Forum Replies Created
Further to that great post Amanda,
the depreciation is only added back on if you sell.
So if you never sell, but keep adding similar properties to your portflolio, you never pay back the depreciation. Over a long period of time with property appreciation the amount becomes negligible if you do sell.Also, as I've mentioned a few times in other posts;
you can actually buy a property that is initially neg geared, but after tax return and depreciation (on-paper deductions) are added, the property is cashflow positive after tax.Not many people understand this concept. They confuse it with positive gearing. The difference is that with positive gearing your rent covers all outgoings and there is a positive cashflow. This is then taxed like a normal business profit.
Pos cashflow after tax means you get better cashflow through the tax return, no tax is payable and the property costs you nothing from your own pocket. You can also arrange to have your tax return paid back to you each week instead of waiting all year to receive it if you wish, thus effectively wiping out any out of pocket expenses.
Combine all this into a property purchased in a cap growth area, and you have a winner.
Pizang wrote:Hey LA,I may have this completely wrong but what I'm hearing is that your properties provide you with income through the equity that's gained through capital growth…? How do you extract the equity from your property and convert it to cash?
My apologies if I've misinterpreted.
Dan
Hi Dan,
The right type of loan set up is needed first, so that you can easily make redraws, or use an offset account etc.
We gain equity in 3 ways; we pay down the principal using personal income, cap growth and tax returns re-invested back into the loans. The combination of all 3 makes it easier to keep ahead of the LVR when and if the cap growth slows down. our current LVR is at 58%. Plenty of room for more investment, or personal use as is required. I try to not go over 60% for safety – I like my sleep.
Our PPoR is fully owned which really helps – all the debt is against the I.P's, but overall we own just under half.
Also; not all our lifestyle is funded by the equity. My wife and I still work part-time, but the difference is it is a choice; not a daily grind.
I would say that half our lifestyle is funded through the equity at this point in time.In our case, we have a Line of Credit with 2 accounts, secured by our PPoR and I.P's; we have only one loan to cover all properties (cross-collateralised which is frowned upon by some; works fine for us; a low LVR is adviseable).
Account 1 is the Personal account – all rent, personal income, tax returns are paid in here. It has a borrowing limit which is adjustable, and we also pay all expenses out of this account.
Account 2 is the Investment account – all the interest for the loan portion on the I.P's is in this account. Also has a borrowing limit. At regular intervals we transfer excess cash from the Personal Account across to this Account, and all tax returns are transferred straight into this Account from the Personal Account after they are deposited.Both accounts are well under the borrowing limits, so if we need emergency money it is there and easily accessed.
We can alter the account limits between each account with a phone call to the Bank; if we need more personal funds we simply lower the upper limit on the Investment Account and raise the upper limit on the Personal Account. Each year we get our portfolio revalued, and the Bank makes an adjustment to the limits on the accounts.
We can make withdrawals from our Personal Account (Account 1) whenever we like and spend it on whatever we like using either a debit card or cheques. We also use a credit card (most purchases go on this, then we pay the balance at the end of the month) which is paid from Account 1.
As long as we stay under the upper limit of the account there is no problem. This account fluctuates in it's balance daily, and every time there is any surplus cash it gets transferred into the Investment Account (Account 2) as I said, but more often than not it is in the red, thus we are living off the equity in the properties.The balance on the Investment Account only ever goes down, unless we make an I.P purchase. In this case the Investment Account limit is adjusted upwards by the Bank, the I.P is used as security for the increase and the Personal Account stays the same.
Over a year, we may use around $30k in equity funds, which, at an interest rate of 7.47% means we pay $2,241 in interest on this account.
So our total drop in equity (if we didn't pay down any principal) would be $32,241 plus bank fees.
Our portfolio increases each year by more than this – last year it increased by over $70k, so we are earning more than we spend, but still staying well under the 80% LVR that the Bank requires.
Good question r;
it seems that many tradies are having trouble getting apprentices these days. I don't know the reason for that; maybe this generation of young guys have different ideas about what to do out of school? Maybe the wages aren't good enough, or, as you say; they don't want to get dirty. Maybe the tradies aren't making enough to pay helpers, or don't have the time or inclination to help and train them?
I can tell you that my plumber brother-in-law went through about 20 bosses to date because of being stiffed by them, and he is very moralistic and a perfectionist, and quit many jobs after seeing what shonky practices his bosses were getting up to. To his credit, he has stuck it out and now enjoys a nice lifestyle and a good job.
Maybe many apprentices start with good intentions and become dis-illusioned?
My two brothers-in-law are pulling around $100k per year each, so I don't think the lack of income is the problem.
I see a lot of younger people around now that can't use a screwdriver, don't want to know how and would rather pay someone else to do it.
Myself; I love renoes and fixing things.
yes, this is my investment property and the expected rental is 350K per week. (quote from the property management.).
cheers !
MingBe careful with rental quotes from property Managers; especially when doing D.D before buying.
Do your own research and establish the actual rents for your type of property in the immediate area.
mathewc73 wrote:Marc,
I did not write that. My userid is mathewc73. That was not posted by me.Regards,
Sorry Matt,
on reading back I saw that it was just another comment by crashy.Dulux "whitesand" or "beachsand". One is a bit more pink than the other – use the one that isn't pink.
We have used it on our PPoR and other I.P's we have renoed.
This color for the walls in satin sheen, along with white enamel for windows and doors, skirts looks fantastic.
It is a warm color, but looks neutral and a bit "beachy". looks great with polished boards."I had some customers who tried to intimidate me by speaking the lingo. This tells me that they are either a know-it-all, or have had so many quotes they have memorised what everyone said. Either way, I deliberately over-quote in the hope that some other poor sod gets the job. If I do get it, the extra makes it worth the headaches."
Sorry Matt,
this section of the post – actually; most of it sounded as though you were a tradie.
What does this section refer to?Sounds like good news wriggles!
Yeah; I live (not at present ) in Dromana.
Nice sleepy hollow but not for much longer. It, like Frangers, has been on the steady rise despite the trend.
We have an I.P in Frangers since 2004. We took the plunge and were nervous as the boom was ending, but happy about it now.
Are you down there too?Be very careful about paying anyone who is an employee cash-in-hand.
Accidents can happen, and if she/he is not on the books and gets hurt, there is no coverage, and you could be found out for not providing the correct work conditions, and either or both of you could get into serious trouble with the A.T.O.
Workcare premiums are tax deductible, and it may be better for your partner to draw a minimum wage to stay under the tax threshold, and then maybe share in the company dividends at the end of the year.
You need to get onto an accountant and set this is up properly and legally and safely.
It is too easy to make money legally than to have to go down that path.I have never heard of them, but what I have heard of investment clubs is that sometimes they are just developer's outfits masquerading as an investment club.
They get you to buy their stock, and of course; you don't know that it is their over-priced stock you are buying.
Keep your antenna way up.A few years ago I saw people paying above the asking price for houses in a boom area.
If the other similar houses in the area are selling for around the reserve figure, and after doing all your due diligence you are confident the area and the house in question will appreciate in value, then offer the reserve, or maybe a bit less say; $350k.
Sometimes everyone wins when you pay the asking price.
Selling the I.P to buy a PPoR is actually a bit of a backward step in your future investment plans unless you then use the equity (if there is some) to jump in and keep investing.
Not only that, there will be cap gains tax to pay possibly, and buying and selling costs. You may even go backwards in nett funds.
The interest and other costs on the I.P are tax deductible, while on the PPoR they are not. This has a significant impact on both short and long term cashflow.
If you are both earning good wages and paying a bit in tax, you can recoup many thousands of dollars of it through your I.P. Over a lifetime this can fund your retirement. If you use those tax refund dollars to continue investing, you are effectively increasing your asset base with free money that you would normally never get back if you live in a PPoR.
If you select well, you can even keep buying properties that are cashflow positive AFTER TAX, which means you not only get your tax return, but the properties don't cost you any money along the way. They don't need to be neg geared. This is a huge advantage.
The emotional attachment of owning (and living) in your own home is very strong for us Aussies, and there is nothing wrong with that, but if you are planning on retiring through the wealth you create through property investing, then this may not be the best way to go.
If you can get past the emotional attachment and think with your head not your heart then you will see that it is better for you to keep renting a nice house yourself, and pour all available excess funds into your current I.P and/or buy more.
As your wealth increases you can keep upgrading the place you are renting yourself and live in a very nice place. Who cares if you don't own it if you are getting rich along the way?
As for the market; I don't think you could ever go wrong in Richmond any time in the market as long as the property is well located and in good condition. It is a high demand area.
But as I said; my advice is don't ever sell; stay where you are and buy more.
One more thing avranjes,
putting a cheque with your low deposit offer is a good thing, and offering to settle in a short period; say, 30-45 days is also attractive if you can.
You need your finances in order to do that of course.That's correct.
Basically, the portfolio keeps going up in value each year more than you can spend the equity.
From the lender's point of view, your nett worth, or your LVR (Loan to Value Ratio) is still healthy, so you can spend the money and they won't ask questions.
But as Investment Prop says; you have to be a bit careful how you handle this as properties don't go up the same amount each year.Rejoice,
Liking you or not is not my issue. You know what my issue is, and it applies to all others who do the same. You are probably a very nice guy.
You are fortunate, quite often unsolicited ads are marked as SPAM by one of the Mods. I think you've been given a good run.
I'm sure the social network could be of benefit to the forumites, but the way to do it is get involved in the help first, and the business will flow back to you. You know; "reap what ye shall sow".
The contact details for the sister of the unfortunate lady are:-
Dianne Burns,
[email protected] or phone me on 0417 747059.But before you go on about how harsh I'm treating you, have a look at blogs' post on her thread.
Does he have an ego problem as well because he is being critical/sceptical?The whole thread is under General Property.
Hey wriggles;
any more news about the proposed Marina?I' m with Paul.
Being personal debt free is nice, but being in Frankston with 2 properties is a good position, and worth the sacrifice now i.m.h.o. You'll regret selling there in the future I reckon; it's on the way up.
I know South Frankston very well. Stay there as long as you can."I had some customers who tried to intimidate me by speaking the lingo. This tells me that they are either a know-it-all, or have had so many quotes they have memorised what everyone said. Either way, I deliberately over-quote in the hope that some other poor sod gets the job. If I do get it, the extra makes it worth the headaches."
Crashy; do you need any more proof that I'm right for god's sake? You keep saying I've got a chip on my shoulder – how could I not? That's 3 tradies in 3 posts all admitting to gouging. You, racetrackman and Matt. Can we have even one tradie post here that has never tried to gouge a client, or not turn up or whatever??
"Its funny you question my ethics after admitting you have no problem dodging GST. Denial now only reduces your credibility further."
You have misinterpreted what I said – I was inferring that the tradie was not going to declare his payment to the ATO and you know that is what happens to many "cashies". Tell me I'm wrong.
I'm not the one dodging anything other than paying too much. I'm just paying the bill. What the tradie does with his payment is up to him. He's the one responsible for the b.a.s. statement and his tax.
You are right though; the thread was "how to find a reliable tradie". I hijacked it because you were talking s**t; crying about all the clients who treat you bad and cause you to get all vengeful and stiff them.
You did tell us how to treat them so they might stay reliable until the end of the job. But this should not be a factor and that's my whinge. You think it is a factor in how the work is done. You're the one with the chip, you think the client needs you and you don't need the client, it's you against the client and you have to gouge him for all that you can get away with. Tell me you've never done it!
What we want to know is how you can find one BEFORE he starts work. This has been my argument all along; it is unfortunately very hard to do. WHY??
Why should it be so hard to find reliable help?
At least we can thank you (and me) for giving everyone a heads up about a few of the rorts that are tried on. Thanks mate.
Does this mean that if I offer you a job at a good hourly rate and treat you well you won't take it? Come on, now you're being a bit thin skinned. I'll treat you well; I promise. I even buy beers for tradies – the good ones.
I'll pay cash as I said. You can do with it what you want. I'm not paying the gst or your company/personal tax – you are.
Can we get back to the thread now? I've had my dig; you've had yours; move on. I think the forumites are having fun listening to us; I know I am.
My middle name is "senseless argument".
I'm not apologising though. I'm not sorry for one thing I said. I tell it like I see it and you don't like it. Too bad.
BACK TO THE THREAD;
wellontheway; the best way to find a reliable tradesman is by word of mouth. The best tradesmen – the ones who look after the clients, get the most work I've found in my experience.
If you don't know anyone who can refer a tradie, then ring one of the local guys up and ask them to supply the names and numbers of 2 or 3 satisfied clients they have worked for recently.
A builder I used to build my first house did this without me even asking and, of course, his record was impeccable and he and his boys did a great job. And crashy; I paid top dollar and bought about 6 slabs of VB for the boys, and was happy to do it.
your serve. I've got nothing better to do. I can play this game until the Mods call full time.
Hey crashy,
your workmanship wasn't bought into question – just your ethics. You yourself said "as a former tradie myself, I can tell you dollar signs flash in my eyes when I hear the phrase "can I get a quote?".
I've no doubt you do good work; I would hope you do if you are still in the trade. Are you in Melb; I may need some work done in the near future. I'll want an hourly rate of course.
I never said ALL tradesman were scum – just an unfortunately disproportionate number of them. And you know this is true.
I agree; there are a lot of bad customers as well. But the issue that wellontheway raised was reliable tradesmen.
We could go on for days about bad clients as well, but that's another thread. You can start it if you want and I will back you up!
I have worked for some real pr***k clients too, but guess what – they were PAYING ME so I still did a great job and thanked them for the business. Don't tell me you think that a bad client gives you the right to do a less than professional job? You are a professional, right?
That goes for you too race1trackday; "If we get a bad/arogant customer, the job losses a part of its sole and you just dont care about it any more."
I can't believe I am hearing this. THE CUSTOMER IS PAYING YOU!!! You are obliged to do your best.
You guys need an attitude check.
You are wrong; the tradie needs the client – the client PAYS YOU. Without the client you don't eat. I have been in business for about 30 years and I am still yet to find an industry where the client was not the boss.
I am not ignorant; as I said; I have been a tradie myself – a reliable and dedicated to a good job one at that, and I have dealt with many tradesman. The sad truth is that more than half were unreliable, indifferent, charged daylight robbery and took too long to complete a job. Some never turned up to look at the job, Some came 2 days late.
Just stating facts – not starting a smear campaign. Someone already did that 100 years ago. Let's face it; tradies reputations are in the can. Sorry if it offends you.One guy I hired to do some tiling bought in his nephew to help him after the job started, which was a quote job (I've learned since then), and then tried to charge me $200 extra each day for the nephew. A good bloke.
Another guy built me a deck – a $5.5k job, and left off 1 length of Merbau to finish the job at the base of the deck. I paid him anyway (cash) and he said he'd be back in 2 days to put the last piece on. I'm still waiting 4 years later – I ended up doing it myself. I even helped him break up the concrete slab which was in the way to dig the stumps and made him about 20 coffees over the week he worked for me. A real good bloke. But guess what – I have a $10k deck job that needs doing now and guess who isn't getting the job? He was a smart guy; stiffing me for 10 mins of his time.I never said tradies should be treated like a doormat – I said that the client should have every right to expect the tradesman to do the job they were paid for, on time and to a good standard; without coercion.
It seems to me that by your statement you think that if they are not being treated with kid gloves then they are being treated like a door mat. Check your attitude.For the record, I always look after good tradesman as I know what it is like to be on the tools in the hot sun working for some fool – I just don't pander to them and I shouldn't have to, but I definitely don't look after bad ones or ones that try to shaft me. I have been let down too often to do that now. I wish I couldn't say that.
I didn't admit to tax fraud – I stated that tradies take "cashies" and quite often never declare the money. This means they quite often are not paying tax on the money I pay them, and I don't care that they don't declare it – good luck to them. But I want a discount off my end as I know that a discount for me will still be more for them than if they were to declare it. We all win.
I have never not paid a tradesman, but I have had the unfortunate experience of having to hold back payment until they came back to finish off the last 20 mins worth of work that they didn't want to come back and finish, or the crap job that they hoped I wouldn't notice and be happy with. I owe no man and have never ripped off a client or a tradie. My conscience is clear.
The house I currently own was owned by a builder. When I inspected the house for the first time he had in his garage enough timber to build an entire new house. All overquoted material from various jobs. A good bloke. Most tradies would think this is funny; a win for the tradie. Am I wrong?
Don't try to tell me you can tell when you do a quote how the customer will turn out; that's like a customer trying to tell how a tradie will turn out when he comes to do the quote. Just admit it; if there is a chance to gouge a bit more when a quote is asked for you say you are gunna take it.
"If the overall job has been a positive experience he will be more likely to come back next time you need him." Nice statement. So, if the tradie has a hard day at the office and the client didn't mop his brow you're saying he won't come back to earn some more lovely money when the opportunity arises because his experience wasn't enjoyable? Now I'm laughing.
If the experience wasn't positive for me (the client), there is no next time for the tradie and I'll tell all my friends how bad the tradie was.
I'll just find another one. There are plenty around who will do the right thing, and 'll tell ALL my friends about the good job he did. And I'll ring him again when I need more work done.
Ego has nothing to do with this.
I live in L.A – it is impossible to compete on egos even if I wanted to. I drive an 11 year old Honda Accord for christ's sake and don't own an IPOD or a poodle.
This is all about me not liking you coming on the forum and constantly flogging your interests and posing as an interested real estate investor. You are not the only one so don't take it too personally.
I am quite sure I am not alone on this; but someone has to be the one to say something.
My agenda on this forum is quite clear; I am here to help people and to benefit their real estate investing through my experience. I don't have a product to sell and don't need to prove anything to anyone. There is no scoreboard.
You, on the otherhand, have an agenda. Selling something. There are others on this forum who also do that, but they contribute ENORMOUSLY with their advice and experience to help people. You don't.
Make me a liar. Post at least 100 times, offering advice or asking for help, and not mention your guff once, then I'll shut up.
If you are here to learn, good. As a question, offer some help, or sit and watch.
