Forum Replies Created
It’s my understanding that if you have a property investment entity (coy, trust) then you can claim but if it’s just you then it forms part of the “acquistion” cost of a property (like stamp duty) and goes towards the cost base when (and if) you sell for CGT purposes.
Check with your accountant – they may have an alternative method.
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Many believe the mid-north coast is going to be a boom area because of the influx of retirees heading that way. If I were you, I’d hold onto it, esp. as you seem to be coping with the cashflow.
I feel that, in a few years, you might regret letting it go. I understand your wife wanting to do the renos. but perhaps you could hold off a bit or do them bit by bit yourself, esp if you say the business is picking up.
The other alternative, as suggested, is to get a loan. It’s relatively low cost compared to the CGT, agent’s commission and legals on a sale as well as the opportunity cost (capital growth) you’ll be sacrificing by selling.
Hope this helps.
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.There are always ways to find them – if you look hard enough.
Still some in country areas – alternatively some outside the box thinking will help find ways of “manufacturing” +ve cashflow – change of property use, developments, renos.
Plenty of good info on these forums about how to find positive cashflow properties.
Regards
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.I wouldn’t sell either. If you have $100K equity and you sell your CGT bill will be at least $25K, I’d imagine (not knowing your full details). You can unlock 80% of the equity using a loan at live off that to prop up payments.
Not sure what you mean by making the loan P&I will turn the property positive. It’s still basically the same amount of interest- at least for a little while until the principal repayments start to “dig in”.
I’d pay the $80K into the loan or into an offset account, turn it positive and then you still have access to the $80K plus the other equity if you want/need it (assuming you have re-draw or offset)
Hope this helps.
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Hi Milenko
Congrats on such a great start – only wish I had known all this at your age!
Great advice in the posts above. If you do put savings into your mortage account (over and above interest) make sure you can re-draw it and, Simon’s right, only do it for other deductible purchases such as more properties. Otherwise using an offset is good advice.
My question is why a 5 year lease? Do you have the ability to raise the rent during the period. I personally only do 6mth or 1 yr leases or, on the odd occasion it’s more, I have stringent rent review clauses in the agreement. You might already have this covered but I thought it worth mentioning.
In your position, I also agree that next property should perhaps be positive – or at least neutral -to stop the drain on cashflow.
Hope this helps.
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Good advice in the posts above.
I don’t understand why you say you don’t have enough to buy. $100K will get you into something around $500K without LMI or more with it (Lenders Mortage insurance).
I also have a friend who started by renting and buying investing properties. She started at age 50 and now has 3 – and her own place so I don’t see anything wrong with this approach.
Also, don’t know if I agree that buying is “dead money”. What you’re buying is capital growth. If it costs you $409 pw to own but goes up by more that $21K a year, you’re ahead.
Either way, I’d be buying something with $100K – and an IP is not a bad way to start.
Regards
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Adam
Apart from Terry’s comments, the only other way to increase cashflow is to make improvements to the property to gain more rent.
I think that using equity to fund further purchases is a great way to go and allows you to exponentially increasing your asset base in a way that saving does not.
Regards
Megan
Baz
Nothing wrong with your strategy. Despite all of the positive talk about positive properties, these little guys are hard to find and most of us, like it or not, usually end up with some negatively geared stuff. Don’t forget that even thought it might be -ve geared you will benefit by capital growth.
The borrowing costs on an investment property are “amortised” i.e. spread out over 5 years. You can claim 1/5 of the total costs for each of the first 5 years. If you rent it out for 1 year and then move in, you only get to claim the first year’s proportion i.e. 1/5th.
Once you’re in, there’s no more claim for any expenses.
I’d highly recommend you talk to an advisor not only about your financial position but also about what entity you should buy your investment properties in.
Sounds like you’re on the right track.
Hope this helps.
Megan
Jacob
Each council has what’s called “Development Control Plans” “DCP” and Local Environment Plans “LEP”.
They will explain to you the various zonings and what you are allowed to do on each. As well, they will give you guidelines as to the structure details e.g. setbacks (how close you can build to boundaries etc), materials you can use, uses, etc. Most have these available on their websites. If not, you can get copies over the counter from the planning section of the council. Of just call the town planner and they should be able to tell you over the phone.
Hope this helps.
Megan
I agree that storage might be worth investigation.
Have a chat to the council and ask them what the land might be able to be used for to get some ideas.
Regards
Megan
Had a friend in the same position. He ended up caving in and selling. I’d suggest you have a chat to a lawyer.
Otherwise, if you want to keep it, can you not finance him out – or find another partner to take that share?
Regards
Megan
Did you have landlord’s insurance? If so, you shouldn’t been able to claim. If not, perhaps lesson learned.
Don’t let it discourage you. I’ve had a similar experience (with no insurance!!!!) and learned – and it’s onwards and upwards from there.
Regards
Megan
The Cupcakes
We all get a bit shaky at times but you just need to take the plunge. You say that you’ve got a good lifestyle – so go for it.
Are you after property that is positive before or after tax? If after, I might be able to help.
Send me an email if you’re interested.
Megan
Jonesy
Do you mean corporate rental or holiday rental?
With either, I’d check out the vacancy rates of comparable properties and make a calculated guess from there after doing a synopsis of what my bottom line is likely to be.
Either way, Cairns is currently getting good growth and, even with a residential lease, it’s only costing you a small amount to hold it and I’d imagine the good capital growth will continue.
Hope this helps
Regards
Megan
Great advice, as always, from Steve.
My first thought when reading your post was “how successful is your accountant?” His advice is very much “old school” save, pay off your loan, put money into super and then retire.
Most people will tell you that this is the slow way not the fast way.
Having said that, you do need to ascertain your total financial position – and cashflow position and needs, before you make a decision.
My thoughts are that it is a buyers market now and the successful investors I know are buying now not waiting – but, of course, you must consider the bigger picture for you.
Regards
Megan
Agree with Rick. If it’s only going to cost you $130K to build and yet will be worth $350K when finished, I can’t understand why you would sell.
You certainly don’t need to sell to unlock the capital – you can borrow it – tax-free – and also don’t have to worry about GST and CGT.
If it were me, there’s no way I’d sell.
Megan
Hi Gilad
My thoughts –
1. Share market – don’t know where it’s going unless you have a crystal ball that works well – in which case, can I borrow it![biggrin]2. Lease Option – interesting strategy but takes a fair bit of expertise and wouldn’t be where I would start in your position – also don’t know if $3K is an investment I’d make if I was at your stage.
3. Staying at home and saving – always a good strategy however it will take you a little longer.
Do you have a like-minded friend who might be interested in going half/half on your first property to get into the market. You could live in it, do it up and be up and running.
Otherwise, perhaps a little longer concerted saving would probably be my suggestion.
Regards
Megan
What about trying to find a property where the vendor will finance you in? Provided you can afford it (and you make a good argument that you can) you might be able to find a person who can “wrap” you into a place
Regards
Megan
Can help you with info all about positive cashflow and negative gearing on our site and can send you some free reports.
Megan
