Forum Replies Created
It may be worthwhile contacting the A.T.O directly to get an answer as well.
I would doubt that you would have to pay cgt in Aus on a property sold in NZ, but you may need to pay tax on the money coming into Aus.
I believe that if you have already paid tax on the money coming over then you would be exempt from any tax at the Aus end. It has something to do with a reciprocal tax arrangement between the two countries.
Of course, check with the accountant as well.Cheers,
Marc.
[email protected]Hi Paybac,
welcome to this fabulous forum.
If you do a bit of searching around on the different topics you will see the common theme about what most of us think about whether to a)sell or b)refinance and use the equity.
I believe that you should do option B as I have mentioned above. The selling and buying costs of option A will eat up a lot of your equity if you choose that path. It isn’t necessary, plus you will lose the benefit of long-term cap growth on your existing property.
Speaking of which, if you declare the room-mates rent that you receive I am fairly sure you can claim that proportion of the property expenses that is used for income purposes. You will need to check with an accountant on that. In effect, you can turn your existing property into an I.P already.Higher debt and the serviceability of that debt is all relative. When you first begin your investment career you will be a bit scared of the increased debt, but don’t forget you will also have increased income, tax deductions etc. You will become accustomed to the numbers very quickly.
Just make sure you spread your risk a bit by not buying something too expensive and harder to get a good rent return on – two cheaper properties is usually a better/safer bet than one expensive one, and the rent returns are usually better also.
The banks will usually let you access about 80% of your property value, less any existing loans you have. So based on the info you have provided, you can use $184k (80% of $230k) less the $90k that you owe. This leaves you $94k of useable equity (I haven’t included c/cards or car loans, but the bank will).
Cheers,
Marc.
[email protected]San francisco is worth the trip. It is about a 5-6 hour drive, straight up the 405 freeway, or you can fly. We elected to fly, as we had some f/f points, and free accom through a friend.
By the time we left our apartment in L.A, and arrived at the front door of the condo in San Fran (we hired a car at the San Fran airport) it was 6 hours!
If you go there, do Alcatraz, Fisherman’s Wharf, Muirwoods Redwood Forest, Napa Valley.
Just south of San Fran is Monterey and Carmel – lots of seals, elephant seals, sea otters, you can go whale watching if the season is right. The Aquarium at Monterey is great. If you can drive back to L.A with some time to kill, go via Big Sur on the ocean – the views are breathtaking up on the cliffs, but it adds an hour or so to the drive.
Vegas is a good trip – not really kid friendly I don’t think, but there are lots of child-care services. Go to the top of the Eiffel Tower to the Obsevation Deck and go to the New York, New York casino.
I stayed at the Caesar’s Palace – awesome, and the shopping mall there is amazing (not cheap). The Bellagio is just across the road where they filmed Ocean’s Eleven – it is spectacular as well.
I haven’t been to the Grand Canyon yet – it is on the ‘to do’ list, as well as The Joshua Tree National Park near Palm Springs.
I can go on all night as there is so much to see here.
If we are still in L.A when you come (we should be here until June) it would be nice to meet you guys and have a beer!Cheers,
Marc.
[email protected]Boats are in the same boat (pardon the pun) as cars – only buy a late model second hand one.
I did a bit of quick research on them before leaving for L.A and I found that most sec/hand ones I saw were about a year old and were owned by people who
a) didn’t use them as much as they expected,
b) were not big enough in the first place.As for Disneyland – we took our son this year in march. He was 4.5 years old and 42″ tall, which is the cut-off for all the rides. A number of the rides he was ineligible to go on because of his height. Several of them you had to be 46″ tall.
If the kids are shorter than 42″ don’t bother going.
Also, you will need at least 2 full days to see the whole place if you are going to the one near L.A in Anaheim. It was absolutely packed and we went ‘off-season’.
We went for 2 days and stayed in a motel across the road even though we live 40 mins away – the traffic will KILL you.
Don’t even consider going there over the USA summer (june/july/august) as it will be;
a) too crowded
b) too hot
The average waiting time for a ride when we went was 40 mins.
Be prepared to take out a small mortgage to pay for it if you have 2 or more kids and your wife. Everything is expensive in there, and the parking was $10 per day if you park at the Disneyland carpark (we walked from the motel – 10 mins).
Having said all that, we still enjoyed it and the evening fireworks display and parade was fantastic.
I wouldn’t go again though.Cheers,
Marc.
[email protected]The apartment building where we are staying in L.A has single beds at $2200p/m and the 2 beds are as high as $2700 p/m.
Several tenants we know are moving out in the next few weeks/months when their leases are up.
When I asked a few of them why, they all responded the same – the rent is going up from $2700 to $3200 p/m!!What’s even more crazy is a big number of tenants keep staying.
(our rent is paid for us so we don’t have this problem thankfully).Cheers,
Marc.
[email protected]why don’t you mention the dealership here and really give them some bad publicity.
That is the last thing they would want. Dropping a few grand on a car won’t hurt them – car dealerships do it all the time to get a sale, but being seen as dodgy is never nice.
You should ring the biggest newspaper in W.A as well for fun. You might end up with a free car!
And finally, never buy a new car anyway – it is not a good financial move. The car is worth 30% less as soon as you drive it off the lot. If you don’t believe me, look up the re-sale price of your car on redbook.com.au.
A one year old traded-in version of the same thing is $$$$$$$$ less and still relatively brand new. (read “millionaire next door”).Cheers,
Marc.
[email protected]The name of the process in the USA where you ‘trade up’ your property to another more expensive one without paying cgt is called a “1031 exchange”.
You can still claim costs in the US but I don’t know how the whole situation is calculated aginst your normal income tax.Cheers,
Marc.
[email protected]Good to see there are so many investors on this forum who have never made a mistake.
Cheers,
Marc.
[email protected]Fair point;
I just wanted to make sure you were attending these seminars with both eyes open. I don’t want to see you get burnt.Cheers,
Marc.
[email protected]Yes.
If you hold an I.P for less than 12 months then sell, you are liable for cgt on 100% of the profit.
If you hold an I.P for more than 12 months then sell, you are liable for cgt on 50% of the profit.
Any depreciation claimed during the time you hold it is added back on to the total as well, but all the purchase and selling costs are deducted from the total.
It may be better if you can keep the original I.P, and access your equity (profit) in your existing I.P for the deposit on your next one. That way you can delay paying cgt until when/if you ever sell.
Speak to your accountant about the cgt situation, and speak to a property investment savvy mortgage broker or lender about which type of loan you should have for the future.Cheers,
Marc.
[email protected]Originally posted by brendon11:contract was signed and everything was in order for the settlement date, which is today.
I had a call from my agent who said the buyer got in touch with him, and wants to move the settlement date back to Jan 10.
Not much I can do but wait until then.
Still, its sounds a bit more positive than it was a few days beforeYou can probably charge him penalty interest for failing to settle by the contract date if you want. It is standard in most sale contracts and the interest rate is quite high as a rule – around 13.5%.
It may be a futile exercise though.Cheers,
Marc.
[email protected]I think what they are referring to is ‘salary packaging’.
This exists in the health industry (my wife is a nurse) and other govt industries as well.
You are allowed to have a certain amount of your wage deducted before tax is applied, so you only pay tax on part of your wage.
The deducted funds are then paid towards loans, or utilities such as elec, gas, water – even going out to dinner.
We used to apply it to our investment loan and our credit card payment. It was a great lurk!
It is something set up by the govt for govt employees as far as I know, and I don’t think it exists outside these selected industries.
You can try asking your accountant/lawyer, but I don’t know that they can do much.Cheers,
Marc.
[email protected]“Hi guys,
Everyone recently has been talking about interest only loans for property… If I was adopting a “buy and hold” strategy what is the advantage of buying a property with an interest only loan and that is still negatively geared?
I ask because if the property is negatively geared (which it most likely will be) than you are totally relying on capital growth and possibly rents rises to offset your losses. This is fine but what happens in 10 years if your property hasn’t gone up much money and you still haven’t paid any of your principal off???
Can someone please help because it doesn’t make sense not to pay of the principal as well. Especially when at the start of the load the P & I repayments aren’t that much larger than I only repayments…
My second question is if you have a 100% mortgage offset account and have say $20,000 in the account will the lender general let you pay this whole amount of your principal amount?
Cheers,
Paul”
My 2 cents worth;
The advantage is that the I.O loan will improve your cashflow situation and allow you to service a neg geared property more easily.
Also, many I.O loans allow you to pay off some principle when you like, but there is no commitment to do this so there is less pressure. Personally, I believe you should apply debt reduction as much as you can anyway as it improves your equity position and your overall financial statement in case of something unforeseen.As for the cap growth – if you have done some good due diligence and selected the right property, you should not have to worry that your property won’t go up in value in the long term.
Many people advocate not paying anything off your investment loan; you just sit on the balance forever and a day until the values of the properties go up and make the loan look small.
But I agree with you; I think you should pay down the principal wherever possible. I like making a profit. The more profit I make, the less I have to work. If I am paying out less than I am bringing in, life is good.
Cheers,
Marc.
[email protected]Just tell the accountant when you first advertised the unit for rent. This is the point when all your expenses become deductable. He/she may want to discuss the next two points below as well:-
You don’t need to inform the bank, but if you plan on doing it long term it may be advisable to convert the loan to interest only, in which case a discussion with the bank is needed.
Also, you may want to have a depreciation schedule done to help with the tax situation.
Cheers,
Marc.
[email protected]There was an article in Property Investor about this a year or so ago.
From memory the news from that article was that the industry was going through a boom, so the future danger was that the market could become over-saturated and the returns might drop away because of this.
The upside was that the returns can be good, with little management, maintenance and tenant problems. I suppose this is why everone may jump in?
I think they are classed as a commercial property by the banks, so your LVR will be lower, meaning you need a bigger deposit to get in. Also, because it is a commercial property, a lot of capital growth is tied to the rental returns. If the rents don’t increase, neither does your cap growth I suspect. If you owned the whole facility and the land then this is a different story.I guess you need to research the area where they are, try to find out why they are being sold – what is the occupancy rate, holding costs etc.
If you are seeking long-term ownership and the returns are still good now, then it could be good, but if you are looking for a quick flip for profit the boat may have sailed.
Cheers,
Marc.
[email protected]Loan Mortgage Insurance is insurance that the bank takes out to protect THEM in the event of a loan default. This should tell you that the bank thinks your debt level is probably too high for their comfort – they think it is at a high level of risk.
All banks have their own policy on what they will lend without LMI and it is usually around the 80% mark. This means that they think at this level, or lower, the risk is acceptable (for them).Without sounding too cynical ( and believe me; I am), you have to try to seek out people’s agendas as there usually is one hidden somewhere. This seminar guy is in the business of selling money – the more he sells, the more he makes in commissions I suspect. Many “seminars” are really sales pitches disguised as an education session. This could be just another one of them.
In fairness, he may be totally above board, but it pays to be your own devil’s advocate.If you can only get into a deal by taking out LMI, then so be it, but it adds to your costs, so the return on the investment has to be higher to begin with to cover this cost.
Some people regard LMI as a way to more leverage to increase your return, which is true, but you should try to balance returns with risk.In the end it all comes down to how you feel about the risk associated with a deal.
My view is to avoid LMI and still get a good return, but with more safety. You don’t need to be greedy.
In these situations I like the quote from Warren Buffett; “I made a fortune out of buying too late and selling too early”. This means he wasn’t greedy; he was cautious – and still did rather well.Cheers,
Marc.
[email protected]would the real Richard Taylor please stand up?
Cheers,
Marc.
[email protected]Hi Sam,
many property managers ask for a copy of the insurance on your property when they take on the management (mine do anyway).
They usually request a pub/liab worth $20 million, and I use this amount as standard on my properties.
You can go for less, but the cost difference is not all that much and is tax deductable.
I also do my Landlord’s insurance at the same time and through the same company. All my properties are grouped together under the one policy – this works out cheaper, and as I have been a client for a long time, they allow me to split the payment so there is not such a cash drain when the premiums are due.
The company I use is in Victoria, but they do policies for me in other states.
Their name is A.I.S Insurance Brokers. phone no; 03 8699 8888.
Ask for Doug Allen – he will give you some frank advice with no bull****.Cheers,
Marc.
[email protected]I live in Dromana (have been in L.A for 15 months) on the other side of the bay from Point Cook, but one of my mates used to live there.
The area is in the growth corridor between the city and Geelong; a satellite city about 1 hour from Melb. A lot of people live in Geelong and commute to Melb. Point Cook is on the way.
Point Cook I reckon will be an ongoing growth area similar to Carrum Downs on the other side, but there is a lot of development around that side of the city, so I don’t think the prices will go up anytime soon ( a bit of a glut). There used to be bugger-all at Point Cook apart from the RAAF base, but there was nothing in Carrum Downs 20 years ago either.As for houses being ADVERTISED for $350k, that doesn’t sound that cheap to me. It may be cheap compared to other parts of Melb, but that side of Melb is going through a development boom and a lot of new, inexpensive estates are popping up.
Was the ad through Harvard Securities or Banc Real Estate? If so, run a mile.And you have to ask youself; if the properties are being advertised, and there is also a rental guarantee, then how much of the purchase price is funding for the ads and the rental guarantee?
If the rental guarantee is for 2 years @ 5%, then they are probably overpriced by $35k – maybe even more to cover the expensive advertising and sales commissions.I would say, with my limited knowledge of the area, and without even seeing these joints that they are overpriced, the rental guarantee is a joke and don’t buy one unless you can get it for about $290k not a cent more. Even then you wouldn’t be getting it cheap; you would be paying market value.
I think the area is good for long term growth, but check out the sale prices in the area for an EXISTING 4 bedder first, and ask all the agents what the rental returns are lately.
Cheers,
Marc.
[email protected]I don’t know the answer to how you combat ‘listing buying’. It is endemic in the industry – it’s very difficult to get a listing without doing it unfortunately. Having said that, I know some very successful (and truthful) agents. It took a long time and lots of hard times, but the people in their neighborhood know and respect them and they get the business.
On getting educated; do what we have all done;
read lots and lots of books on investing, learn all the strategies, terms and words associated with investing and get out there and buy one or two I.P properties yourself to get some hands on experience.If you have been in the r/e industry for a while you should have a good head-start on it, but investors want to know the ‘nuts and bolts’ side of the equations – not just that it has 3 beds and a new walk in robe in the master bedroom.
Things we like to know about are;
what is the rent return, rental vacancy rate, depreciation, interest rates, outgoings on the property such as rates, water, body corp fees, stamp duty, landlord insurance, management fees, proximity to amenities such as schools, parks, shops, transport.
The size of the building, when it was built, land size, zoning, future plans by the local council which may affect the neighborhood.
Local and (more importantly – reliable) pest/building inspectors and tradesman.
These are just a few aspects.Cheers,
Marc.
[email protected]
