Forum Replies Created
Most people who come into a large sum of money (or inheritance) end up spending the lot on ‘doodads’ and wind up back where they started (or worse). If you sell it, what are YOU going to do with the cash?
My 2c worth –
Unless you are desperate for the cash, or need the place as your PPoR, then I suggest do a reno and rent it out If you have access to funds to carry out the reno.You could actually borrow the funds to do this from the property you inherited.If you sell it you could be liable for cap gains tax, which is not that big a deal as the property wasn’t yours to begin with, but you can do better by keeping the property in my opinion.
If you plan to rent it out the reno doesn’t need to be exorbitent, and in an area like Bondi, you should have a very nice positive cashflow. Check with local agents on the likely rent return.
You also have a great asset there for further investing in the other asset classes – property, shares (and mutual funds), businesses and/or paper assets. You can do this by accessing the equity in the property, but you should sit down with a financial planner who is experienced with Property Investing and who won’t just try to get you to buy a whole stack of mutual funds that they get commissions on (you can still buy th M.F’s and shares, but you want a Financial Planner who is looking out for your interests not theirs).
You will also need a good Property Investment savvy Mortgage Broker to set up the right loan structure, a good accountant and probably a lawyer to assist you.Structured the right way, this property will set you up for the rest of your life.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I’ve got 101 – it’s great, but hard to find anyone willing to play it. Tells you something about 90% of society, doesn’t it?
There is a kids game as well, I haven’t seen it, but if your kids are old enough to use a computer and a cell phone, they are old enough to use 101 I reckon.
Me and a mate went halves in the game. Maybe you can do that with a like-minded buddy.
You’re dead right about school – it’s a disgrace. Trouble is, most of the teachers are ‘upside down’ with their finances as it is, so what can they teach the kids?
The USA is no better; everyone has got 6 maxed out c/c’s and no savings or investments. Their cars look good though.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Personally, I don’t like the figures on any of those – not enough rent return for me (no.1 is just o.k), but if you are buying for cap growth and don’t mind the neg cashflow then so be it.
The other factors worth looking at for those 3 properties are:
1. which area has the best potential for cap growth.
2. which property has the best proximity to amenities, transport, schools, parks, shops etc.
3. which property has been built after 1987 so you can maximise your depreciation for tax purposes.
4. which property has the best potential for add-on value.
5. which one has the least amount of outgoings.Pick the one that has the best combination of all those factors.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Yo! wattup bruvva?
I tink da word ‘the’ is spelt – T.H.E.
know wud um sain?
[grrr]Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by d_robb21:dare_to_dream, a 6% yield is not a bad return, of course depending on where the property is, growth prospects. I assume that your calculations are not including growth prospects, tax breaks, etc, with that factored in, this property may pose a great opportunity to some investors.
That being said, its not my cup of tea, but I know many investors in Melbourne who would be pleased to get 6% yields. Obviously not enough for you (or me), but I’m sure there will be investors out there to whom that appeals.
d_robb21,
your post brings up an interesting observation; like you, to me a return of 6% (when the interest rates are over 7%) is no good, but to some it is. I guess the more experienced and knowledgeable you become, the more you can see a good deal or bad deal.
I don’t subscribe to the view of a certain % return is good “considering the market”.
A return is a return is a return, and the state of the market doesn’t factor into the equation in my book.
If the current interest rate is x%, then to me, the return has to be at least 1% or more to be considered a decent return, notwithstanding any cap growth or tax breaks.
That’s what I love about this forum – knowledgeable people sharing their experience and knowledge with the not so, and hopefully steering them away from bad deals towards good deals.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
We have been discussing this very issue over recent days in other threads.
I am living in L.A at present, we are renting our PPoR, and intend to do so for a few more years yet, so I am in this position exactly at the moment.
I placed a call to my accountant last night to get clarification, and both TerryW and I posted an answer, but I’m happy to do it again.
The bottom line is you CAN move out of your PPoR, rent it for up to 6 years and NOT be liable for cgt.
I don’t know the situation when if you move back in for a year, then move out again for a time, which would take you over the 6 years of rental; I think you then are liable for cgt and it is pro-rata.I would be surprised if the reason why you move out would matter – whether you do it for a straight forward financial decision, or whether you are forced out due to work shouldn’t matter I suspect.
Check this one with your accountant.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Elka,
J.B’s book is an A-Z of how to get out of debt, how to maximise your standard of living on your present income, and free up more cash for investing, and finally a section at the end about investing; but not a great deal of ‘nuts and bolts’ on that.
It also goes into the mindset of the wealthy; what they think about, how they manage money etc.
It has some fantastic stuff about everyday things such as insurance, buying cars and household stuff, how to pay off debt, credit cards etc, etc. and it is very in depth. It lists lots of websites to look at to help the reader, and there are many great little quotes from various famous (and unknown) people.
Excellent for both learning how to save and get rich, and how to get out of debt.
By the sounds of your post, he would be preaching to the converted when you read it!Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I have got the book, have read it 3 times.
Great book – every high school student should have to read it as part of their curriculum in my opinion (and a lot of adults as well).
I don’t own any mutual funds – I love property (have a few shares that I sourced my self).Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
agree entirely B.B
No one ever went broke making a profit.
Pos cashflow will eventually allow you to become financially free.
Cap growth will too – when you sell, but you’ve gotta be able to service the debt in the meantime; you are chained to your I.P.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Straight pos cashflow properties are about as common as an honest politician these days.
However, you can buy a ‘standard’ purchase property that is pos cashflow after tax if you look hard enough.
But you need a few important factors for it to happen –
1. A high tax bracket income helps, but is not essential.
2. The rent return would have to be at least 1% higher than the current interest rates (2% would be better).
3. The building has to be built after 1987 to be eligible for the ‘special building write-off’, as well as other depreciative items in the property.
4. On that note, you need to also get a quantity surveyor to prepare a ‘depreciation schedule’ for your accountant to use in the tax return preparation.
5. Putting down a larger cash deposit will also get you over the line.
6. Look for ways to increase the rent by adding value, such as repainting, new carpets, built in robes etc.
7. Finally, keep trying to pay down the debt. I know that a lot of people advocate not paying down deductable loans, and I think you should clear any personal debt before starting on the Investment debt, but the less debt you have, the more likely you are to be making a profit.The trick with an ‘after tax’ profit is you start with an ‘on paper loss’, but end up with a profit after tax that is not taxable. Now that’s nice.
A combination of all the above factors would still get you there in many areas.
If you read all the Margaret Lomas books she explains very clearly how to go about it.
At the end of the day, even a neg geared property is better than doing nothing, as it is a forced saving, but only buy for neg gearing in a high cap growth area to offset the neg cashflow.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I am not sure, but I think that unless there is an income from an investment you can’t make a claim for a tax deduction. This is probably why there are no tax deductions on vacant land that has no income I suspect.
If you were to buy an I.P that produced an income in the same financial year as the literature that you bought, then I think you can make a claim for them.
Personally, I have spreadsheets and software to track my I.P’s (I like to look at the spreadsheets so I run both types of records). All my literature is recorded and I hand the records to the accountant at the end of the year. I have been doing this for quite a while, and he has never questioned the expense or asked me what it is about, or said it is not allowed.
So, being basically lazy, I haven’t asked him if the claims are, or are not valid – I just assume they are. I am not too concerned as I buy the books anyway because I like to read them and the expense is not that high.
But you should check with your accountant.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Thanks Terry,
I just got off the phone to my accountant tonight (my time in L.A) and saw your post.
He confirmed that if you rent your PPoR out, after 6 years of renting you will pay cgt on the period you rent your house for.
There is no cgt payable if you rent it out for less than 6 years.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Andrea, welcome to the forum.
You can buy an I.P without a cash deposit. You can use equity in your PPoR as the deposit, but it is still a loan.
Doing it this way means you are using 100% finance to pay for the I.P (actually it is more if you use the equity to also fund the purchase costs).The plus is that you don’t need any cash to start investing; the minus is that because there is such a large component of the purchase which is financed by loans, it is harder to obtain a positive cashflow from the property due to the higher interest payments.
Some people don’t mind this and are happy to have a neg cashflow. However, there is a limit to how many of these properties you can buy.I have done this with every I.P property I own, and I now have a mixture of pos and neg cashflow properties; the result is now a pos cashflow.
You will probably need to restructure your home loan to set up the right finance structure to begin and continue your I.P investing long term. Talk to a property-wise Mortgage Broker who has property investing experience to help you begin. There are a few great people on this forum who can. I am sure a few of them will come forward.
Read lots of books on Property Investing, follow this and other forums to keep learning.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
It’s a bit hard to compare apples with apples when talking of landscaping – different plants, different sizes, how many, the design, how much paving, retaining walls, lights etc, etc.
If you are handy and have the time, you could do it yourself and can make it look great. Something really elaborate may require the pros.
As for rendering; I had a PPoR built back in ’91, and it was rendered. I watched the guys doing it and I wouldn’t even try to attempt it. It is a real skill, and done wrong would look crappy. Get the pros to do that.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Which ever market you look at, focus on it and become very knowledgeable in it. You want to know what every single property is worth in your target area.
As a first I.P, Commercial Property may be a little more risky, as there are more factors to consider than a Residential Property.lack of experience increases risk.
After all; people have to live somewhere, so a tenant is easier to find for residential properties.
The returns on C.P can be better, but the market can be fickle, and you may have trouble attracting a tenant if one leaves. It depends on the type of building you buy.
Starting with a cheaper one is a good idea, you can still get a great return and your mistakes don’t hurt your cheque book as much. As you get more experience and confidence you can scale up, but maybe you don’t need to.
I am still conservative and cautious even after a number of deals, so I keep aquiring cheaper, little pos cashflow deals as they are easy and don’t hurt the hip pocket. Lovely!
Problem+Solution=Profit will be good for cashflow, which is good to have at first, but this usually takes a bit of experience.
A well selected buy and hold can produce a pos cashflow (read Margaret Lomas’ books on this) and will provide a good base for your future endevours.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by kpi:Hi Peachy,
As an ex estate agent I know from experience that some vendors get very nervous about accepting an offer with no money down. I am in Victoria and $500 was usually enough, however, the initial deposit has no advantage to the estate agent, so try and listen to what the agents advice may be as they will know what their client would prefer.
As I am an investor, and I buy because it suits me, I offer only the deposit that suits me ($1,000 usually).
I don’t care whether the deposit I offer suits or doesn’t suit the vendor. It’s my way or the highway. I’m not buying to do them a favour.
They want to sell the house, I want to buy it, but there are many others to buy.
They will get the rest of their money at settlement.
Fortunately, most vendors don’t have a problem with the $1k.
The ones that do lose a sale.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I suspect a lot of the recent interest rate rises have stopped the ‘pay check to pay check’ brigade from going mad at xmas. Another interest rate rise, petrol rise and an increase in the tax on smokes and grog will make things interesting.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Not sure; I thought I heard (read) it on this forum, but I may have been horribly drunk as usual and didn’t know where I was.
But I did hear it somewhere and it stuck in my head.
I was like you bb – I thought the rental period cap growth was pro-rata.
It is a factor for us as we are renting our PPoR at the moment and intend to do so for a while yet. I had better find out for certain I suppose – another call to the accountant..Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Fair point, but we were fixing bouncing floorboards. No load bearing problems involved that I can see.
As I said in my post; we went overboard to make sure it was done well.
8 years later; still all clear.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Residex have lots of different reports on projected rents etc, but they cost. No free lunch I’m afraid.
The other place that might help is Property Investor magazine. They have updates on each state.The other method is as bridgebuff said – get on the phone and ring the agents in the area you are interested in and ask them what the rents are for a particular property, or check out the rentals for the area on r/e.com.au.
I always ask about a 3 x 2 house. This is just the starting point but tells me enough to go on with. On r/e.com.au I look up the asking prices of the 3 x 2’s, then look at the rentals for the same. Takes about 5 mins.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
