if GMH454s’ plan will work as it changes the dynamics of the situation.
Hello groages, Terry
I’m begining to feel like the 5th leg on a chair as Terry is a trust guru. [smiling]
You might also like to think about the fact that a HDT works just like an ordinary trust if there have been no units sold so you will still have complete discresion over profit distribution throughout a large extended family.
It’s possible (you will need to ask a proffessional) that even with units sold the deed may be so worded that not all income will need to be distributed to the unit holder(s).
I think my main point is that you never know what oppertunities the future brings. If there are no disadvantages or high costs associated with a HDT why not….?
Also I love the point Terry raised in his last post here and that in itself may be a huge tax saving.
Of cause you should check all of this with a proffessional.
Cheers [smiling]
ElkaHello Paul
On browsing through some of the back threads/posts I found yours unanswered. Even though I am not Marc I will give it a shot. [smiling]
Yes the 20% Marc uses will include all expenses except the interest on the loan.
In a residential IP the tenant pays electricity and water usage.
The other charges on your water bill are charged to the owner.The exception to this is if you have 2 different tenants on your property (e.g house with Granny accommodation rented seperately) and there is only one water meter. In this case the owner has the pleasure of paying the usage bill as well.
Hope this helps
ElkaHello jaineyb
Like L.A. Aussie I am not qualified to give advise either but will give you my understanding of each of the situations you discribe. I’m sure someone will be awake enough to correct me if I am wrong.
I don’t actually think that you need to do anything as far as advising the bank that you are going to rent out your PPOR. I hope one of the savvy brokers on the site will correct me if I am wrong.
Of cause I would check my insurance policy and take out landlords insurance as well. If you then rent and not declare any other place as as your PPOR then you can rent for up to 6 years at a stretch and not be up for CGT tax if you sell. You can claim all normal expenses associated with an IP (interest,rates, insurance etc. etc).
Interestingly enough the ATO lets you start the 6 years count from scratch if you move into it again as your PPOR (I don’t know if there is a time requirement for that) and then move out again. There is a good explination of all of this on the ATO site.
I think it would be a good idea to get a valuation every time you switch the status of this house or at the end of the 6 year period or at the time you declare another property as your PPOR.
If you buy a property to renovate, move in and declare it as your PPOR then your first property will cease to have that status for CGT calculations when/if you sell.
All expenses (interest, renovation costs etc.) will not be tax deductible but you will not be up for CGT when you sell. I’m not sure how many times you could do this and in what time frame before the ATO decides that this is not a case of someone with itchy feet.
In the your last scenario, if you have had a property as an IP for 3 years and then move in to it and declare it as your PPOR (I would get a valuation at this point) when you sell, CGT will only apply for the period that it was an IP. As L.A Aussie has pointed out you would not be able to claim expenses for the period you live in it.
Actually, seeing as the expectation generally is for a pretty flat market there does not seem any point to this strategy at the moment. Even worse, if this property experienced negetive growth during the period you used it as your PPOR this would not be taken into account for the CGT calculation.
Also don’t forget the effect this would have on the property that is currently your PPOR (i.e. you would miss out on the chance to have 6 years CG for free)
I hope I have not confused you even more. [smiling]
ElkaHello stayfly
There is some good reading on the subject of inheriting a dwelling on the ATO site.
Hope this helps. [smiling]
ElkaThis is a link to a good post by Terry as to how HDT’s work to effectively allow negetive gearing in a trust. Actually the whole thread is of interest to you I think.
https://www.propertyinvesting.com/forum/topic/23356/3.html?sortfield=&sortorder
Cheers
Hello groages
As Terry said depreciation is an expense that you can deduct from your income.
To clarify, your simple equation should look like this ..
Profit / loss = total income(rent) – depreciation – other expenses (interest, rates, repairs etc.)
“I’m not sure that I follow. I thought that depreciation was used to make a property as close to neutrally geared as possible.”
That is true only in as much as you get to deduct this extra expense (which unlike all the others is not a real cash out of pocket expense) against your other income (at your top tax rate) giving you a reduced overall tax bill and thus more cash in your pocket.
This is naturally only possible if you have other income in the trust to offset the loss against. Trusts can not distribute loses.
“If a trust claims it as an expense then this is actually doing the opposite and you would be better off not claiming it at all.”
It is always worth claiming. As I said earlier it is not a cash out of pocket expense and you get to accumulate the loses which you can then offset against any future profits.
A normal DT may not be the best structure for a negetively geared property which is why there is so much discussion on the forum about HDT’s or hybrid DT’s. Do a search and you will find plenty of information about it.
You need to talk to a savy trust/investments accountant before you actually take out any loans or sign any contracts.
Hope this helps [smiling]
Elka“I am happy to go first. Here goes.”
Hello L.A. Aussie
Good idea but where is your story? [biggrin]
“To be on the conservative side, I always underestimate expenses, over-estimate returns/income. It is a successful rule that I live by, and I wouldn’t quote blown up figures to ill-advise ‘simple’. “
Hello L. A . Aussie
I’m a bit puzzled. This is the second post that I have seen you say the above. The first time I just thought that you had mixed it up but now I am not sure.
Don’t you mean
I always over-estimate expenses, underestimate returns/income.
Sorry, I’m not trying to nit pick. Maybe I am missing something?
Thanks
ElkaOriginally posted by manofaction:Have a property I wrapped some years back and all is well.
Hello manofaction
Surely you can’t terminate the wrap if they are paying on time ?. The fact that they are having a difference of opinion is not your business unless they are in breach of contract. i.e not paying off their loan with you or neglecting the property.
Having said that it seems as if person A is the road block so if you really want to “stimulate” her/him to action you first need to work out why they are “dragging the chain”.
Have you any idea why?
Is it possible that person A is not really financially literate and has just put the problem into the “too hard” basket?
Or maybe they are afraid that they can’t really afford the property on their own? After all, they need to refinance for at least $145K and probably more to cover stamp duty, conveyencing etc. plus then needing to be able to pay all the costs of the property instead of just half.
You may be able to help with this by calculating it all out for them.
Cheers [smiling]
Elka
