Hi Bindi,
The article you’re referring to in the NZ Herald was by Simpson-Grierson, a well known law firm in NZ.

The issue of “intent” when purchasing investments is to determine whether or not a person can be deemed a “trader” in those investments. ie if the sole purpose for purchasing a property was to on-sell it the next day then you would be deemed a trader and be taxed on the capital gain.

In most cases investors are buying the property for the cashflow or income. In these cases you are not a trader and therefore exempt of capital gains tax.

You can still buy property and on sell it quickly and not be taxed but it depends on how the bulk of your income is derived.

If you do trade in properties regularly and are deemed a “trader” by the inland revenue dept it will create another problem which is termed “tainting”. This basically means, once a trader always a trader in which case all capital gains will become taxable – property developers often fit into this category.

Cheers
Jeff

“If you enjoy what you do, you never have to work a day in your life”

Property to me is financial freedom – I can do pretty much what I like, when I like.

Kids, who mentioned kids – better rephrase that aforementiond comment. I can do pretty much what I like when the kids let me.

I fish and scuba dive, play squash, dine out regularly with the family, and when we holiday, because my living is derived from property, the holiday is tax deductible as well.

As far as saving for retirement, I am more prone to “Spend the Kids Inheritance”

Cheers
Jeff

Hi there,

Four times in four consecutive years in NZ. Tax audits are bigger timewasters than the kids.

I needed to provide all my tax invoices, depreciation schedules, and cashbooks. They even came out and inspected my vehicle (which of course I use for locating property etc.)

The best part about them was that in the last two audits they discovered they owed me money.

We’re on first name basis now and I haven’t been audited since – if that’s any consolation.

My records were not the best in the beginning but they’re pretty good now.

Make sure you check everything before you give it to the ATO. Try and make their job easy.

All the best
Jeff

Look in http://www.dolfderoos.com

Cheers
Jeff

Hi Westan,

5% ground rental in Napier – Wow. Have you seen Rotorua – 8% of land value on a High School Board lease (21 year perpetual lease, 7 yearly reviews).

And the ground might still bubble up underneath you

Regards
Jeff

Michael, you and I obviously both have an understanding of “Other People’s Money”, finance and property in general. Perhaps however, you just need to come back a couple of levels and look at things from a novice investors point of view where the existing equity is limited and traditional lending criteria applies.

Our contradictions appear to result from our differing interpretations of what Bashiba is asking. Is it a technical math question about CoCR or is it a question on using CoCR as a tool for valuing property?

My suggestion is that CoCR should not be used as a tool for valuing a property in this way.

I guess we should just agree to differ.

Regards
Jeff

Hi Smithy,
I’m not too sure on whether or not you can register your trust in NZ as well but to resolve your problem you can either:
– Set up an account in your own name
– Form a Limited Liability Company for about $300 and have the shares of that company owned by your Australian Trust.
– Set up a NZ Trust

If you buy property in your own name you can always transfer it later. There is no stamp duty but you will incur legal fees, title transfer fees and perhaps refinancing fees.

By the way, most of the banks in NZ are owned by Australian banks anyway.
eg BNZ is owned by NAB, National Bank is owned by ANZ, ASB is owned by CBA and of course we have ANZ and Westpac as well.

Hope this helps

Cheers
Jeff

Hi guys,

I guess after many painstaking years in the work force I am now classed as a Ticker.

Each week I download my bank statements onto the computer and tick that the rent has gone in and the mortgage gone out.

If there’s any left over at the end of the week I split it betwenn the stockbrokers and the government.

Cheers all
Jeff

Michael R

You seem to have misunderstood my point. I said that ]”For the sake of determining whether or not a property is a good deal or not, treat the 20% drawdown as a cash deposit when doing your calculations.You are limited to how much equity you can draw down from other properties and the theory is that each deal should stand on its own two feet.”

Yes of course if you have 100% borrowings and a +ve cashflow your CoCR is infinite but that could be $1 per year – how bad is that.

The fact is, you need to know if each property is a good deal or not.

Example 1: 100%finance using 20% equity from other IP’s
Purchase Price $ 200k
Rent 20k
Less Interest on $200k at 7% -14k
Less Opex -5k

+ve CF 1k = infinite CoCR

Example 2: 80% finance & balance in Cash
Purchase Price $ 200k
Rent 20k
Interest on $160k @ 7% -11.2k
Opex -5k

+ve CF 3.8/40k 3.8k = 9.5% CoCR

This is a loose example but the point I’m making as in example 2, the deal doesn’t stack up at 9.5% so you wouldn’t buy the property. Yet in example 1 at 100% finance it is still an infinite CoCR. Why would you utilize your good equity to buy a property that doesn’t stack up?

I repeat,each deal has to stand on its own two feet – you should do your calculations accordingly. If you are then able to extract equity from other properties to finance the deposit then you are that much better off.

Regards
Jeff

Pisces
Your question on “chain set up”, it is where people entered into contracts to purchase subject to them selling their own property first.

I’ve seen instances where there have been upto 4 contracts in place. None of the properties can actually sell until the last one in line settles. Sometimes they end up in a conditional agreement as well.

Getting involved in a chain of contracts can add a lot of time onto deal. Great if you can fix the price when you’re buying and let inflation kickin.

Cheers
Jeff