Thanks Jamie. I don't have any other debt/loan with interest higher than the unit trust dividend rate I mentioned in (2).

I'm now considering of buying some unit trust and leave some cash for expenses. Maybe open a savings a/c with interest earning for the spare cash.

At least it earning something other than 0%.

On LMI. Say if I go beyond 80% loan for the IP and paid the LMI, can I claim this as expenses come tax time? If this is possible, would it be wise to unlock some more equity on the IP and invest it elsewhere – for example in the unit trust I just mentioned?

Cheers.

Thanks wilko for your reply and tips. It's a 3+ year old unit and BMT told me I can still get a decent depreciation out of it. I forgot to mentioned the insurance. I spent $277 on a landlord insurance for the property.

Never thought I could claim those expenses insured while visiting the property. Will definitely keep this in mind. Will keep those receipts as well tax purpose as well.

I was told that in Victoria a transfer between husband and wife will not incur a stamp duty. Not sure if the regulations has change since then though. I'm thinking, if the tax implication is not that much come tax time, I'd probably skip the ownership transfer bit to avoid all that paperwork hassle.

xdrew,

I don’t quite get you on the 6 years, PPOR, CG exemption bit. If I rent elsewhere for say 5 years, then decide to sell my apartment (which I rented out for all that time), I get CG exemption? Wouldn’t my PPOR be my new rented property, and not my apartment? How do I then declare any loss/profit of my leased apartment to ATO?

On the title change, I ran some rough numbers with my tax accountant and she said it may not be worth the hassle to change the title or even get the depreciation schedule done…we’ll see once I get all numbers on the table.

The property is actually solid, good location, close to uni and major shopping and easy access to CBD. The bad eggs bit are mainly in the common areas which we are addressing now.

Once resolved, it would be a good property to keep for long term rental. Of course I will always look at overseas option. I’m actually finalising 1 overseas property purchase at the moment (in Malaysia), mainly for long term retirement purpose, to lock-in current market price, and more importantly stay close to family than making big bucks out of it.

My brother-in-law bought his property by the same developer 2 years ago in next door development and price has gone up by a whopping 30%. Sounds like Australia property market 30 years ago when price doubles every 7 – 10 years, before it pauses for income to catch-up and supply/demand to rebalance itself. It’s emerging market from my personal opinion. As I said, main purpose is to secure a property for my retirement and to stay closer to families in the future, than anything else. That, to me is priceless…

Also to split my eggs (risk) into different baskets. I am a Malaysian citizen, but even then it took me several years to observe and research this market, getting some advice from friends and families before I took the plunge.

I fully agree, oversea investment can be tricky sometimes. I’ve got a family now, with single income household and other commitments, I have to be very critical of my risk/reward analysis and ensure I also have my worse case scenarios adequately covered.

Btw, if you’re interested to see what I bought (http://www.cascadia.com.my/the-product-bamboo.php). I paid approx $215K (AUD) for it (today’s exchange rate). I’m taking local mortgage there @ 4.15% interest rate (variable loan). Let me know what you think. The most likely place I will live in the future – when my wife and I grow old, and the kids are free to roam the world by themselves..

Now you understand why I can’t buy a 2nd AU property (especially not in the near future) due to my current commitments…

Thanks Freckle. You’re probably right. Doesn’t appear to be any chance of CG anytime soon. Main reason why i want to hang on to the property for now is because we have some building defects and legal issue going in with the builder at the moment. If i sell now, we may not get a fair market value for it, due to the building issues.

Assuming market stays flat until we settle the legal issue and if we win (which seem like a high chance at the moment), at least i have the option to put it on the market and get get as close to market value as possible, once the issues resolved. I know these are assumptions and things can go either way…

Other option is sell now, take the money and invest elsewhere. I can park some 65K @ around 8% p.a return tax free overseas – and it’s legal. Balance 135K cash maybe invest in some asian booming property market, which is looking more promising right now. We then move to rent somewhere and use the overseas investment income/CG to cushion the inflationary effect and our rent rises..

Just my hyphotetical, high level options on the table right now…what do you guys think?

Thanks guys…and happy Easter.

Here’s my plan:

1. Get a quantity surveyor to prepare a depreciation schedule.

2. Meet with rental agent to assess rental potential (and work out all outgoings – management fees etc).

3. Once I have all the numbers, meet-up with a tax agent to determine whether the property is in a positive / negative gear territory.
a. If property is a positive gear, then:-

a (i). Either convert property to my wife’s name (100% ownership) to reduce tax on profit made as she is unemployed. Note: Not sure if bank will allow this though???

a (ii) Or, allocate say 90% ownership to my wife and I take remaining 10% to reduce tax impact, just so I still have some ownership in the property. Who can help me with this?

a(iii). Once I decide on either a (i) or a(ii), I then convert the loan to interest-only. Note: Not sure if there is any benefit doing this though, as we do not intend to buy another property (as we can’t afford it). Instead, we intend to rent another place and start paying rentals. Or, should I just leave it as principal + interest and simply reduce tax implication by doing either a(i) or a(ii)?

b. If property is in the negative gear region, then:-

b (i). I will convert property from joint tenants to single ownership (100% under my name) for tax purpose.

b(ii). I then convert the loan to interest-only. Perhaps same concern I have as in a(iii).

Do most people usually buy another IP once their current IP reaches the positive gear territory, for tax purpose? As I mentioned above, we don’t plan on doing now simply because of affordability.

We simply need a bigger place to stay in a suburb we want to live in. The only affordable way to achieve that now is renting..maybe down the track if we really like the new suburb we live in, we just sell the IP and buy a house there – but that’s another big consideration and decision.

Not sure if my plan above make sense or not. Look forward to get some expert advice from you experts out there…

Cheers.

Thanks guys. I will look into the depreciation schedule. May I know who can help me with that? Tax accountant?

Initially I was thinking of converting the property title from joint ownership (me and my wife) into just my name, as she is a stay home mom and not generating income. I had the impression that I might be able to turn the property into negative gearing category – which obviously something I need to put on paper first and taking all considerations such as depreciation schedule etc.

Jamie,
Yes, I did paid a fair bit to reduce the loan to under $200K when we bought it. Actually I only took a loan of $190K. My idea was to avoid borrowing too much back then, and to reduce the interest rates. Perhaps what I should have done is instead to take a bigger loan and use an offset account – silly me!

I take it that I can’t ‘increase’ my loan amount to move the property into a negative gear category? Perhaps a silly question..

So, if after I worked out the numbers and the property is a positive gear one, does that mean it’s pointless for me to change the property title to just my name?

I guess I might have to put up with the investment income tax…

I wonder if there is buyers agent out there that can offer negotiation service only. I will do the research and “check out” those suburb, houses myself and once I’ve found “the one” I like, I then let the BA check it out and do his magic with the sellers agent.

Has anyone done anything like this before?

Thanks Scott. You mean special requirements such as settlement date, property inspections etc?