Matt,

Yeah, I remember that part clearly, which is why I'm confused in the first place.

If timing the market is key, then why invest in positive cashflow property now? Prices have great potential for a huge drop all the while interest rates are temporarily low – it's not going to last forever, so why is cashflow so worth it now?

I am under the impression the Forster example was to demonstrate good deals in the current market. That deal is good now, but for how long? When values decrease and interest rates increase – you're stuffed!

I do understand that it was to demonstrate the 1% rule, but was unsure whether or not it was a form of encouragement for present day investing.

In saying this, I've probably already answered my own question… the result of a Monday night seminar I 'spose

Hi DrSupachicken,

Your yield is calculated by dividing your annual rent by the purchase price and multiplying the result by 100, i.e:

Yield = (Annual Rent / Purchase Price) x 100
Yield = ($20,280 / $300,000) x 100
Yeild = 0.0676 x 100

Yeild = 6.76%

Sounds like a good return to me considering the 5.81% interest rate.

Thanks for sharing Terry 

Well in Dolf's case he refinances his properties to purchase depreciating assets (a.k.a liabilities) like his PPOR(only an asset once sold and if it makes a profit)/Cars/Other luxuries – This is how he 'realises' his gains. If you've read Steve's book '0 to 260+ Properties…" you'll find that this technique can become dangerous if you're not careful with managing your debt as I mentioned earlier.

You did raise a good question though about tax loop holes. You can limit the amount of capital gains tax you pay to 30% in the dollar if you purchase your investments through a discretionary trust or company.

You can learn more about Trusts through this post: https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4326640

This article is a great read too: http://www.propertyupdate.com.au/articles/149/1/Trusting-Trusts/Page1.html

If you have any questions regarding structuring your investments (i.e. using trusts) then there's plenty of help available here. Just ask away!

Cheers

Hi RubberduckyAU,

An option is an agreement between you and the seller. I'm positive you can negotiate subdivisions within the option clause, but I doubt you are able to do so without the owners consent (without him knowing). It will remain the owners property until you 'exercise' the option.

I'll just write up a quick example:

You find a property with development potential, the vendor is looking to sell at $150,000. You however, decide to offer the vendor a 24 month option to purchase the property at $200,000 (Let's assume that the market is trending upwards at the time and you want to make the deal sound fair for both parties as you may take up to 2 years to purchase it).

You state in the option clause that you will be granted entry during the 24 month option period to do all the appropriate work –  the subdivision. So in this case you have plenty of time to complete the job and save money since you're not paying for any holding costs. Once the job is completed you can exercise the option at any time you like during the specified 2 year period.

If, however, the deal turns sour and your subdivision will not produce your expected profit (which will need to cover the sale price of $200,000) you can simply walk away from the deal by letting your option 'expire'. In this case you lose the option fee which may be a few thousand dollars and the cost for the subdivision. The vendor keeps everything and you walk away a little broke but a lot smarter.

If you're interested in options I highly recommend you get some thorough educational material and seek competent advice on the topic as there are many avenues with options.

You never pay capital gains tax when you sell your PPOR. But since it is now an IP, you will need to pay CGT on sale. If the property is owned as an IP for longer than 12 months you will be entitled to a 50% CGT discount.

I suppose the capital gains will be calculated from the exact date it was converted to an IP to the day you actually sell it – not exactly sure though

Hi Erik,

Good on ya for sharing some nice pointers. And thanks for sharing the hot spotting site! – I should mention it's http://www.hotspotting.com.au/ and not hotspotting.com as this directs you to ebay (for me anyway), go figure.

By the way, I had a look at your site recently, it's coming together nicely

Cheers mate

Hey Linar,

Yeah, good advice is key. I'm forming a solid idea of what I want in terms structuring my investments. It'll save me a lot of time and heartache finding the right lawyer & accountant once I can clearly identify what I need.

I am leaning towards keeping several properties within certain trusts depending on their suitability as you have mentioned.

Cheers