[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 27, 2008 - 11:43 am

Sounds like you’ve skipped at least 2 steps in a solid investment plan… Before you consider the best loan structure, consider your objectives first and then your ideal asset structure.

Talk to your accountant and read lots of books for these. Education and preparation are everything. Just like the house you’re planning to buy, if you don’t have solid foundations to your plan your investments are likely to fall down around you.

THEN talk about loan structures.

I don’t know the answer to question 1 but as for question 2, refer above.

Don’t rush into anything, the deal of a lifetime comes about once a week. Good luck!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 27, 2008 - 12:02 am

If you're in Melbourne, try Educated Investor in Collins Street. I find the staff there knowledgable and they'll definitely point you in the right direction. If you're not, try their website…

http://www.educatedinvestor.com.au/

No one book holds the key – read lot's and take little bits from all of them. I'd spread your reading between investment strategies, tax / structure strategies and even Bios of successful people – they provide the inspiration.

First books I recommend anyone read are the Rich Dad Poor Dad series (at least the first few). They're simplistic and they'll change your outlook on how money actually moves around and the difference between assets and liabilities. I never looked back.

I also read books by Dolf De Roos.

Steve's books are good too. His methods (wraps etc) aren't for everyone, but there's no doubt he's incredibly successful – goes back to taking a bit from everything you read.

Renton's knows his stuff inside out but can be a bit dry & tedious.

If you're interested in trading shares, Guppy is well known and renowned.

There's plenty out there – go get 'em!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 26, 2008 - 10:27 pm

When we bought our PPoR we spoke to a couple of the neghbours and asked them a few questions – Is the street used as a drag strip? Young Families in the area? Quiet? How long they'd been there? What did they think of it? etc etc… You'll get heaps of info from them…

Secondly, did you notice kids running around the streets or riding their bikes (not loitering, that's different)? Kids being kids without the need for adults watching them would indicate to me that either a. Their parent's don't care (unlikely) or b. they feel safe letting their kids out to play…

At the end of the day, you're borrowing a truck load of cash and paying a truck load of interest to live somewhere, so if it doesn't grab you, I'm with Kellstar – walk away.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 25, 2008 - 2:38 am

wdemirdonder wrote:

Cheers guys for all your help, so lets say I'm new to investing and this would be my first IP. Would LOC be the best option, and does anyone know if this is true ? 1. You can buy a IP and as long as you don't live in it, you can later purchase PPOR and get FHOG

Dude, you're asking the same questions in 2 or 3 threads

SRO Victoria website sayd the following with regards to eligibility for FHOG…

• You and your spouse/partner must not have owned residential property, either jointly, separately or with some other person prior to 1 July 2000, in any State or Territory of Australia

• You and your spouse/partner must not have occupied for a continuous period of at least 6 months, a residential property in which either of you acquired a relevant interest on or after 1 July 2000 in any State or Territory of Australia.

So, providing you haven't owned a property prior to 01/07/2000 AND you haven't lived in a property that you do own for anything more than 6 months, you are still eligible.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 25, 2008 - 1:38 am

From the first link above…

• You and your spouse/partner must not have owned residential property, either jointly, separately or with some other person prior to 1 July 2000, in any State or Territory of Australia

• You and your spouse/partner must not have occupied for a continuous period of at least 6 months, a residential property in which either of you acquired a relevant interest on or after 1 July 2000 in any State or Territory of Australia.

This says to me that as long as you didn't own a property prior to 01/07/2000 and haven't lived in a property you own for more than 6 months, you're still eligible.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 23, 2008 - 3:16 am

You probably want 2 appointors and you also need what's called a settlor – someone who deposits and initial amount ($10.00 generally) who then has no claim to anything whatsoever. They are basically the person who gives your company the money to hold in trust.

Is $2k the quote to set up your company and the trust? Because if it's for both it's probably not that bad a price.

Talk to an accountant. They can advise you on the best structure and organise to set it up if you want.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 23, 2008 - 1:31 am

Chris / Jo

This is a public forum and you make comments to gain feedback from people, in this case a lot of people that have more experience in these matters. For what it's worth I don't consider myself to be one of those, just a beginner myself.

Research and Preparation are the most important things when it comes to investing in anything, not just property. Read around these forums and you'll see them mentioned countless times. Research means reading books, asking questions, talking to people, courses etc. Preparation includes speaking with your accountant at the very least to make sure you have clear objectives and are structuring everything correctly to reach those.

Ultimately, of course the decision is yours and I'm sure everyone here that has either posted or simply read the thread wishes you all the best with it.

TBH it sounds like you got sweet talked into signing on the line before you spoke to an independent accountant, independent valuer, independent lawyer etc and are seeing your investment through rose coloured glasses, which is a dangerous thing to do.

You mention that at worst you'll sell for a loss and put it down to experience – you must be far better of financially than myself Rene Rivkin used to say that the pain of losing a dollar is far greater than the joy of making one.

Whatever the case, whether you've researched and prepared or not, good luck – I hope it does work out for you and hope you don't end up putting it down to experience.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 23, 2008 - 1:08 am

You can get a month by month amortisation calculator here…

http://www.infochoice.com.au/Home/Banking/Calculators/tabid/137/Default.aspx?ArticleId=15319

It shows exactly how much is going on interest and principal each month.

Hope it helps

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 22, 2008 - 3:20 am

You can do both – the IP first AND still get the FHOG…

https://www.propertyinvesting.com/forums/getting-technical/finance/4325600

Third post from the bottom of the page.

Go to work!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 22, 2008 - 1:42 am

dgabriel wrote:

Thanks for your advice too imugli, I am starting to think you are right, but am still in 2 minds. Maybe we are just not in a position yet to buy. We have been putting away all our spare money, but it is slow going, and a decent chunk of my spare money goes towards the negatively geared IP. I guess it is also not a good idea to redraw on the IP but is is the only source of equity we have, and I thought that it may be better to buy now at 100% than to wait 2-3 years saving the deposit and throwing more away on rising rent.

D,

What type of loan do you have on the IP at the moment? If it's PI (Principal & Interest), consider the following (if your situation allows)…

1. Refinance the existing loan on a new 30 year term, interest only for 10. Only borrow what you currently owe though, unless for investment purposes for the abovementioned reason.
2. Set up an offset account connected to the IP loan.
3. Pay what you would have been paying on principal PLUS your savings into the offset account.

This will have the following effects –

* You are saving your deposit and any money you withdraw won't cost you deductible interest.
* You save interest on the IP until such time as you withdraw it to buy your PPoR.

That may work for you…

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 21, 2008 - 11:29 pm

Best place to start is by reading lot's of books on property, investing and tax / structures.

Then figure out your objectives – what do you want to gain from investing? Reduction in taxable income? Passive cashflow (i.e income you don't have to work for)? Asset protection? A 'legacy' for future offspring? Is it simply a land grab (because they aren't making any more)?

Then speak with an accountant – they'll give you advice on what you've come up with. Make sure you go in with an idea though, because their time is your money.

THEN start looking for a place.

The first steps are the boring ones, but nothing can substitue for knowledge and it's easier and potentially far less expensive to put the right structures in place from the beginning than it is later on. Don't rush it – it's more important to get it right.

As for renting rooms in your PPoR – it's a personal thing that you'll have to weigh up yourself. Privacy vs income, all that stuff. It will have implications on your income / expenses etc. Best speak to an accountant to get all the info.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 21, 2008 - 10:19 pm

Congrats on the savings and getting in so early – keep up at this rate and you'll have set yourslef up in no time…

Quote:

The first thing to consider is the 'first home owners grant' (or whatever it is called these days
If you buy an investment property you won't be able to claim the grant.  To make it worse when you do buy your first PPOR you won't be able to claim it either because you will have already purchased a property.

Incorrect, apparently. If you can show you have never lived in a previously purchased property, you can still get the grant. I only found this out myself a couple of days ago right here. 

Congrats again and good luck!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 21, 2008 - 5:41 am

Don't draw on your IP. The interest you pay on the equity draw or redraw won't be tax deductible like it is now…

Second, you will, in effect be borrowing 100% of the value of your new place – <$38k from the equity and the remaining on a new loan. Can you afford the payments on that? You'll be at least 90% geared – could you afford a negative equity situation?

Doesn't sound like you've factored for legals, Stamp Duty, bank fees etc. Some places will capitalise this, but it will increase your gearing and repayments even further…

I'd be opening a high interest account and putting all my spare coinage in that from now on until you have your deposit for the PPoR. Let the IP do it's own thing for a while – only pay what you have to and concentrate on your deposit. You'll get there!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 21, 2008 - 4:28 am

Think of a line of credit as a great big credit card, but secured against your property as opposed to being unsecured like a normal credit card.

You have a limit and an interest rate and you have to pay x% of the outstanding debt each month, not an MMP as such like with a standard mortgage…

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 20, 2008 - 10:40 pm

Qlds007 wrote:

Imulgi

Precisely the reason why i asked the question.

Seems to me like the office plants dont really understand how – gearing works.

Some 22 year old fresh out of uni with a degree they'll never get a job for, no doubt…

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 20, 2008 - 7:07 am

joanne76 wrote:

Richard

With $430 a week rent plus tax benefits we can reduce the interest paid through our line of credit and this will help us reduce our debt faster than we can by our selves.

Regard

Joanne

Yes, but you've said it's COSTING you $130.00 per week. How are you paying down your debt when something is COSTING you $130.00 per week? Do you know how negative gearing works? It COSTS you money just to pay the interest on the loan you take out, before the pricipal is even touched… Not the best way of paying down debt I've ever heard of…

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 19, 2008 - 2:23 am

Welcome aboard Justine!

As far as I know, the income would be distributed equally between the two of you, yes.

Best person to speak with about income and taxation matters is an accountant – he'll tell you what is deductible etc.

As for insurances, my landlord's building insurance covers 10% of the value of the building for contents. Anything that can be broken by a tennant that you would need to replace should they bolt should be covered – light fittings, ovens, cooktops, Blinds, carpets etc.

Cheers and good luck!

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 18, 2008 - 12:04 am

Martin63 wrote:

Thanks for the reply imugli.

We currently operate our business within a family trust structure, and perhaps I should create a new one for property investing to help protect the assets from creditors of the business in the unlikely event that something should go wrong.

 
Sounds like a good idea to me but again, figure out what your objectives are first. Trusts cannot distribute losses, only use them against future profits, so they're probably not the best structure for long term negative gearing. Great, however, for asset protection, CF+ investing and the 'legacy' factor.  

Quote:

Can you still claim all the deductions in purchasing and running the IP in a trust and do you still get access to the capital gain reduction after 12 months?

The deductions are made by the trust against it's income, not against your personal income – so things like interest etc don't reduce your taxable income but reduce the trusts taxable profit / loss. I believe trusts are eligible for the CGT discount – check out http://www.ato.gov.au/individuals/content.asp?doc=/content/33727.htm for more info.

Can't help you with the accountant out east, sorry…

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 16, 2008 - 11:46 am

Welcome aboard, Martin. Enjoy your stay with us!

Investing and structures is really a different for everyone thing and would possibly even be dependent on the structure of your current business and what your objectives are.

For instance, my objectives are asset protection, passive income and flexibility as to who gets that income, so I have my IP positively geared in a Discretionary Family Trust, controlled by a company of which I am the sole director. That fits my objectives and situation but may not yours…

You say you think there could be better accountants out there, best place to start is by asking friends / family / *other investors* if they can recommend anyone and sitting down with them to see if your hunch is right. No harm getting a second opinion.

[imugliMember@imugliJoin Date: 2005Post Count: 87]

August 16, 2008 - 6:54 am

Qlds007 wrote:

imuli, Yes you always link the offset account to the non deductible debt.

Only if you have no NDD would i link an offset account to an investment loan.

Thanks Richard!