Forum Replies Created
hb,
Is the Federal MP you contacted an accountant?
If not, why on Earth does it matter what they think?
Jay
Originally posted by rickotton:The house was worth 350k and we paid $276,800
Rick,
How did you arrive at the market value of the property? Cant an argument be made that the market value of a property is whatever price it sells at? In this instance, the market would not pay 350k for the house, so therefore it was not worth 350k – it was worth whatever a buyer would pay for it, which in your case is 276k.
If the agent couldnt get a single person through the house at the advertised price, then how was that the market value?
I know it makes for great advertising to tell people you got a property 25% under value, but I dont think its correct.
Jay.
Originally posted by Spanky:Hi guys,
I own a 2br strata title unit in my name that I currently live in. I would ultimately like to rent it out and place it under a company name for obvious reasons.What are the obvious reasons?
Most accountants and financial experts advise against holding property in a company for a number of reasons (loss of 12 month halving of CGT for starters).
What is your rationale for wanting to hold property in a company structure? Unless you’re actively trading properties or developing and selling, I cant see why you’d want to do this.
Jay.
Thanks for clearing that up KS.
When you said you were doing a “development”, I figured you meant you were developing multiple units and wondered if you had secured presales – I didnt realise you meant “development” to mean building a single house.
Thanks for the clarification.
Jay
Originally posted by KS:I purchased a block of land in Rockingham 6 months ago. The development will be finished in 5 months and the total gain will be 100k in equity.
Hi KS,
How can you be certain of the profit the development will generate without either (a) a sale, or (b) a bank valuation of the finished product?
How many units/townhouses in the development?
Thanks,
Jay.
Hi Maria,
Could you perhaps post the numbers youve used to arrive at the property being cashflow positive?
Im just having trouble seeing how a property returning around 5.6% would be cashflow positive with interest rates hovering just under/around 7%. Even taking into account depreciation, on top of interest payments youve also got insurance, maintenance, rates, water, agents fees, body corp payments etc. eating into your yield.
I have a few properties with yields around 8% which are pretty much breaking even after taking the above into consideration – Id be interested to see the numbers in your situation.
Thanks,
Jay.
A quick search on Google would have given you everything you needed [snitch]
Robert Sim
John Kerr & Associates Real Estate Pty Ltd
Shop 2/1E Moore Street, MOE VIC 3825
Phone: 03 51277133 Fax: 03 51277144
MOB: 0409 194 084Jay.
Terry is exactly right. Never, ever agree to purchase a property with the intention to flip it UNLESS you are in a financial position to settle it if you cant onsell.
Potential upsides are great, but you should always make sure you have the downsides covered too. Flipping without a backup plan is not investing – its speculating.
Jay.
Regarded by whom?
Are you doing it for the knowledge you acquire, or for the additional prestige the diploma might give you in a job application?
Whether completing it is worthwhile or not depends entirely on your reason for beginning it in the first place [grad]
Jay
Hi Kelly,
You need to download and fill out an Income Tax Withholding Variation. You can find it here:
http://www.ato.gov.au/corporate/content.asp?doc=/content/57470.htm
Jay.
Originally posted by jsandso:I have just done a little research in regards to CGT and believe that the capital gain is not added to your gross income.
Therefore it is not lifting you up into the next tax bracket it is only taxed with your marginal tax bracket you are in. So if your salary is $50,000 you are in the 30% bracket, that means your gain is taxed with 30% and if you were holding the property for more than 12 month you get only taxed on half of your gain.
Remember that I’m not an accountant and have not sold any of my properties yet but try this calculators they may help to understand:
jsandso
jsando,
Please dont take offence, but there is only one line in your post that is actually correct, and that is I’m not an accountant
If you’re not sure of something, then it may be better NOT to post rather than to confuse the situation further with misinformation people might take as advice.
kp is indeed correct. Capital gains (minus the 12 mth concession, minus costs added to the cost base) are indeed ADDED TO YOUR GROSS INCOME.
Using your rationale, someone on a salary of $6,000 per annum (who pays No Tax as they are under the Tax Free Threshold) can sell a property with a capital gain of $1 million dollars and pay no tax at all, because their marginal rate is Zero. Is this what you maintain is the current state of affairs under our current tax system?
As always, please seek professional advice when triggering any sort of tax situation in which you find yourself out of your depth [jealous]
Jay.
Originally posted by The Mortgage Adviser:What I meant by my comment is that if you are a “student” (ie: no job and no property), you do not pay any tax so who cares if it is deductible or not? There is nothing to deduct it against. Maybe in a few years though!
Robert Bou-Hamdan
Mortgage AdviserHi Rob,
I understood what you meant [hair2]
Although, being a student doesnt preclude you from owning property, being gainfully employed or paying tax – as a student I owned property, had a job, paid tax on my wage, sold a property, and paid CGT.
Jay.
This is a HUGELY grey area.
The ATO will allow deductions to a seminar if you can prove (a) you are in the BUSINESS of property (will come back to this), and (b) there is a direct nexus between the content of the seminar and your property business (ie if the seminar was about wraps and you were not currently involved in a wrap, then you would not be able to claim the cost of the seminar…)
Back to point (a).
In the past, the ATO gave taxpayers a little more leeway to claim investment related expenses due to the fact that there were both (a) far fewer property investors, and (b) far LESS spruikers to provide said seminars. In recent years this has changed… and, as to be expected with the ATO, there is no hard and fast rule:
In IT2423, the ruling is that anyone with less than 3 investment properties can NOT be in the business of property… but in Cripps V Federal Commissioner of Taxation 1999 AATA 937 the ruling was that, although the Cripps’ owned 14 investment properties, they were not actually IN THE BUSINESS OF INVESTMENT PROPERTY because they had an agent manage the properties.
To my mind, this is ludicrous – one could argue that, as business owners reach a point where the turnover of their entity is such that a manager is required to look after it, so too do property investors hire an agent to look after their holdings once they reach a certain threshold.
Apparently, such is the wording of the legislation that you can own 20 investment properties and NOT be in the business of letting them if a property manager is working for you, but you can own 5 investment properties and manage them yourself, and therefore be in the business of letting property…
So, to sum up a long winded and somewhat meandering post [jealous], it is VERY unlikely a deduction will be allowed for seminar attendance, despite what the seminar holders might tell you – your best bet is to seek the advice of an accountant well versed in property investment.
Jay.
Note the above is personal opinion and not accounting advice, as I am not an accountant.
Terry,
In VIC there is also the provision to pay stamp duty 3 months after settlement.
The Wizard, in which state is the property? Each state has fairly different legislation regarding OTP purchases and payment of stamp duty.
Jay.
Originally posted by Atma:Hi all,
Looking for an accountant/solisitor/mentor ect
Please respond to this add.I live in Bathurst and
work in sydney.And am only interested in Positively geared property.[biggrin]Hi Atma,
Why are you only interested in positively geared property?
Originally posted by The Mortgage Adviser:Unfortunately, he is from Newcastle but we won’t hold that against him!!!
Robert Bou-Hamdan
Ahh.. such blasphemy…
You should travel up and come sailing one afternoon Rob – spend the afternoon on Lake Macquarie and you wont ever want to go back to that festering cesspit you call Sydney.
Simon even has a new puppy he might let you pat (looks like an inside out Ugg boot [trigger])
Jay.
Originally posted by The Mortgage Adviser:I have been advised that I cannot claim anything on my land until I actually build the investment property. I have not pursued it since. If this is wrong, I will be very upset as I am owed a stack of deductible interest.
Rob,
I suggest you find yourself a new accountant, as this information you received was incorrect.
The relevant ATO case is Steele vs. FC of T (1999) and the relevant section of legislation is Section 8-1 of the ITAA 1997. Interest charged on vacant land is deductible if the funds were borrowed with the intention to construct an income producing asset.
Some more information here:
http://law.ato.gov.au/atolaw/view.htm?find=%22Steele%22&docid=AID/AID2001307/00001
Best wishes,
Jay.
Hi Property Angel,
In your first post you said:
Originally posted by PropertyAngel:
Rennovation completed but have now found that valuer refuses to value.Then, in your last post, you state:
Originally posted by PropertyAngel:
The renno isnt finished and settlement as been agreed to be 12months or longer if i wish, as I live in the house at the moment.Im not sure which one is correct – is the renovation complete, or not?
If the renovation is not complete, then Im unsure how you can expect a valuer to value it based on something that will occur in the future. If the house is curently not fully renovated, then the valuer can only base the valuation on the property in its current state – NOT on what you say it will look like when its finished.
The best thing you can do is get the house renovated then apply for an increased valuation.
Jay.
Nobleone,
Why does accessing equity have to involve refinancing? Why not establish a stand-alone LOC secured by each property with sufficient equity?
There are no loan termination charges because youre not terminating the loan – youre actually establishing a new facility to access your equity.
Not sure how an IFHL would help, seeing they are currently for Australian properties only.
All the best,
Jay.
Originally posted by ss2306:Thanks everyone so much for your replys. My computer has been and still is out of action hence me not logging in for a while. Currently on my Mum’s puter. I think I have covered everything listed, ie stamp duty, finance, research, etc, etc. Hope I am on a winner!!! My first venture so lets see how I go.
Thanks again
Shelley230672Shelley,
What happens if you don’t find a buyer? Can you settle the property yourself?
Never, ever attempt to flip a property unless you are in a financial position to settle it yourself in the worst case scenario. You should always have a backup plan in case should the situation arise.
Did you end up going ahead with this deal?
Best wishes,
Jay.
