Forum Replies Created
Quite right Dr.X;
Financially rich to me is the freedom to choose what you do with your time and your money.
I have a very good friend who makes an extremely good income, but his money habits have locked him into working long hours for the rest of his life. He is not financially free and will never be able to retire early unless he takes a massive lifestyle cut.
To me he is not financially rich although he looks it – he is really a slave.
On the other hand, I know someone who is effectively retired at 45. He works part-time because he enjoys his job and workmates and for the mental stimulation. He has a nice lifestyle (similar to friend A) and can do what he likes, goes on holidays several times a year.
That is financially rich.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I am not 100% sure about this, but I believe if you buy a property and rent it out immediately rather than move in yourself, then move in later on, you are liable for CGT as you have used it as an I.P and not a PPoR.
The CGT rate is: tax on 100% of the cap gain if you sell within 12 months, or 50% of the cap gain if you sell after 12 months.
However, if you move in straight away and make it your PPoR (Principle Place of Residence), you are not liable for cap gains tax unless you move out and then rent it out. You can rent out your PPoR for up to 6 years and be exempt from CGT. After 6 years of renting you become liable for CGT, but it is pro-rated on the years that you use it as an I.P (Investment Property).
Again, not sure, but if you move back in before the 6 years, stay there for a while (I’m not sure how long) then move out and re-rent again you defer the CGT again for another 6 years.
It may be better to move in for 6 months (or is it a year?) to satisfy the FHOG regulations, then move out and use it as a rental, thus making the property CGT exempt for up to 6 years of renting.
It is advisable to check this with the ATO and a good accountant.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I don’t know about the others, but no agent property isn’t free.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by browny76:Gday again. Good stuff Nicko, thanks. I enjoy the opportunity to divulge in these matters with PEOPLE IN THE KNOW, & is always interesting reading the different stories & situations people find themselves in. Fixing houses Im good at, conversing on the computer not so good! Reckon I’ll leave it to the EXPERTS as it is time consuming stuff eh Marc? Nevermind! CSI I wish you well with your endevours. To other Esteemed forum Contributors my aplogies for dirtying an otherwise usefull tool with Attitude! Guess its just part & parcel with Blue Collar Middle Class types as myself!
I think you’ll find that most people on this forum (including me) are blue collar middle class with no money from their parents to help them. We all just work hard and help each other.
It doesn’t give us an excuse to have attitude and disrespect.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by browny76:Gday Re Off Topic Marc.
Get off your computer mate & get out in the real world! The way in which we have made such profit is the original purchase price of the property being below the market value to begin with. Secondly we have aquired the skills to perform said tasks through perserverance, learning & persistance. $40,000 may not be enough for a deposit in Sydney but in sleepy South Australia you would discover that enough for maybe 10. More examples are the first property I aquired at a price of $48,000 in 2000. Within 3 years the Council Valuation went to $73,000. I quickly set about re-financing the original loan for another $20,000. With that I PAID A BUILDER $8000 To Re-Roof the house with new Verandah,gutters & fascias. Paid for paint & other materials including Beer & BBQ’s for mates lending a hand. In 2006 I sold that Property for $147,000. The first Investment Property my Partner & I aquired for $75,000. the original loan for that Property was also $100,000. It needed extensive work to wet areas which consisted of completely ripping up the foundations with a Jack-Hammer that we hired for a day & PAYING A PLUMBER to re design & install waterpipes & runoff. New foundations were laid by a CONCRETER & the new Framework for the building was constructed by a BUILDER with my assistance. Weatherboard Cladding was used on the Exterior which a mate & I fitted also cement sheet on the interior. After painting the building inside & out (a monkey could paint marc!) total cost of reno was $20,000. The new Bank Valuation ( less than market value) was set $137,000. $37,000 of which consisted of Equity in our next loan for a Property purchased shortly thereafter. All the houses are rented out & paying for themselves. So Marc for this OFF TOPIC it seems to be working well for us. Not all number crunching, it actually means getting up from your computing machine & getting your hands dirty!!! ONYA WALLY!O.K browney,
Firstly, you nothing about me, how much I know, what my nett worth is or anything.
Secondly, based on your amount of posts, you are VERY new to this forum and should treat people with respect until you get to know them a bit better.
I was, in fact, trying to offer advice based on experience. I do not know you, or know how much experience you have, and I always assume that when people ask for help on this forum that they may not have a lot of knowledge. Many people come on this site with little experience and are about to make mistakes that we more seasoned “wallys” try to save them from.
Obviously you have taken offense and that is too bad, but this forum is about helping others by offering our advice and expertise – it’s not a pissing contest.
I was concerned that maybe your numbers were wrong and I apologize for that assumption, but even our esteemed “Foundation”; a veteran of over 800 posts thought you had got your figures wrong as well.
The way the post was worded gave me the impression that you had “recently” bought the property. This had the sound of being in the last few months. You said you paid $79k and borrowed $100k. If the re-value is, as you say, $130k then the way we read it is that your “usable” equity from this deal is only $4k, but you are talking like you are going to use the full equity ($30k) to buy again. Maybe there was something missing in the translation.
Good to hear you’re doing o.k. Maybe I can learn something from you in future posts.The reason why I sit on my computer being a “wally” so often is because I am financially free ( I still work from time to time but it is by choice – isn’t that what we’re all after?) and don’t need to go out and paint like a monkey anymore.
I like to help others; it’s my way of giving back to others what I have gained from an industry that has been very good to me.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Steve,
Hobart is a gorgeous, historic smaller city in the south of Tasmania.
Houses are historically cheap and rents returns good.
There was a boom in r/e prices there about 3 years ago, fuelled by investors looking for better rent returns, but this has since died and prices are more normal again.
The population movement is at best extremely low or could even be negative, which means in normal times there will be little or slow cap growth.
One other thing; the climate is colder. Good in summer for a few weeks or so, but it a long way south. I hope your daughter likes this sort of weather.
I’ll private message my phone number (I.m in L.A at the moment)
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
To buy the waterview house and keep the current PPoR you would need to either have cash for the deposit, or use “available” equity from the PPoR as a deposit. Either way, you will have a large, non-tax deductible mortgage on it.
If you move out of your PPoR and rent it out the holding costs and interest on the loan become tax deductible.
But the holding costs and loan interest on the home with water views will not be tax deductible if you live in it.
If you want to invest, the best scenario there may be to sell your existing PPoR, buy the water view home, then use any equity in it to buy another I.P.
Hopefully, this way you would owe less on the waterview house than you would if you kept the current PPoR and borrowed the whole amount for the waterview house. You will have a smaller non-tax deductible loan to service.
Whether or not the financial scenario will work will depend on what you currently owe on your PPoR, what you will owe on the water view home, your incomes, the cost of the 2 properties, how much equity you will have in the water view home, how much rent there would be on another I.P you may buy.
You will need to sit down with a good accountant and/or mortgage broker to work out the numbers.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
marry Paris Hilton or James Packer
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hey Sanjiv,
you changed your name to “PropertyPower” – what’s happening there. Sounds like a new business name?Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by browny76:Gday, My Partner & I recently bought a property for $79,000. we borrowed $100,000 spent approx 10,000 which included a very small wage for our labour. This amount paid for paint interior & exterior, tiles for bathroom & kitchen, new tapware & also new carpet throughout. When the reno is complete we hope to have taken the value of the property at very least to $130,000. A new Valuation should be carried out immediately to provide to your bank / broker with your next application for Equity loan. The loan we have set up is an interest only payment that the $150pw rent covers & some, fixed for 5 yrs. Meanwhile the extra Equity provides for your next Deposit, or remains on the balance of the loan to keep payments down. It can easily get away from you if not carefull on expenditure i’ve found. Less is more so to speak!
Sorry this is slightly off-topic; [offtopic]
That seems like a very, very good appreciation in value over a short time. What do you base the estimated re-valuation on? By the way; assuming the re-val comes in at $130k, your ‘available’ equity is $4k as Foundation said. Not enough for a deposit any time soon.Is this a boom area that no-one else knows about?
A word of caution; in this current market of little growth and rising interest rates, many areas are not going up in value much; if at all, and quite often minor cosmetic renos like the ones you mention only improve the value of the property by the cost of the renos; or worse; not as much.
What has a comparable renovated property in the immediate area sold for in the last 2 months? This will tell you what your place may be worth.
To answer CSI 1’s question;
Many builders live by doing “speccies” and buying, renovating and selling. The problem is many never accumulate any assets or wealth as they continually sell the asset to live off. They are highly trained guys in the industry – not part time amateurs like you and I with no qualifications. They can do it better, faster and cheaper than us.
I don’t know of many, if any, who buy renovate and rent out, then live off the equity, especially at the start of their careers.
You can eventually do this, but you need to have enough property increasing in value to allow you to use the equity (you are really only borrowing the equity) without eating into your LVR (Loan to Value Ratio). Once your LVR gets up to 80% many lenders lock the vault on your lending, and with good reason – risk (for them). Some will go higher, but I think this is very dangerous for you.
For example;
you own $3 mill of property and owe $2 mill. The portfolio is either cashflow neutral or positive. Of course, this occurs after several years of investing. This is an LVR of 66%. (This is fairly healthy from the banks perspective) – the lower the percentage the better for you too; you can borrow more to invest with but that’s another thread.Most banks will allow you to borrow up to 80% of the properties’ value, less any existing loans. 80% is $2.4 mill – $2 mill = $400k available equity.
Now, assume your property portfolio goes up in value by 5% per year. $3 mill x 5% = $150k. So if you use none of your equity for 1 year, your nett worth increases by $150k to $1,150,000. Your available equity goes up to $520k.
But you need to use the equity to live off, so in the next year you borrow $75k of your equity to live on. Even though you have spent this money, your nett worth has increased by $75k (not including extra interest on the $75k you spent – $5,625 @7.5%).
So, you can’t hope to live on the equity/rent from your properties until you reach this sort of level of wealth. The good news is that once you do, and as long as you don’t live extra extravagantly, you couldn’t spend all your equity. It will continue to outpace your spending.
Don’t quit your day job just yet.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I agree with Sanjiv and Terry.
Many people advocate never paying down the loan on I.P’s because of the tax deduction on the interest.
At the end of the day, the less you owe against what you’re worth is a good thing.
In my opinion, once your personal debt has been paid out, then you start on any other debt you have (investment).
This increases your equity for further borrowings for investment and also gives you more equity for ‘unforseen incidents’.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Allow about 20% of the rent to be eaten in costs.
This is usually an over-estimation – no nasty surprises.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Be careful about building more than 1 dwelling on the land – all land has a zoning which defines exactly what you can and can’t do with it. The local council be able to tell you the zoning.
You may be able to change the zoning, but don’t count on it.
Also, if you really wan that much land, try to incorporate pleasure and wealth building; try to find a block that will allow subdivision and /or multi-dwellings on it. Best of both worlds.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Sorry to interupt guys, but getting back to the education thing….
I am a secondary teacher, and the school I currently teach at offers a subject called Personal Finance. It is a compulsory subject for Year 10 students.
After reading this thread I talked to the teacher about the content that is taught. He said that mainly they teach information such as, Budgeting, Credit Cards, Investments (such as stock market). They do activities such as paper trading on the ASX website, and making their own budget.
Good to see some financial education at last, but it worries me that it is not balanced – too much emphasis on the stocks and shares. It’s a similar scenario over here. All the media focus is on the stock market and the big investment houses are relentless on tv as well.
There is an agenda for sure. The next big industry is finance – big money in lending these days. Pity it’s for mostly for consumer debt on their home Line of Credit.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Quote:Originally posted by daniellee:Hi,
Foudation: Thanks for your insight. Most interesting as usual. Personally, I believe that with the increasing debt domestically, something has got to give. Something like what is happening (or going to happen in the US, maybe? LA Aussie: Any comments?).
In the end, best to do the due diligence (as mentioned by Ausprop), buy a place that requires some simple reno (so that it is cheaper), as close to its last rates notice price as possible (Read that in Anita Bell’s book) and location, location and location.
At the mean time, just save like mad. Personally, I do not intend to pay more than $180k for a 2 bedroom unit inclusive of transaction cost. So, I better work on improving my property knowledge so that I can spot to ‘deal of the week’ when it is time for my partner and I to buy.
Regards
Daniel Lee [specs]Hi Danielle,
I have been following this thread with great interest as it does concern me that the current generation of kids/adults seem oblivious to their future of poverty, given their financial habits.It is even more worrying when there is an absolute wealth of financial education information freely available.
In my opinion the USA situation is similar to Aus, but on a much larger scale, and from what I’ve seen there is only bad news looming as the average punter keeps spending. It is fueled by relentless ads, media scrutiny of the rich and famous who are living the life; keeping up with the joneses.
As people go further into (bad) debt, it must ultimately leave them with less and less to spend on housing, unless the Banks come up with new ways to provide finance to those who probably shouldn’t be getting it.
They are already doing this now to a degree; with products like 30 year fixed interest rates, ARM loans etc.
On the Aus front; I see increases in defaults and foreclosures, like here in the USA, increases in rents as more people are forced out of the homes they struggle to afford or are forced to sell. Fortunately for Aus, we have a much better wage system than the USA – we have regular, and in line with CPI wage rises, where the USA does not. So I think our problem will be deferred for a while as the average wage is still going up on a regular basis.
The minimum wage hasn’t gone up over here for many years, neither has the middle class income. This puts houses more out of reach and people don’t seem to care.
The best case scenario I believe is a long, drawn out recession where average houses don’t go up much in value over the short – medium term. It becomes even more important for investors to improve their education and due diligence skills to find a deal that will make money. It won’t be a case of buying something good and waiting 2 or 3 years for the value to go up.
The good news is there will be plenty of well priced properties to pick up for those in a position to do so over the next 2 years.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
The order of those questions in the last post was wrong 65ens – you should have put the “havin’ a beer and relaxing” question first. That’s the priority!
Anyway, the options are many, but my 2c worth;
If you are planning to stay in the PPoR, I think it’s best to reduce that loan as fast as possible because the interest is not tax deductible.
However, if you move out and rent your PPoR (not many people would do this due to the emotional attachment) then the interest IS tax deductible, so it may be better to not reduce it in this case.
You can rent out your PPoR for up to 6 years without becoming liable for CGT on it.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
renos are great fun, but hard work.
Allow more of everything to get the job done – time, money.
There is a thread somewhere on this forum about cashflow capital. Be careful, research the area they tell you about yourself.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by gmh454:Foundation… the ABC mid day current affairs just did a piece on the impact of the problems in the US mortage market, and coined the phrase mortgage lead discussion.
Does not sound good, guessing it may be a sign of things to come.
If only they had our optomism and just kept spending….
The average punter is still optimistic and still spending over here. That’s precisely the problem.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I was joking about the pool… and the yard full of concrete.[blink]
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
A good place to look is at suburbs along/near the new Eastlink Freeway extension down to Frankston.
Frankston has been mentioned a fair amount lately on this forum, but there are several more suburbs further north that previously were too far from the city, and not near freeways that soon will be. they are still affordable,but the commute time will drop, so they are becoming attractive. eg; Mitcham, Nunawading, Ringwood or further south to Keysborough.
They may have already started to ‘go’ but have a look. Don’t know about rent returns – could be ugly.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
