CGT works from CONTRACT dates.  Not settlement dates.  So yes.

I think it would be a good idea to speak to an insurer about this plan. If something happens with the house during the tenancy, it might only be claimable if landlord insurance is in place, and there might be a requirement for a contract.

The only problem with that plan is that houses will go up in value during that 2 years, and as such you will require an even larger deposit and stamp duty contribution to get back in…

I'd hang on if I were you.

Surburban investments tend to involve land which is the part of the property that goes up in value (apartments are not great because they are just a box that depreciates).

Why did your friends not have the necessary insurances in place?

Speak to AAMI about BUILDING and also LANDLORD INSURANCE WITH TENANT PROTECTION.  Understanding the manner in which you can insure your investment will make you feel more at ease.  You can get a dodgy tenant in an apartment just  the same as in a house in the suburbs. 

Always Interest Only… with an offset account.  Put all spare cash in there. 

Why were the pictures taken at night?  It certainly makes the place look darker than it probably is.  Also why are the blue curtains in the loungeroom closed for the pic?  Get them open – bring in the light. 

Not sure about the purpose of the pic of the corner of the loungeroom which shows only curtains in it.  I'd get rid of that pic altogether.  And the one of the toilet.

Who took these pics?  It certainly wouldn't have been a realestate photographer.  Probably the agent.  Certainly wasn't someone who knows how to maximise the appeal of the place through a pic.

I wonder if the absensce of some kind of privacy curtains to the front room would turn tenants off?

Maybe pop a splash of colour into the kitchen and re-photograph it.  eg a vase of flowers.

Where are the pics of the bedrooms?

What about pics of nearby facilities such as playgrounds, schools, shopping centres?

I think they could do far better with the pic of the bathroom.  It shows only the vanity, and no visibility on the shower situation.  Maybe take the picture from further back, and not pointing at the floor.  If you include the mirror over the vanity (I am assuming there is one) in the pic, then it will show the reflection of the shower etc.

I wouldn't be going with any more off the plan apartments if I were you – as you are praying they are valued above what you have agreed to pay for them when completion time comes.

Banks are generally offering only 80% finance.  So this means you need to pitch in 20% per apartment.  So that's $80k each. 

If I were you I'd be speaking to financers to ensure someone will actually come up with that 80% when the time comes.

Then for future purchases, diversify.  You already have two Melbourne apartments.  So look to other ideas so that your other properties can do well in times that Melbourne apartments do not.  Perhaps a 3 bedder house in the burbs.  They have land and that means capital growth which is GOOD.

That's my 10c worth anyway!

from:
http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2001307/00001

Issue

Is interest on a loan, taken out to fund the purchase of vacant land held for future income producing use, deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes, interest on a loan taken out to fund the purchase of vacant land held for future income producing use is deductible under section 8-1 of the ITAA 1997.

Facts

The taxpayer borrowed funds and purchased land with the intention of constructing an income producing dwelling. That intention remained constant during the time of the taxpayer's ownership of the property.

The taxpayer incurred interest expenses on the borrowed funds.

For financial reasons, the taxpayer was unable to commence actual development of the property for a four year period.

In that time the taxpayer saved for the construction, viewed display homes, progressed the building design and discussed the concept with colleagues.

Four years after the land was purchased the taxpayer engaged a builder. The property was built over a period of eight months. The house was then let to tenants.

Reasons for Decision

Section 8-1 of the ITAA 1997 provides that a deduction is allowable for expenses incurred in gaining or producing assessable income, provided those expenses are not capital, private or domestic in nature.

In Steele v. FC of T (1999) 197 CLR 459; 99 ATC 4242; (1999) 41 ATR 139, the High Court considered the deductibility of interest expenses incurred on borrowings to purchase land intended to be developed for income production. Taxation Ruling TR 2000/17, in considering the above decision, concludes that interest incurred in a period prior to the derivation of relevant assessable income will be incurred in gaining or producing the assessable income in the following circumstances:

·

  the interest is not incurred "too soon", is not preliminary to the income earning activities and is not a prelude to those activities;

·

  the interest is not private or domestic;

·

  the period of interest outgoings prior to the derivation of relevant assessable income is not so long, taking into account the kind of income earning activities involved, that the necessary connection between outgoings and assessable income is lost;

·

  the interest is incurred with one end in view, the gaining or producing of assessable income; and

·

  continuing efforts are undertaken in pursuit of that end.

In the taxpayer's case, the interest was incurred on borrowed funds used to acquire a property that was solely intended to be used in income earning operations. In these circumstances the interest expense is not considered to have been preliminary or incurred at a point "too soon" before the commencement of the income producing activity.

Furthermore, the taxpayer's intention throughout was to build an income producing building and there was no private or domestic purpose for holding the property. The taxpayer was committed to the project and took steps to develop the property prior to construction by saving money and planning and designing the building. The length of time between purchase of the property and commencement of construction is not considered to have been so long that the necessary connection between the interest outgoings and the assessable income is lost.

In these circumstances the taxpayer is entitled to a deduction for the interest expense under section 8-1 of the ITAA 1997.

Note: TR 2000/17 was withdrawn by TR 2000/17W with effect from 9 June 2004 and is replaced by TR 2004/4 which applies to years of income commencing both before and after its date of issue.

Date of decision: 1 August 2001

Legislative References:
Income Tax Assessment Act 1997
   8-1

Case References:
Steele v. FC of T
   (1999) 197 CLR 459
   99 ATC 4242
   41 ATR 139

Related Public Rulings (including Determinations)
TR 2000/17

Keywords
Deductions & expenses
Interest expenses
Rental property

Date of publication: 8 September 2001

ISSN: 1445-2782

About 6 years ago, I was wondering if the serviced apartments were a good investment.  I looked at one as my "case study" at the time… it was on the market for $178k.  Looking at the real estate websites, the same sort of thing is now on the market for $180k.  So a whopping $2k of growth in 6 years.  Eek.  In effect, the thing is losing money, because its value certainly is not keeping up with other properties, or inflation.  Imagine if I'd bought such a thing with the intention of selling it upon my retirement to fund my living costs for a while.  By my calculations, based on what things cost now and what they'll cost in 30 years, I'd have been able to sell the thing to purchase a small hatchback car upon my retirement.  Great.  So basically I would have forked out $180k to swap it later for a car worth about $20k.

Residential.  Preferably property that provides something extra such as subdivision potential