Hehehehehehe…that is ssooooo funny !!!

By the way, you got mail……not..

Stirrers unite,
KP

Thanks Derek,
Everything you wrote made sense and is accurate.

I fully agree that the claim of interest and other costs incurred are legitimate expenses involved with owning a rental property, as it is similar to running a business and that you cannot discriminate against an investment property owner vs a business owner.

But consider this: as a PAYG employee that also operated a business which happen to run at a loss…not too many years ago, it was also legitimate to offset this loss against your income ( job) and hence get a tax refund.

This was abolished by the ATO so that the loss incurred in the business was then quarantined within the business and could only be offset against future profits or against the capital gain if/when you sold the business, assumeing it sold for a profit.

There is no reason to suggest that this cannot be applied to negatively geared property investment.

Sure, you maintain the right to quantify the loss, but only for the purposes of carrying it forward to offset against future profit from the property either by way of positive rent return or when you sell for a capital profit.

It is the PAYG taxpayer who also owns a business who is now being discriminated against, vs the same person who instead buys investment property.

Negative gearing was abolished in the USA, what was the effect ? I would assume market forces took over.
Probably the rent return is better over there so the impact was not so great ( ie… property investors deserting the scene in droves like they would in Aus if it was abolished))

It certainly is not impossible to conceive that the tax refund component against income (job) could be abolished…

I say : never say never !!

The query I have for all you died in the wool negative gearers is : would your strategy change if the tax refund component is erased ??

The answer for me is YES…mine would, and I would start to look at alternatives to take the place of the negative properties in my portfolio be it by offsetting this against positive cashflow properties or entities, or something else.
The point is, if it was to happen, have you considered the alternatives ??

As far as “Itll never happen”
NEVER SAY NEVER !!

KP

WOW !!!
You guys disagreed to agree..

someone say something contentious so we can get off track again

Hi Derek,
A question for you…

quote: I also recognise that I am investing to make money rather than saving tax – any tax savings are considered a bonus.

Does this mean that if negative gearing was abolished .. hence no tax refund to support your neg properties, you would still hold onto them on the basis that the anticipated capital growth would outstrip the loss you are incurring ??

Also, at what point would this cash outflow inpinge on your ability to keep accumulating additional property ?

IMO most neg gearers would quickly re evaluate their strategy if there was no tax refund to go with the rent to support a neg geared property, therefore the tax refund is an integral part of the equation and not merely a bonus.

KP

Geeze we just sold a property….never considered that the insurance might not cover it while it was on the market

This cannot be right !!

Are you sure it you are not confusing the coverage of the property if it was vacant vs being occupied ?
I understand Insurance companies do not like a property to be vacant for any length of time…

Our normal practice has been to contact them after the sale is completed to get a refund on the balance of the premium…

KP

Well in the lease agreements I have used, there is an option on who pays for water or excess water. ie..0%, 50% 100%
Since water used is all chargable now, we elect for the tenant to pay 100%

As for bottle gas, I have always wondered about that….having never had a property with bottle gas ( usually mains reticulated gas off the street..)

I would assume the tenant is responsible for replacement bottles ( its a consumable, same as the water or electricity or the phone connection)

The same goes for light globes…tenant is responsible for replacement if they blow.

KP

Luke,
When yo say a “flip” as in, onsell a property either before you settle or else settle with a view to sell again immediately, the as far as WA goes ther is no licencing requirement.
But you will be liable for stamp duty on the purchase.
As far as a licence goes, you may be referring to vendor financing or wrapping, which is one of the strategies that Steve uses, in which case, for WA you will neded a Credit Providers Licence as issued by DOCEP.

KP

Hmmmmm…time to change banks ??? or try going through a good mortgage broker.

I used to think ( many years ago) that the bank manager was god and that it would be a good thing to build up a relationship with him.

The branch went through 3 managers in the two years I was dealing with them…two got made redundant, the first one told me he was considering taking up a lawn mowing round ( buying himself a job )to try his hand at doing something different….!!
I came to realise that they are very much human, and very much a slave to the bank…nothing more nothing less..

BTW…we are currently under construction and the bank seems to be happy to use the valuation on completion ( due Nov) as their LVR and have not knocked back further borrowing in the meantime.
In fact, they have also factored in future rental potential ( after completion of construction )to add to the income side for further borrowings..

I reckon you need to ask around a bit more..

KP

OINK! OINK! errrr… which way is south ??

The book was great but I don’t think you should take it literally…such as trying to find property that conforms to 11 sec rules, etc.

Surely there is a greater message behind the book…such as developing an investors mindset, and exercising discipline, and getting used to looking at property using the numbers, and taking action.

If you are limiting your search to specifically Melbourne, then the rule to adopt would have to be forget the 11 sec rule. It will not apply.
Does not mean that you shouldn’t invest in Melbourne…

I don’t think the properties mentioned in the book ever referred to Melbourne property, they were all outside capital cities.

I believe Steve has updated his strategy since then anyway…maybe you could attend his book launch in Oct to get an update …

KP

eye b4 eeeee except after ceee