Forum Replies Created
Hi Mark
I bought a 2 br apartment in a serviced apartment complex in ACT CBD 2 years ago & let it privately (+ve cashflow). Owners there have the options to join the serviced apartment group or live-in/let-out. I borrowed 80% from the bank without any problem. Its capital gain is not as good as houses but not too bad either & it’s easy to get tenants with good rental return.
Check if you have the option to let it privately after the lease ends. Recheck net return (rent – rate – body corp – insurance – managed fees …) & obtain a depreciation schedule if you can.
[
]Huey
If you purchase an IP in Canberra you can claim the whole lot (stampduty + legal fees) in that financial year. It was explained in this forum before. I forget the threat number. [
]I’m a retired grandma, ex Software Support manager, currently work for the family & occasionally for the community without pay. I may be the oldest here. [
] HueyI’m rather new but notice this is more than a property investment forum. I’m trying to catch up by reading old entries & I’ve found good info & many nice & helpful people here. For the rest of the group I think you are nice as well & hope we can communicate more when we have time & not too shy.
Sorry, at this stage I only ask questions but can’t offer answers because I don’t know much about Property Investment. However with my 30+ years experience in raising children I could contribute heaps & learn more at the same time if the name of this forum is changed to http://www.propertyinvestingandchildcare.com.au [
].Last week when making winter clothes for my grandchildren I made some for Sooshie’s boys as well but haven’t got a chance to ask for her address. I hope she is having a good holiday.
[
]Huey
I think overall it would come out the same when you take money out from 1 IP & put it in another IP. You would pay or get back the same amount of tax. [
] HueyPls follow your conscious. She already told you she couldn’t afford the current rent. If you increase the rent what would you expect her to do? She could not even move out until the lease ends at Xmas. [
] HueyCan someone please confirm info from Laurie? ATO & M Lomas’ book have left out this type of depreciation from their calculations for capital gain.[?] [
] []When using a discretionay trust to buy an IP if the IP doesn’t return positive cashflow how we’d claim depreciation?[
]Hi Michael,
Your other replies make sense, just as I thought.
Q1 is the one that I’m confused. Here is the extra details :
Mortgage duty : $1,600
What is Transfer duty ? is that stamp duty($16,000)? The bank charged us few hundred dollars extra for mortgage registration or something like that!
(The numbers provided are only for the purpose of calculation. They are not exact.)
Sorry Sebastian. I hope this info will help us all.
Cheers
Huey[
]We are lucky so far to have good tenants. I manage the IP close to home. The previous tenants even helped my daughter with her homework [
] & showed potential tenants around before they moved to their new house. I brought the lady flowers when she was sick. The current tenants are very nice too. They all transfer money directly to my bank account monthly. We meet for coffee & chat when we have a chance.The agent manages our 2nd IP. The tenants rang us when they couldn’t get prompt service from the agent. We had to drive 300 km twice to see them. When the builder came to fix things within the 90 days warranty period they didn’t mind to come home from work to open the door. They even planted new shrubs for us.[
]Sorry Michael, I overlooked & didn’t know you has carried over the topic of Working Out Capital Gain here.
You wrote “we can add any capital cost not claimed against income, such as renovations or the closing value of assets not fully depreciated. Add these to cost base.”. This is the grey area. Can you clarify further what the cost base should be for the following senario:
1. New carpet value $5000 included in the purchase cost (Land 320,000, building 180,000, F&F 50,000). Depreciation claimed for 2 years at 15% of $5000.
2. Pay $5000 for the carpet right after settlement (new house without carpet. Depreciation claimed for 2 years at 15% of $5000.
3. Replace the carpet for $6000 after 1 year. Depreciation claimed for 1st year at 15% of $5000, 2nd year at 15% of $6000 (???). Can we claim the writeoff amount ($5000 * 85%) at this point?
4. Replace the carpet for $6000 just before selling the IP.
I couldn’t find any info regarding the deduction of the closing value of F&F from the cost base. It appears that for the F&F value already included in the purchase price we don’t need to deduct the past depreciation claims from the cost base! I hope this is the case otherwise all F&F depreciation claims would have to pay back at selling time. It would be a huge problem for people like us who rely on depreciation claims to make up for the loss from low retal income.
Regards
Huey
[]Thanks Stu & Michael,
More details : We already paid off the mortgage for our PPOR before I retire. We used this equity to borrow 105% the value of our 2nd IP. Since the bank undervalued our PPOR so much it’s not enough to secure the loan without allowing the bank to hold both properties as security and paid mortgage stamp duties.
We have 2 IPs. The 1st IP is under my name & with another bank. I bought it with 20% deposit. The 2nd should be under my husband’s name but a friend advised us to set up with 99% him, 1% me for its ownership so when 1 of us die it would be less paper work & tax & stamp duties….. I’m not sure this arrangement is sound or not. After reading info from the forum it seems setting A DISCRETIONARY FAMILY TRUST is the way to go but I still don’t understand much yet. We have both grown-up & school-age children.
I’m in a better position now in term of equity to get more serious about property investment but still wonder at my age I should or should not. There are so many of you in this forum are young, knowledgeable & well planned in this field. I admire that & thank you very much for sharing your knowledge.
Huey
[
]Oops! I should minus (not add) $9000 depreciation of building from the cost base. Thanks Michael,
Other depreciations = fittings like Carpet, kitchen appliances, security system ….
We spent $7000 for carpet, blinds and have claimed depreciations for them every year. Can we still add the $7000 to the cost base?
We claim bank fees (= $1000, from $20,000) over 5 years. (1000/5 = $200/year or $400/2 years). Should $400 be deducted from the cost base since I’ve already added $20,000 to the cost base?
Because we only get $400/wk rent, after paying for agent fee, rates … it’s not much left! We are in red even after claiming depreciations for building & fittings. From the below calculations, after 2 good years in property market if we sell the property we will get $21,664 from $70,000 increase in value.
I keep thinking is it worth all the worries? Should I sell it & do something different? We have to prepare for bad times as well.
Cheers
Huey
+++
BUY
– Purchase Price $450,000
– Carpet, blinds 7,000
– Stamp duties, bank, solicitor fees $20,000Total : 450,000 + 7,000 + 20,000 = $477,000 (
Keep for 2 years, tax claimed during this time:
– 2.5 % depreciation of building cost 180000 * 2.5% * 2 = $9,000 (a)
– Other depreciations : 4,700 + 4,000 = $8,700 (b)
–
– 20% on Bank fees/yr : 1000/5 * 2 = $400 (c)SELL
– Sell price $520,000
– Agent fees : $10,000
– Bank, solicitor fees : $1,500520,000 – (10,000 + 1,500) = $508,500 (S)
PROFITS:
= S – B + a + c
508,500 – 477,000 + 9,000 + 400 = $40,900
Taxable gains : 40,900 * 50% = $20,450 … tax at 48.5% = $9,918 (my hubby has 99% ownership, he is in high tax scale)
NET PROFIT : 508,500 – 477,000 – 9, 918 = $21,664
++++
Would anyone please let me know approximately how much the accountants charge for doing a tax return with fixed income + 1 IP + bank interest + dividents for 3 shares + charity donations ?
Many thanks in advance.
Huey
[
]Thanks CY,
From what you explain, I understand that :
(1) both types are subject to CGT
(2) for the periods that our family live in these houses we can’t claim depreciations unless we rent them out to other people, if to ourself it has to be at the market price.There is nothing worth from my mistakes for you to learn! Over 2 years ago I decided to buy an IP & planned to pay it off by the time I retired so the income from the IP would supplement my super pension. I had a look at properties for sale at 5 potential areas in the city or 3, 4 km from the city . At the end I chose a privately owned apartment in the mixed privately owned/serviced apartment complex in the city. Reasons : I didn’t know that I could claim heaps from depreciations. I was unlucky I met a new real estate agent who didn’t know much about depreciations or other aspects of investment to advise me either. I thought if I couldn’t get tenants I couldn’t affort to pay the bank but I could because I was in the high income group. I felt safe with an IP in the city because it’s easier to get tenants.
I’m still ahead with my IP. It’s positive gear but it’s capital gain is not much. Its market value is the same as what the previous owner paid for 6 years ago. There are so many new residential buildings in the city & will be more in the next few years. Finding tenants will be tougher.
All properties in areas that I considered at the same time have increased in price between 80 – 100%. They are either at walking distance to University, shopping center or not very far from the city.
Huey
[
]Thanks CY, I will search thru Domain.com.au. The areas I’m looking for IPs are limited because I don’t feel comfortable buying in areas that I know nothing about. Houses in Sydney are so expensive but I used to live there.
Huey
[
]Many thanks Andrew. It seems that I have to kiss my 70k super savings goodbye for a long time. Huey [
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