Hello 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]
Elka

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]
Elka

Hello

There was a discussion about these loans on the forum awhile ago.

Here is the link

https://www.propertyinvesting.com/forum/topic/24327/1.html?sortfield=&sortorder=&SearchTerms=capitalised,interest

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
Elka

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
Elka

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]
Elka

Hello 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]
Elka

This 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

“I am happy to go first. Here goes.”

Hello L.A. Aussie

Good idea but where is your story? [biggrin]

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