Forum Replies Created
isn't tax irrelevant when comparing the two.
If he takes money out of his offset account which is linked to an investment property, the interest expense will be higher and his tax benefit (tax shield) will be lower. If that 50K was put into a TD, then he would have to pay tax on the interest.
So the important thing here is the rates between the two. If the offset account rate is higher, put the money in there
I was thinking of refinancing my mortgage to the Heritage Building Society 3 year fixed rate of 6.75%.
From what I can see on the Mates Rates Mortgages website (http://matesratesmortgages.com.au/mortgage-lenders/mortgage-broker-commissions), Heritage gives the following commissions to its brokers:
Upfront Commission: 0.605% inc GST (0.55% exc GST)
Trailing Commission: starts at 0.165% inc GST (0.15% exc GST) and gradually increases the longer the loan is heldMates Rates Mortgages gives the consumer 100% of the trailing commissions excluding GST under the ORP system, whilst YourShare gives 50% of the trailing and upfront commission in the first year (ex GST) and im not sure what percentage of the the trailing commission for every year after that.
Which broker do you think is better for a loan amount of $160,000
If you want to keep both houses, wouldnt it be better to rent your current PPOR out and rent out yourself at a much cheaper rate.
Rent your current PPOR as a permanent rental, which means you will not need the 30K for furniture and move to a smaller unit which will have significantly cheaper rent.
However as others have said, I would probably sell the PPOR and from the proceeds pay off a large sum to the bank to show good faith and rent out in a cheaper area.
Thanks for the replies.
Land tax is a big expense for many Sydney investment property owners as there are many propertiesIP's which have a land value greater than $380,000.
With regards to asset protection, as both you and Terry have pointed out, this structure will not provide much asset protection but I think is the cheapest way to own an IP with a group of investors that are not family as it avoids Land tax, and in the case of an invesment group, provides fixed apportionments to each investor depending on how much they have invested.
Lockymac, I'm not sure about the last point that you make, but I only gave the wife since she can pay for it by cash (not a large amount) and since she is a low income earner (no income) will not benefit if negative gearing was in place. I also included her so that she can be trustee as she is least likely to get sued (but as you pointed out, there is no asset protection).
With regards to financing by the individuals to purchase the units, how does the loan structure work?
If banks lend to the individuals for the units in the trust, do they charge at mortgage rates and I assume they have a charge over the property. How likely are the banks to lend to individuals to buy the units in the trust?
Another point i wasnt sure about was the FHOG. I know that my cousin will be eligible for the FHOG when her purhases his own PPOR later, but is he still eligible for stamp duty exemption? If he bought an IP in his own name or a partnership, he would forgo the stamp duty exemption when he would purchase his PPOR, but is this the case of purchasing a property through a trust?
Thanks Terry,
Thats what my manager told me as well. He said the accounting/tax side of it was fine but the banks will kick up a stink with this structure.
I was shying away from a Discretionary trust due to it not receiving the Land Tax threshold of $380,000 in NSW which is quite a fair bit at $6460 (380K*1.7%).
Regarding Duplex builders, I advise you not to go with Eagle Homes as we have had a lot of trouble with them.
On face value they seem very cheap but will not provide anywhere near the service or support that other builders provide.
Thanks for the advice,
Im quite sure I wont get a loan from CBA.
So based on my situation, what is the most cost effective thing to do, considering the break fee for the loan is $700.00 and interest rate I pay is 5.06% and would you have any lenders or loan products in mind.
Thanks and Cheers,
Mohammad
I am in a similar boat, being 19 (turning 20 in August) and have been working full time for a year and a half.
I bought an investment property last year and am looking for another one to buy.
I was particularly interested in Display homes and I have found three which I like since they are at market price and are positively geared.
Well my details are as follows and if you can help me out, it would be of great help.
Income:
– 1st Income (PKF Chartered Accountants): $30,000 annually
– 2nd Income (Doing tax returns and accounts for individuals and small businesses): $20,000 annually. (This is an on the side business so is low documentation)
– Investment Income (Dividend Income): $2,000 annually
– Rental Income from first Investment property: $180 pw or $9,360 annually (I can raise this to $200.00 pw as there are other units in the complex that are renting at $205 to $210, but have not been bothered much to do so, since current tenants are very good)Expenses:
– Mortgage repayment on current Investment Property: $650 per month (Principal + Interest)
– Personal Loan repayment: $504 per monthSince I live with my parents, I do not have any boarding or lodging expenses.
Details on current Investment Property:
Loan Balance = $119,500
Value of Property= $155,000This investment property is positively geared and is a renovated apartment in Minto
The property I want to buy has the following details:
Brand New house in Minto.
Price= $360,000
Rental Return= $28,000 paThis property will also be positively geared.
I know the above rental income can be used in the loan application.
Since I have minimal cash savings as I also have a Share Portfolio to the value of $10,000 which provides me dividend income of $2,000 pa, I was wondering If it is possible to capitalise the Lenders Mortgage Insurance.
Furthermore since I have equity of over 20% in my current investment property, is there anyway I can utilise the equity to reduce LMI.
The Loan I have currently is with CBA and do not want to move it from there due to exit costs.
Since you guys are experienced investors, it would be very much appreaciated if you can help a new beginner like me.
