Forum Replies Created
Aussiemike,
Thanks for the info.
Wayne
Aussiemike,
Originally posted by aussiemike:Discretionary trusts for property investment are mainly desgined for positively geared properties not negatively geared ones.
So what’s the best vehicle for negatively geared property? Would that be unit or hybrid trusts?
Wayne
PMJI, but I also have a question regarding costs in NZ.
What’s the situation with buying and renting property in relation to GST?
Looking on property Websites, I’ve seen some prices stated as $X plus GST, while most just have the price. Is there GST on all house sales or only on some, and why would some be advertised as “plus GST”?
Likewise with rent. Is there GST on rent? If so, and I’m told what a place is currently being rented for, would that be before or after GST has been taken off?
Thanks.
GP
Mel,
I would have thought that the company lending money to the trust is different to lending to a director thoughI don’t know, but hopefully my accountant will tell me.
And I suppose I could nip over to somersoft.com and ask Dale.
Wayne
Mel,
Thanks for the response.
I’ve read Dale’s book now, plus a number of others and heaps of threads on this and other forums, and have a much better overview of the situation.
is there any way that you could loan the money to a trust that you set up?From the company you mean? That’s exactly what I’ve asked my accountant. However, I know the tax office is not real keen on loans to company directors, so I’m not sure if this would be viewed much differently.
But then I would wonder about the benefit of being able to distribute from a discretionary trust to a company. It would mean only 30% tax, but if the money was then stuck there with no way to get it back in the trust for reinvestment, what would be the point?
Wayne
Right now, everything I can find on property investing.
For fiction, Gene Wolfe’s “Fifth Head of Cerberus”. He’s a great writer, if you like SF/F and don’t mind thinking a bit.
Myydral – I read a lot of Michener some years ago. My favourites would be The Source, The Covenant, Chesapeake, and Centennial, but a lot of them were pretty good.
GP
Derek,
As I said, he flew through the figures so fast that it wasn’t really possible to try and work out exactly what he was doing, but I think it was much like you said.
The idea was though that you’d realise that return through refinancing at the higher capital value (meaning you’d borrow another $8K against the $10K increase in value). While that’s only 80%, I think the rest would supposedly be made up by depreciation and overall positive cashflow.
Can’t remember how he allowed for the first couple of years now while the place would still be under construction. There was talk of buying from the developer at a discount, so maybe he was counting that somehow.
Wayne
I did notice in Steve’s book that he got motivated by going to a seminar [singer]
Even if it was by Robert Kiyosaki.
aussiemike,
Ah yes, sorry, I must have overlooked that part of your message.
GP
aussiemike,
>> If you are bankrupted, the trustee in bankruptcy could take control of the corporate trustee and distribute income or capital to you as a bankruptee <<
But wouldn’t the appointer be able to sack the trustee company before that could happen?
GP
Thanks for the replies.
So you would consider Housing NZ to be a good tenant? Not difficult to deal with?
Would a lease be much the same as a normal tenancy in regard to the obligations of the owner (maintenance, etc)?
GP
Terry,
Thanks for the response.
Unfortunately in this case I’m on the top marginal rate, so there’s a difference of 18.5% which adds up to a fair sum. And I already give the taxman more than he deserves…
Anyway, I’m going to talk to my accountant about it again shortly.
Wayne
Thanks for the reply xxx and the link to the other thread.
$1000 to join now – the price seems to be going down.
The figures he mentioned sounded good, but I’d want to go through them slowly and in detail, checking out all the assumptions and claims, before committing to anything. All the emphasis he kept placing on 100% return per year and no tax to pay sounds too good to be true. I noticed at one point he was very quick to circumvent a question about some of his claims not holding for Australian residents investing in the NZ properties.
And I’d like to see some figures of real returns on investment achieved over a number of years from some of the forum members (and I don’t mean just testimonials on their Website). Still, it does seem like they have a lot of members taking up these investments, so I’d expect to see more about it if they were too much of a dud deal.
Wayne
Lucifer,
Thanks for the response.
Since writing that post I’ve looked more through this site, and the Gatherum-Goss one, and noticed that trusts seem to be the preferred structure (presumably discretionary rather than unit trusts).
I’ve ordered the Trust Magic book, but am just wondering why a trust is that much better than an individual, particularly if all trust beneficiaries are high income earners.
You say CGT is only taxed at 15% in a trust. I thought that all profit had to be distributed from a trust each year, and that it would then be taxed at the beneficiary’s tax rate?
Finally, since I already have a company, presumably moving cash from the company to a trust would involve having to dividend it out first, and thus pay income tax on the difference in tax rates. Would the benefits of a trust over a company make it worth doing that?
Thanks again.
Wayne
Thanks for the welcome Henry.
At this stage I’m just starting to learn about investment property, so am struggling even to come up with ideas for myself.
Wayne
Thanks Hux001 and Derek for your quick replies.
Regarding Investors Forum, the seminar only glossed over the situation but a few things bothered me. Firstly, the amount of depreciation on the fittings sounded good, but there was no mention of the cost of maintaining and replacing those fittings as required. ISTM that depreciation and cost of maintenance/replacement would balance out in the long term, so the initial depreciation would only be a short-term gain.
Secondly, they seem to work on maximum gearing with interest-only loans, although he did specifically say not negative gearing. And while he did say that they only invest in properties that return at least 10%, to cover the interest, etc, they presumably can’t guarantee that, and any loss of income would presumably result in large interest bills. Of course he sounded very confident that they’d always get 100% tenancy.
On top of that, many of the places are not ready to live in for a couple of years, so it sounds like they’re relying on capital appreciation during that period and refinancing at the higher value to show a return during that time. I haven’t had time to study this, or do any figures, but he continually referred to a gain of about 10% pa as if it were a given, which seems rather optimistic to me. This combination of 10% gain and 10% return, with only 20% equity, supposedly gives an effective return of 100% pa, but I got a bit lost as to what happened to the interest payments and where the depreciation fit it. As I say, all the figures flew past pretty quickly, with only the good ones (like the 100% pa return) being emphasised to any degree.
Regarding the 50sqm, he did say that generally that’s the smallest they do.
Thanks again for your responses.
Wayne
