Forum Replies Created
Tax minimisation is not illegal there are many legal ways of reducing you overall tax liability.
An Australian would use a trust in NZ to buy property to:
1.Provide asset protection,
2.Avoid any possible death duties and/or gift duties that may arise now or in the future,
3. Allow for the accumulation of losses to be carried forward,
4. Enable income distribution/splitting to beneficiaries to take advantage of lower tax brackets etcThose are just a few possibilities off the top of my head. All situations are different however, and it is probably dependent largely on how the Australian structure is set up as to the extent of the benefits.
Cheers
JeffHi Milly,
I suggest you get an assessment of how bad the problem is first, it may only be with the verandah.Complete restumping may or may not be required and you don’t want to spend money unnecessarily. You do however, need to stop further deterioration.Your income is derived from having a liveable house to rent out, you need to protect that income. Leave the fence for now
Jeff
Latest Property News
Friday 4 June 2004
Our web siteBubble will not burst in the short term
In a report outlining their expectations for Australian property markets between 2004-2007, market forecasters BIS Shrapnel have predicted the housing market will flatten out during 2004/05 but will not experience a large scale drop in prices as other market commentators have predicted in the past.
The report said steady demand for property and low interest rates will help ensure the housing bubble does not burst in the short term.
This has been highlighted recently with the release of the latest vacancy rates from the Real Estate Institute of Australia showing the balance of supply and demand for property in most capital cities (with the exception of a few small pockets of oversupply) remained steady.
The ‘vacancy rate’ for rental property is defined as the proportion of vacant rental property at any given time in the market as a percentage of the total number of rental properties in a market.
Generally speaking a market with a vacancy rate of 2.5 – 3.0% or lower is experiencing a shortage of rental property, while a market where the vacancy rate is higher than 3.0% is experiencing an oversupply of property.
The BIS report pointed out the fact that Australia is still operating in a period of strong economic growth and this, in conjunction with low interest rates, means owner occupiers and property investors are not yet feeling pressure or panic to sell.
“Overall, underlying demand is expected to remain strong, supported by continued strong net overseas migration and improving economic growth and employment prospects,” BIS Shrapnel said.
The report went on to say, “…the residential property market is not expected to enter a downturn until 2006/07 when high interest rates bring a price correction.”This was an article just emailed to me by IPR. Thought you might find it interesting
Cheers
JeffDo any of you listen to what happens in the US at all?
Unfortunately our markets are influenced by what happens there. Alan Greenspan has just announced he will take every possible step to curb inflation – I read that as putting interest rates up.
When he puts rates up it paves the way for NZ and Aus to put rates up. Rates go up, demand goes down and hence prices – (price elasticity of demand)
If our rates do not rise with the US our currencies get hammered.
In saying all this, Greenspan could just be talking inflation down.
The joys of crystal ball gazing. While the jury is out on this one I personally will not overextend myself, but I am still buying.
Cheers
JeffScott, how far have you gone with this?
Have you been to a broker with the figures? Have you spoken with a valuer? Have you asked the vendor to leave some money in at ?% interest?
You need to determine how much you will require as a deposit. I once paid the deposit on a house with a credit card at 28% interest. This was a short term measure until I was able to revalue and refinance.
If the figures stack up you will get the finance, it’s just the interest rates may be a little higher. Otherwise look for a partner (50% of something is better than 100% of nothing)
There are some mortgage brokers who are active on this forum, perhaps you should make contact with one of them.
Best of luck
JeffTry contacting some real estate agents and commercial valuers.
Many valuations and sales of commercial properties will be based on the income streams so the information should be available.
Cheers
JeffYou say you are unable to finance the deal yourself but have not said why.
What would the property value up at?, how much can you borrow on the property?, do you have equity in other properties?, have you looked at unsecured finance, or vendor finance or even a partner?
It is difficult to assist without all the information. Firstly I would look at getting a contract on the property with a delayed settlement, this way you won’t get gazzumped.
If you can’t raise the finance after exploring all your options then look at on selling the property before you have to settle.
Cheers
JeffHi James
Some banks will allow you to open overseas bank accounts from Aus, some won’t.
Westpac allowed us to open an Aus account from NZ but the BNZ, which is owned by NAB wouldn’t.
And yes, you can access it via the internet. You would just download your statements via th net. Ask for a low fee account.
If you have your NZ transactions go through a NZ account it will be easier to prepare your income statements and tax returns.
Cheers
JeffWe’ve established that commercial loans can be called in, so that’s not an issue.
The question here is can a home loan be called in due to negative equity even though it is performing.
My question is at what time is a homeloan on an IP deemed a commercial loan? How many IP’s can you have before the banks say this is not a consumer loan it is a business loan? This would of course make a difference to this discussion.
Another problem with negative equity is when investors are heavily leveraged and interest rates rise, positively geared properties can become negatively geared. Defaulting on one property can have a domino effect and cause a number of properties to fall over.
Jeff
Hi Del,
Firstly it depends on how much you are borrowing.
Secondly, is there any possibility you may wish to reduce the loan or break the term of the loan?One possibility is to split the loan – part fixed interest and part floating, it gives you a dollar each way
Cheers
JeffYes Misty1,
Repairing the existing driveway is fully deductible in the year the expense is incurred.
If however, you were to up grade the driveway (eg seal it when it was originally gravel)then this would considered an improvement and is capital expenditure.
Cheers
JeffNat R
The “erosion” of equity is something all investors must be aware of – it does happen and can result in negative equity, hence this discussion.
There is nothing to be concerned about – at least if you are aware of the consequences you can take appropriate steps to protect yourself.
Adding value, improving rents, fixing interest rates and stabilising cashflows are all forms of hedging against a downturn in the property market.
Cheers
JeffQuote: He told us that many loans written today, have a clause that allows the lender to trigger a mortgage sale if the equity/debt ratio shifts too much.Nat R, you said this was fiction. I for one completely refinanced my commercial portfolio late last year to provide more flexibility and to lock in some low interest rates. The bank stipulated in the loan agreement that my total borrowings could not exceed 60% of total assets.
If you get the opportinity to read a book titled “Lost Property” by Olly Newland I suggest you do.
UCCC – uniform consumer credit code…no lender can move in a sell a property whilst the borrower is still fullfilling thier obligations to pay and is not in default or arrears.I think you might find that investment and commercial finance are classed as business loans and not consumer credit. It’s a different ball game.
While I believe the banks will exercise a degree of caution regarding any foreclosure the clauses do exist solely for their protection and can be used at their discretion
Cheers
JeffHi Birdy
The percent return on your share of the property is: $15367.50 / (165000 + 6000?), depending on your total set up costs = 8.99%You say your repayments are $930 pcm, which I assume is on the total $171000 loan and part of which is P&I, and your income is $1280 pcm.
This gives you a positive cash flow of $350 pcm (1280-930). You have increased your annual income by $4200 per annum and after adjusting for depreciation on the buildings and chattels you do even better.
As you have not put any of your own money in your Cash on Cash Return and Internal Rate of Return is infinite or “incalculable”
“Is it a good investment?”
On a cash basis, yes.However, be careful about comparing general or residential growth rates with your particular commercial building. Commercial rents are determined on a square metre basis among other things, the rent rate per metre of your building must be comparable to what the tenant can get elsewhere – if it is lower than market rates and has room for growth you should have a good investment.
Cheers
JeffHi abundance,
This will vary based on the applicable regulations governing each small business.
You main concern will involve building and fire codes, eg how many people safely within a building, appropriate exits, fire systems etc.
The list goes on.
Check with the council as a starting point
Cheers
JeffThis negative equity issue is going to be a bargain hunters paradise
Always looking
JeffThe reason the value can be important even though the cashflow remains is that the banks may require further security or recall their loan.
A real domino effect, refer to my earlier post on page 1
Cheers
JeffI’ve never been in your situation Bob, and you have paid a commission. Your issue is should you pay it twice – I think not. Seems as though the REI should sort it out or divvy up the commission.
Many times I have been approached directly by a would be purchaser after being introduced to the property by an agent. The success of my property investing relies on having agents work with me and for that I do not deny them their commission.
If I ever attempted to bypass the agent I think the word would get around pretty quickly and the agents wouldn’t work for me.
“My word is my bond” as the saying goes, and I feel comfortable sleeping at night. The agent has to live as well.
Cheers
JeffJimbo,
Would your friend from the UK be an Arsenal supporter, or dare I say it, a Milwall supporter?
Cheers
JeffDo you think there maybe some “bargains” to be had in Sydney at the moment?
Cheers
Jeff
