Forum Replies Created
Yes, that is true. No cgt on your PPoR.
You pay cgt on any Investment Property.
If you sell your I.P within 12 months from purchase, you pay cgt tax on 100% of the gain, at your marginal tax rate on your salary.
If you sell the I.P after 12 months from purchase, you pay cgt tax on 50% of the gain, at your marginal tax rate on your salary.
If you use your PPoR as an I.P, you can rent it for 6 years I think before you will become liable for cgt on it.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I agree with Terry;
get rid of the non-deductable debt, then immediately redraw some of the equity to invest in more assets with deductable debt.
The accountant can advise on the structure.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by petlover:I am about to embark on buying my first investment property, but don’t know wether to buy a negatively geared property in a proven high capital growth area, or buy a positively geared property which may not have much capital growth, but may enable me to hold on to more property in the long run?[hmmm]
You’re assuming you can just ring up the agent and pluck a pos geared property off the supermarket shelf?
You will be hard pressed to find a pos geared property anywhere in Aus that has a decent rent demand and decent renters at the moment.
You may be able to find one that is pos cashflowed – one that is returning a profit AFTER tax (read Margaret Lomas)
The other options are do a wrap, or subdivide and sell one and keep the other, or renovate and sell /rent out etc. More sophisticated strategies and require more knowledge and experience, but can be done.
Having said that – it you want to be financially free soon, buy investments that pay you, otherwise you will be a slave to your real estate. Unless you are an extremely high income earner, go for cashflow first, growth second – you can’t guarantee growth.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
go down I hope.
Actually, I think that if the housing market starts to show signs of a recovery around the main areas generally, and if the consumer spending doesn’t slow down a bit, then the rates will continue to go up some more I’m afraid.
Stop buying doodads you idiots! (forumites excluded – I know you’re all with the program).
Being that whatever the U.S does then Aus tends to follow, we may get a drop in Aus as there are drops predicted here in the U.S in the next 6 months as the housing market keeps slumping. But don’t count on it.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Quite often an equity partner can be as close as your circle of friends/contacts.
If you find a deal and can’t do it alone, and you have a few ‘cashed up’ friends, run the deal by them and give them the opportunity to see all the details. They may be receptive.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
quick update on my loan application with ‘barrywire’. After a few attempts to get them to send me the loan application forms, and them asking me to send details ‘in order to proceed’, the correspondance stopped. Damn; I was having so much fun.
Oh well, at least I’ve still got a few Nigerian email scams on the hook until they work out I’m pulling their chain.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I think you have answered your own question there;
I was going to say –
Look at existing properties with similar design, building size and block size that have recently sold in the immediate area. This is pretty much what a valuer would do. It may be worthwhile paying a few hundred bucks to hire a valuer to help you anyway.
If you work on an under-estimation of profit and an over-estimation of costs then you won’t go wrong.
As for design, look at lots of display homes in the area, existing homes to ascertain the more popular styles already in the area. Developer/builder websites and home ideas mags for the current popular styles and fittings etc.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
As a very simple calc for the closing costs and interest paid, I work on:
– 6% of the purchase price for closing costs (this is usually an over-estimation).
– yearly interest, using 1% higher than what I am paying right now (again, an over-estimation for the most part). This is worked out AFTER adding the closing costs to the purchase price.I then work out yearly rent, subtract 20% of rent for all expenses (this is an over-estimation and includes 1 month vacancy).
This formula wiil pretty much guarantee that you will not get a nasty surprise.
It is also a very quick guide as to working out how close (or how far away) to cfp the property will be ‘as is’ without any value adding, and tells me whether to continue with the property or not.One last thing; when I enquire about the likely rent return for the property with the agent, I factor in a 10% decrease just in case the agent is incorrect with their estimation (speaking from experience).
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
One of the schools of thought with investment debt is you shouldn’t or don’t need to pay it down as it is a tax deductable expense. You should instead pay down any PERSONAL debt first such as car loans, credit cards etc as this debt is not tax deductable.
If you sell the other investments you have and put them into the I.P loan, you will pay cgt on those investments when you sell, and you will lose any future cap growth because you don’t own them any more.
Sure, you are tranferring the money to another investment which will hopefully go up in value, but at the moment you have 3 different investments all growing in value at different rates. While one is stagnating, the other two may be gaining.
You are earning a very good wage for your age, my advice would be to re-assess your lifestyle to free up more income for debt reduction on the I.P so you can improve the cashflow from it (i.e. get rid of the Beamer and buy a 2 year old Honda Accord), and hold the shares and managed funds if they are performing o.k.
Incidentally, managed funds are still shares – they are just picked and managed by someone you ‘hope’ knows what they are doing and you are paying them your hard earned to do it. It is the investment of the uneducated, or lazy, or time challenged ( a lot of people are all 3).
If you have a bit of a clue about the share market, do it yourself and save some commissions which you can use towards the I.P loan.Lastly, have you had a Depreciation Schedule done for the I.P? If not, do it asap as this will give you possibly a few $k’s more per year on your tax return, which of course you will re-invest into the I.P loan; won’t you?! It’ll cost about $400-500, but will pay for itself in the next tax return. Speak to your accountant on this.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Good post Rent New Tampa.
On that note;
As a guide for the newbies who are maybe not sure how to crunch numbers on a propsective property, a basic rule of thumb I use with expenses on an I.P is to allow 20% out of the rent per year to cover all expenses. If the rent is such that I can lose 20% of it to costs, and still cover the mortgage, then I know I have a potential winner.I am a cashflow investor as you describe in your post – I want a good rent return and take the cap growth second. Of course, I want both, but I don’t want to be a slave to neg geared properties. I have a basic system for the numbers and if they don’t stack then I move on.
The 20% covers management, repairs and maintenance, building/content/landlord’s/public liabilty insurance, water and council rates, body corp fees (if any) and 4 weeks’ vacancy.
If you add to this the prospect of adding value through renos etc to increase the rent, then I can be fairly sure this will give me a positive return.
I buy newer (post 1987) properties as a rule so the repair and maintenance figure is usually lower, thus the 20% figure is an over-estimation. I have one property that I have owned for 5 years which still has the same tenant and we have spent less than $100 on repairs, so we are well and truly under the 20% fugure with that one.
On top of that, with the newer properties the depreciation is high, so the tax benefits are good which puts the icing on the cake.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
If you’ve ever read any of my posts on this issue you will know my view – never sell unless you have to when you can use the equity to buy more.
It may be a good idea to sell one or two to decrease some debt and increase some cashflow on the ones you keep, but to simply sell all and turn around and buy again is going to eat up a lot of profit in selling and purchase costs unnecessarily. To me that doesn’t make a lot of sense. You will be giving thousands to the agents and lawyers.
Not to mention the loss of future cap gain on the properties you sell.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by wapi001:I too have been thinking of Adelaide for the next investment. Does anyone have first hand experience with Destiny Financial Services run by Margaret Lomas?
I have been a big fan of Margaret for many years. Her books are excellent.
I joined the Melb branch of Destiny Financial Solutions as a client 3 years ago as they were specialists in property which is what I was looking for.
The service, follow-up support and advice has been terrific. Michael and Laurel Sloane are the franchisees there, and they are great people and very obliging.
They do not sell properties – only advice and can arrange the correct property loan for you if you don’t already have one in place.
The property software program – DestinyTrack, is brilliant and they upgrade it regularly.
There are also a regular focus groups in Melb and newsletter, as well as the website with a forum etc.
I don’t know about the S.A branch, but if Margaret is behind it (and I am sure she is) then it will be well run. You should be able to get a free consultation without any hard sell.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
My first property purchase was a PPoR when I was 25 and sold 3 years later for a modest profit.
No real story there, but go to the Discussion Forums, then look up “heads up” and then look under the “Lemons” topic for a good laugh about my first I.P purchase.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
We can argue until the cows come home about which gives better returns – it depends who you talk to, but here’s a question for some discussion:
You own, debt free; one property – your PPoR and it is worth $500k. You have no other assets such as I.P’s (cars, boats, house contents, superannuation and personable valuables such as jewellery, don’t count).
You can access the full 80% of the equity – $400k, through a standard Line of Credit.WHO WOULD PUT THE ENTIRE $400k INTO SHARES? (current sharemarket position not-withstanding)
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Ems,
good to see Warnie and the boys give your sorry arsed lot a good hiding!! Now that he and Glen McGrath are retiring you may have half a hope!Down to business; we are living in L.A and have been here for 16 months so far – 14 to go!
We have I.P’s in various states of Aus, all are managed. We are renting our PPoR as well and it is also managed.All the rent income is deposited electronically into our check account each month, any repairs/maintenance/fees are paid out of the rent and we get our statements and invoices emailed to us by each manager. I print them out for my records and tranfer the emails to a separate folder on the computer. I do back-ups to disc and memory stick as well every month just in case.
Our investment loan repayments are deducted each month from that same account electronically and our Bank statements are mailed to us here in L.A.
Everything is automatic, I don’t worry about a thing.Our situation is a little different to what you will have as we don’t get any of the rent money sent to us here. It stays in Aus.
You will have to arrange for the rent to be sent to you (probably by electronic transfer) in the U.K if you keep the property after you move back. I would be arranging a meeting with an accountant soon to work out what the options are.
I don’t know how you will be affected by taxes if you send money back to the U.K – an accountant in the U.K can sort that out when you return.You will have to do a tax return in Aus each year as well, we do this from here and all I do is send my records (which are very thorough) to my accountant by mail, he subtracts his fee from our refund and deposits the refund electronically into our check account.
So, if you decide to invest in Aus and move back to the U.K you will need 2 accountants, but if you are worried that it is too hard to do; don’t worry! As long as you put all the paper-trail processes in place first, it is easy.
Go for it!Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by condog:Then with due respect you havent analysed the right companies.
ANZ, CBA, WBC SGB have all averaged a first year franked yeild of well over 7% and 15% growth in share price and earnings for 8 of the last 10 years.
In roughly a 5 year period
MND has averaged over 40%, BHP and RIO have averaged over 30%, WPL has averaged over 50%, UGL over 30%, Rinker above 10%, Wesfarmers 16%, TAH 18%, Seven network over 30%, etc etc etc.The only two here that arnt blue chip are UGL and MND, both of which have fantastic outlooks, sustainable growth and good balance sheets.
That being said no one here will be able to buy in and attain these returns at the present prices until we have a correction.
So who wants to be the last man/woman to jump on before the ‘correction’? Most people I talk to that have some shares knowledge say the correction will be big when it happens.
The last 10 years (and almost all 5 year windows in between) will show a fantastic return on the stock market. It is probably the longest bull run in history.
Will it ever happen again? I think so – but not until after a major correction. I have my check book ready for that time. I’m waiting for the winter to buy some straw hats.The difference with property is that you can buy at any time in the cycle and as long as you select the right property you will be able to sleep at night, knowing that the price won’t take a major dive overnight – if at all.
Sure the returns on property may not be as good (personally I think they are) as shares, but the return added to the relative safety of property is what I like.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by PosEnterprises:Hi i am wanting to be independent from my govt job i don’t like answering to bosses!
Should i buy reno and sell or buy reno and hold? What is the best way to have cashflow so that i may work for myself!
any ideas[blink]
If you have a govt job never, never, never leave! –
Until you have built up enough assets that pay you an income you can live off.The perks from govt jobs in Aus are too good to pass up. You don’t know how lucky you are.
Try working at Walmart in Crenshaw, Los Angeles for $6.50 per hour – no holiday pay, no sick pay, no superannuation, can be sacked on the spot, slave wages, dealing with the worst element of society, your boss is an 18 year old who didn’t graduate high school and can hardly speak English, weekend and public holiday wage rates have no penalties.
This is just one example of what I see every day in this city in hundreds of businesses.As Robert Kiyosaki says: “your bosses’ job is to give you a job; not to make you rich”.
On a more productive note, my .002 worth;
keep working hard, put up and shut up, and keep buying income producing assets with every spare cent you can.
Every tax return -put it into an asset, not a plasma like 90% of the world.
This can be a property or a business, or shares – as long as it keeps making money, and (hopefully) increases in value.There endeth thy lecture.
Happy New Year All.Cheers,
Marc.
[email protected]Personally,
I love all the Newbie questions – it draws out the helper within; I love to help those who want help if I can.
Not only that, I get to talk to like-minded people – they are in short supply around here in L.A.
But it also makes me think a bit more and re-remember stuff I take for granted now.
Bring ’em on!Cheers,
Marc.
[email protected]I have had to do this twice in the past. The tenants don’t particularly like it as they usually want to stay, and this can create problems.
After discussing the situation with my property manager, I offered my tenants rent reductions for the inconvenience for the duration of the sale campaign and that solved a problem before it occurred.
If the buyer is an investor it may be more appealing if it is tenanted, so I think that if the tenants are co-operative with inspections etc, it may be better to let the situation stay as it is, and let the new owners decide how they want to approach things after settlement.Cheers,
Marc.
[email protected]So am I.
It is good fun. I’ve been having a laugh or three with the Nigerian emails all last week as well.Cheers,
Marc.
[email protected]
