Forum Replies Created
quickchick
That is what is said for $60K – 9 properties (or someone told me that 135 properties were sitting on all 135 diffirent peices of land – they were all bedsitters)
For $100K income after tax – you will need 20 properties as the tax rate will go up when income goes up – i know that sideInstead if you had 4 properties – fully paid up in super – since there is no tax – you can have $100K income – but for super to reach that milestone – you have to contribute (also known as salary sacrifice).
we are on the same page – but sitting in diffirent vehicles.
Manoj
I do not know where you got 67 age from – the preservation age is 55 (when you are able to access your super) – 67 is when the Govt will give you pension
Further if there is enough in super and you donot have a job – you can access your super and live on it – instead of applying for unemployment – you need to look into financial hardship rules – you do not have to be retired to access your super
All your properties outside super in the trust will be subject to CGT
You will have to have quite a few properties (20 +) to live on property alone if the gearing is at your level as each property will contribute say $5,000 after tax – 20 will contribute a $100K income.
Capital growth has no meaning as you cannot sell them – because you are living on them – further selling them would mean – sharing the growth with your silent partner (Mr Wayne Swan or his treasury) so that option is out – anyhow you can leave that problem for the kids – education is good – but there is no one right way.
good luck! – please cut and keep this argument for 10 years later – perhaps you may agree then….
Manoj
Quickchick
The biggest problem in our lives is to pay off our own home loan – since in a 31.5% tax bracket (incomes upto $80K) we have to first earn $146 then pay tax of $46 and then $100 back to the lender.
With all this happening – we have 3 people who stop us from paying our own home quickly
Our employer – by paying us only 1/3rd of what we earn – the rest they keep
Taxman – by keeping a part of our income (from 1/3rd of the above) for doing a lot of good work – like police – hospitals etc
Bank – by telling me that how much i cannot borrow and telling me that i cannot buy the whole street
2nd Point is how much do we need – as most of us are collectors and not spenders – as we will mostly not be able to spend whatever we save. If we decide to retire at 60 and die at 84 like any other Australian – there are only 8765 days to spend !
Remember, at 60, if you eat out three times in a week you will end up with liver problems and diebities. With current inflation if you accumulate $2M – you can live on a 6 figure fruit and leave the kids fight over the tree.
In my Post i said there will be no income from rental income as we will be able to claim the interest as a tax deduction – I want investors to use the rental income to pay off their own home instead of paying off the investment loan or interest on investment loan = so that interest on investment loan is never paid or paid when the property is sold.
Strategies
1 = Pay off home loan from income after tax and max super salary sacrifice and rental income
2 = Maximise salary sacrifice and set up a SMSF and do gearing in the SMSF instead of outside super – because super will not pay any CGT when you sell the property in pension phase (after age 55) – remember CGT has to be paid on investment property (either when we are alive or by kids when we die)
3 = After you reach $2M you are sacrificing the goodies for anklebiters – so better enjoy it
What are we looking for – after reading 20 pages of posts – buying 100's of books = is it for some magic trick! and a wand which will take us to some Pandora Land.
With the current rules – if your super fund owns 5 properties – you are over 60 – the super fund will pay no tax and you will pay no tax – on the flip side if you own these properties you will pay tax. Once you contribute more to super – the borrowing in super will be paid off.
Negative income (due to depreciation) is for those people who do not understand the meaning of Estate Planning and usually do not know more than 5 people who are doing it the right way and have poor advisors – they have only one mission – aim less GREED – and in the process make the banks rich – if the asset values supporting the borrowing collapse = so does your retirement – few properties will beat compound inflation (C CPI) but not when you adjust it with each years CPI contribution and CGT – not many will measure up.
So, you must be thinking, what is the right answer, because i want to replace my working income with rental income (or free money) – how can i get money without working for it.
The answer is in two words – "compound income" – that is income on income – that happens when you pay less tax.
Manoj Abichandani
ZacJ
I clearly said that you can claim the interest and quoted you the tax office determination earlier
tax office determination TD 2008/27
Click here to read the determinationwhen you claim interest – hopefully there will be no income (after expenses) and no tax to pay. Phone your tax agent and ask him why he is making you pay back the investment loan and not your own home loan
Infact after the home loan is paid you must contribute maximum into super and let your super fund borrow – if you need more information read below
http://www.trustdeed.com.au/tools_pct.asp?action=1&link=tools&page=pct
Manoj Abichandani
Tax AgentHi all
Every Investment property can be a CF + property – read below
I understand the benefits of CF+ properties – however wonder if readers are aware of the tax office determination TD 2008/27
Click here to read the determinationThis determination is about deductibility of compound interest on investment properties.
The logic is simply, if interest is deductiable because the loan is for "income purposes" which means that "interest" on "unpaid interest" is also deductible.
You can have many properties under one loan and all the rental income from these properties can be used to pay your home loan which is not deductible. Interest on the investment property can be capitalized or paid by a line of credit account each month – there is no need to pay any interest back to the bank, since it's capitalized – In Hart's case, the courts agreed that claiming compound interest was correct but the way it was done came under Part IV of the Income tax act – remember that all the interest expense for the investment property and the loan which is pays the interest (assuming 2 loans) for the investment property is deductible.
Infact it is possible that you have been claiming compound interest without even knowing it (depending on what type of loan you have)
If you have a loan with a bank which charges interest "calculated daily and charged monthly" – what this means is that interest for the second day is being charged on principal amount and interest amount of the first day. For example if the loan is for $1,000,000 and the interest for day 1 is $200 – then 2nd day's interest is charged on $1,000,200 and not the original principal amount of $1,000,000 (if you do not believe me, check your bank statement) – which means that interest will be more than $200 for day 2 and so on …. on day 2 you are being charged "interest on unpaid interest of day 1" or "compound interest" – this compound interest will be charged monthly to the account. If you have claimed this monthly interest amount in your income tax return – you are already claimed compound interest as a deduction.
Every investment property can be a CF+ property – because if you decide not to pay any interest back to the bank – simply capitalize it or decided to pay it when you sell the property – all the rental income is cash flow +. – the idea is that we are not paying ANY interest AT ALL to the bank, forget the rate of return Vs Rate of interest argument.
The next obvious question is how / why the banks will lend you the money to purchase this property – The answer is very simple – this strategy can only work, provided you use equity to purchase that property – say you borrow only 70% or if you have enough equity in your own home or other investment properties which the bank can use for the 2nd loan to fund interest and interest on interest.
Remember there is no need to pay anything to the bank, no return of capital and no return of interest amount and no interest on intrest amount – provided there is enough equity to hold the borrowing – this strategy is NOT for new investors.Happy Investing!
If you want to read more…. find my articles on the net – it's easy – simply google my name.
Manoj Abichandani
Hi all
I have not read all the 16 pages – so could be repeating.
I am about to give an example of a client who purchases only CF+ properties and at any given time he has 100 + such deals available to choose from. His formule is simple –
"Buy residential and convert to commercial usage"
The method is very simple, all one has to do is visit any council and get a plan of the city – close to the town centre – there is always an area which is marked for commercial usage – but is currently being used as residential. And one of them is available for sale. When any purchaser looks at the property, they look at a residential property, but not my client – he either sees it as an office, restaurant, retail outlet or some other commercial usage.
Before purchasing, he then visits all the local real estate agents and talks to them – most agents will not give you quality time – so he offers $100 for their one hour – most decline – some take it – but all give him the quality time he is after. Once he has a collective opinion of atleast 10 agents – he then talks to council office and local architects about converting the usage to commercial.
By this time, he has a fair idea of the expected rent as commercial property. The next thing is find a tenant – this can be hard – but his team of 10 REA help him and give him an idea of holding time – he takes the next step – if the wait is only 6 months of less – that is the time it takes him to lodge the proper DA to convert the usage –
An example of a last purchase is in a small town where he paid $220 – spent another $30K to renovate for a doctor to occupy – believe it or not the doctor is paying him $30,000 + gst as annual rent.
He has 7 other properties, each deal gives him about 3 – 4 % more than what it costs him – as after purchasing he refinances on rental return and removes his capital for the next deal – so each property is 100% financed – his capital of $300k (which has grown from $100K) is still intact with him for his next purchase.
He contributes in his super to reduce his income – Now he purchases property with his super fund.
Should any one want to learn how to purchase property with your self managed super fund – they can visit http://www.trustdeed.com.au/seminar – there is one on 24th March 2010.
i have got that email as well and it is only telling the truth – terryw – please read the email – no harm in telling the truth – infact it is helping to clear his image.
trustdeed.com.au do not give advice they just sell trust deeds to mostly accountants like us
and they are not in competition with Chan & Naylor who conduct seminars with Dr Yardney
i think this thread is getting ugly – no more posts please…
Micheal
i think you should send the above message in your e-magazine to all 40,000 people and get it out of the way once for all
if it is untrue – why is he silent – after all he is the one who started this thread…
When someone advises you – like a doctor – or mentor – you trust them because of their capacity in your relationship.
You take their advice because you trust them. But if they are known to break that trust earlier, with other people, may it be for another matter and i know about it, i will move on…But if you decide to stay and continue to take their advice – that trust WILL be broken – in just a matter of time…
Once an offender… always an offender….
trust is a very delicate thing ….PNFS
There is no restrictions placed on a SMSF from acquiring any assets (including residential property) from 3rd party. Restrictions are on acquiring from related party with two exceptions 1) listed shares & UUT & 2) Business Real Property.
Before you do any deals you must understand what is a "related party" – it is quite wide and includes entities owned by the member.
But buying a property from a total stranger is "no problem".Manoj Abichandani
SMSF Specialist Advisor
SMSF Specialist Auditor
Technical Director http://www.trustdeed.com.auRichard
5.74% is darn good – i do not know, from where? – all i know is 6.85% from westpac / nab / st George and now cba – there is a loan available from ING – but i do not like that strategy where the co-borrower is the trustee of the property custodian trust with the member of the smsf who onlends the money to smsf – i think they have an in-house issue (IM available on http://www.firstfolio.com.au).
As far as PG is concerned, i think you are a bit out of date here – nowadays the lender will issue a letter to say "if the fund is going to lose its complying fund status due to PG – we will withdraw this PG" so basically PG does not exist anymore. We have done a few deals with the support of this letter.
Look, i audit close to 500 smsf each year – i think i will have a problem with the PG and i have written many newsletter on my website on it (http://www.trustdeed.com.au click previous newsletters)
who is asking only 5.74% – i can make you famous (read as rich) with new loans – we have over 10K susbscribers…
Manoj Abichandani
Richard
I highly respect your experience in smsf borrowing. I know there are limited number of lenders – however now CBA has come to play and i am also aware that rate of interest is higher in smsf lending. However, once you do a cost benefit analysis of borrowing in super – it is a better option.
I am aware that LVR is only 70% and outside of super you can use equity of your own home to borrow.
Now i am perhaps new thinking – you should not use "income" to run your kitchen – because over $34K of income the cost is 31.5% which means that if you are going to a restaurant to eat – you have to earn $146 then pay $46 (31.5% ) tax and then pay $100 for dinner – the same thing goes for paying off interest on home loan – you see it is NOT tax deductible – hence what i suggest is very simple and only some can understand. My strategy is – use the equity in own home to run your kitchen and pay the home loan (line of credit will pay home loan) then all you income is free to salary sacrifice – where all your assets will be built – obviously this strategy will only help someone a) who has equity b) who is about 50 years old. Well then, perhaps i am only talking to only those who are 50 – they will usually have equity in their own home and they should pay no tax – all their income should be used to purchase property – but in super – not outside of super – once they are 60 and retired – they can take the money out of super and pay off the line of credit and the home loan – please do your sums and tell me if i am wrong – if you still think i am wrong or do not understand – please come to my seminar – and YES the seminar is free if you subscibe to my newsletter on the website.
Manoj Abichandani
SMSF Specialist Advisor
http://www.trustdeed.com.auSorry mate too late SMSF can not purchase residential property from a member
if your property is commercial BRP then smsf can purchase from you at market value – provided it has enough money or smsf borrowsManoj
For god sake it is "bare" trust and not a 'bear" trust
Manoj Abichandani
Dear Property Investors
1) First of all thanks to Terryw for mentioning my website http://www.trustdeed.com.au above. Articles on SMSF borrowing are written by me since Sept 07, for those who have not read them – please visit the website and click on "previous newsletters".
2) I do not understand why a person should purchase an investment property outside of super – if property is purchased in super, you
– pay lower capital gain tax and if you sell in pension phase – no tax
– super funds can borrow, which means that you can salary sacrifice and pay no tax on the salary which is sacrificed as there will be a loss in the smsf due to borrowing
– access super in case financial hardship or in case any temporary disablement or permanant disablement or terminal illness if you are under your preservation age3) any negative gearing after the tax refund is paid by after tax dollars – once it is grossed up – any benefit of the tax refund is lost
Hence which one is better "Salary Sacrifice" or "Negative Gearing" – i think salary sacrifice in super and then pay off the loan of smsf without paying any tax – do that till you reach 55 – then commence a transition to retirement pension and retire when you are 60.
To be rich is easy..
If you are on good income (say $80K each) – pay only interest to the bank on your own home – if you have equity on own home loan – pay nothing to the bank – home loan will be paid by line of credit = reduce your income by salary sacrifice to $34K and salary sacrifice the remaining income to smsf – purchase property with borrowing in super (i can show you how – with costs of less than $1,000 from our website) – if you contribute $50K each H&W – you should have $100k going in super each year wih nil tax – all you have to do is repeat it for 10 years – then rule of 72 – money doubles every 7 years! you are basically done ! Believe me $2M in current climate is enough to live on for ever – you can live on the fruit, whilst the tree can be passed on to the next generation.
I am organizing a seminar in April 09 at parramatta RSL where i show how a 50 year old can pay interest of only 3% on own home loan and how smsf can borrow – entry is $55 – but for those who register for e-newsletter on our website – it is free!
Have fun! and start selling all properties you own outside of super
(standard disclaimer applies – the above is not advice)
manoj abichandani
Registered Tax Agent, Licenced Real Estate Agent
SMSF Specialist Advisor(TM)
SMSF Specialist Auditor(TM)
of http://www.spaa.asn.au
technical director http://www.trustdeed.com.au
before you believe anything any one says to you – first find out who the speaker really is
type "Dr Michael Yardney" in googleinvite pets
Manoj
