Forum Replies Created
Hi meatgroup, welcome to the forum!
This may be an obvious question;
Have you factored into the equation any likely tax benefits from depreciation while researching your properties?
On your income, the tax benefits for investing in property can be substantial – especially in properties built after 1987. You can claim 2.5% per year depreciation on the building for 40 years from construction, as well as all the other items in the property. A depreciation schedule will determine the percentages for each item.
You normally wouldn’t have a D.S done until after you purchase the property, but you can make a ‘guestimate’ on the building at least – eg: 20 sq house constructed in 1990 @ $5k per sq = $100k.
That’s $2,500 per year you can claim at your marginal tax rate.
This may bring a property a lot closer to cashflow neutral or even positive.
As a rule, banks don’t factor the depreciation aspect of the investment into the figures on an I.P, so if they assess that you can handle repayments on an I.P based primarily on the rent and your income, then you can be fairly sure that after tax benefits AND depreciation are considered you probably can do it easily.
Of course, you will need to talk to an accountant about this.Cheers,
Marc.
[email protected]I saw the website; quite good info.From what I’ve read you guys have learned quite a bit through some ‘tough experience’ already. I am interested to know how do you guys make money from your website?
I have a book soon to be published here in the U.S (not property related – it’s from my ‘real’ profession) and a guy I met suggested maybe a web-book to add extra income. I would love to swap a few ideas with you if you are interested.
As for me, I got started in property when I reached 40 and started to realise my mortality and all that.
I chose property as my main vehicle for investment as I like the relative safety of it compared to other investments like shares and super, which is linked closely to shares anyway. There are others on this forum who will disagree with me about that, but historically, a well selected property is the safest investment that offers good returns that you can have.
Having said that; I have shares, but this is my ‘play money’ at work, and I can afford to lose the money I have invested in shares.
I also have a superannuation policy, but to me this is really a forced saving and a bonus at the end when I retire. I also don’t like the apparent ease that the govt has in ‘tampering’ with it.
Mind you, the return for this year on my super fund was 17% which is great, but it is ‘unattainable’ money to a large degree until retirement.
Lastly, I have my own business, so all up I have 4 investment vehicles in action, but my main vehicle is property and it is where the bulk of my money goes.
I didn’t have a hard time at first investing in property as I had already bought and sold a few PPoR’s before I began. The hardest part was waiting until I had enough education to satisfy myself that I could start. I read and studied for about 18 months before looking for my first property.
I also obtained a Real Estate Representative’s Licence and worked in real estate sales for a time to get some insider knowledge on the agents and their games to help my negotiating skills.
That’s my ramble; somebody else’s turn now. Good luck boys!Cheers,
Marc.
[email protected]I think that if you put NO money into an investment and get a positive return from it, then that is an infinity return.
The less of your own money you can put in, the better the return figure will be.Cheers,
Marc.
[email protected]I found this post on this site while doing a search on Powerloan: –
Originally posted by Red13:I worked for powerloan a couple of years ago. They have a very very high turnover rate. There are alot of restrictions on what you can do, and they constantly bag brokers and banks. They are mortgage brokers, but only selling the branded products – therefore have mininal range.
There is alot of hype, and it is easy to get sucked in. The positivism and constant motivational talks make you forget that you are not earning money, or are only earning a bit. I would describe some of their practices as dodgy.
They place all the risk on you – no wage etc – but expect you to conform to their standards relentlessly. I believe many of their former/current workers could claim entitlements as workers which are otherwise completly denied to them, except most just dont want anything to do with them anymore, or couldnt be bothered claiming (or dont know their rights through all the hype).
The founders come from a multi-level marketing background, and powerloan is a mortgage broking company with that structure. Most people only sell to their friends, and make money for those higher up in the structure.
I recall them spruiking “Kebble”, one of westpoints products, relentlessly.
However I did learn alot about the finance industry, and professional ethics, but really nothing I couldnt have learnt from a 2 day course from WEA.
I would suggest that you join a reputable firm of brokers – your future will be much better, and realistic.
This is referring to how they treat their employees. Not a good sign.
8cubed, this is your first loan and a very big investment. The last thing you need is doubt about the loan, especially with a baby on the way.
I would suggest doing LOTS of research on all the banks’ loans either on the internet, or ring them and ask to speak to their lending rep/manager (including your own) to compare apples with apples before you sign with Powerloan. Their website looked o.k, but whose doesn’t?
Before doing any research on a loan get your financial statement together – how much you owe, how much you own, your monthly expenses etc. All banks will need this info, so get it ready now.
This will allow the banks to give you an accurate figure on what you can borrow.
A few hours of hard work now on your part will save you thousands of dollars and less heartache in the future.Cheers,
Marc.
[email protected]Also look at the Jan Somers website forum – somersoft.com.au
Cheers,
Marc.
[email protected]Hi Maraa,
welcome to the forum.
Closing costs will vary slightly from state to state, but as a guide, you should allow about 5-6% on top of the purchase price to cover everything. That should apply to pretty much any figure you choose.
If you factor this figure into your number crunching it makes it easier to work out the viability of a prospective purchase.
The main portion of these costs will be stamp duty – you can use the stamp duty calculator on the realestate.com.au website, or their is a website called stampoutstampduty.com.au as well. There are others, but can’t recall where or what name off the top of my head.
There will also be legal fees and some bank fees, and adjustments on rates etc, but that is all part of your 6% figure.
I always like to over-estimate expenses (outgoings) and under-estimate income (rent), and then you get no ‘surprises’.Cheers,
Marc.
[email protected]I have one of mine listed on noagentproperty.com.au. Gets a quite a few hits.
Check it out.Cheers,
Marc.
[email protected]I have found the same thing – I guess “you can lead a horse to water, but you can’t make it drink”.
I think it is the old 90-10 rule; in this case, only 10% take action and 90% don’t.
That’s why I love this forum – like minded peolple who share the same interests and are on the same wavelength.Cheers,
Marc.
[email protected]Yes,
but property investing is interesting to everyone on this forum, and the main point of this forum I suspect.
There are those here who want to share knowledge and ideas with others about investing in property, and there are those here who are trying to self promote…Cheers,
Marc.
[email protected]been done before. yawn.
[sleepy2]Cheers,
Marc.
[email protected]Originally posted by Qlds007:Nothing to stop you approaching them but same story you won’t find a UK Lender take an Australian property as security.
I still have a couple of UK loans but they are all on Uk properties.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Hi Richard,
Do you have the income from these properties sent to Aus? If so, do you get taxed when it arrives, and what is the tax rate, and is the nett return worth it?Cheers,
Marc.
[email protected]Originally posted by The Contrarian:10 yrs ago it was $50K, today I think $100K+.
Ofcourse that is just the beginning for some.“There is nothing scarier than ignorance in action”
Are you saying the ‘average’ income is $100k? Or are you saying it is a ‘high’ income?
Cheers,
Marc.
[email protected]Yeah, I understand. You need to re-evaluate what your goal for this property is/was. Try to look ‘big picture’ for now.
Did you buy it with the intention of keeping it long term? if so, it is way too early to assess it’s performance. Look at it after 7 years – this is around the time-frame for properties to get close to doubling in value (7-10 years historically). If it achieves this it is performing to the average.
Is there anything you can do to improve it’s value and rent return?
For example, add ducted air/con & heating to increase the rent by $10 per week. Something like that.Cheers,
Marc.
[email protected]I have never done one, but I can tell you what tends to happen with them.
From the agent’s point of view, they don’t really get behind the listing and try to push it as they can have the property sold by another agent in another company at any time, thus wasting a lot of time and work and commission.
From a buyer’s point of view, they are out there searching and looking at all the local agents’ websites and windows anyway, so when they see the same house advertised at every agency it can give them the impression that the vendor may be desperate to sell. This could attract low-ballers who you probably don’t want.
Last of all, you may have to spend needless sums of money on advertising with multiple agencies when the buyers are already out and about.
Chances are the agent who you signed has ‘bought’ your listing by quoting a too high sale price to get you to sign them. They do this all the time, then over a few weeks try to ‘condition’ you to drop the price to get a sale.
May I suggest you send/deliver your current agent a letter saying their services are discontinued as of now (you can do that – they hate it) then resign an exclusive with another agent, but only for 45 days (they hate that too) but it will get them working.
If you had no nibbles in 60 days it could also mean you are asking too much. What do you need – top dollar or a quick sale? each have a different time frame.
Tell the new agent to pay for the advertising out of their commission. That always gets a good response, but it is what should happen.Cheers,
Marc.
[email protected]Your exit strategy depends on your investing goals and your tolerance for risk of loss. An exit strategy should be based on the question ‘what is the worst thing that can happen?’
Personally, I am risk averse and like to sleep at night, so my entry strategy is low risk to begin with, which makes my exit strategy easier. When I assess a possible investment, I look at the worst case scenario first. If that doesn’t look too bad I proceed to the next step.
For example, some people don’t mind to use every single cent of their equity or LVR (loan to value ratio) to aquire an I.P or shares or whatever. This leaves less ‘wiggle room’ in the event of a problem occuring.
As an example, banks generally don’t like you to have more than an 80% LVR, so they quite often won’t lend you funds higher than that without mortgage insurance. This means that they think above this figure is risky. If you can only invest using mortgage insurance, so be it. Keep in mind that it is a more exposed position so your investment selection needs to be even more careful. I find this too scary, but I am fortunate not to have to need M.I.
Therefore, for me; an LVR of 60% is my limit. I don’t invest unless I can stay at this level or there abouts.
This means if I have to sell in a hurry I won’t lose money and my very fragile sleep pattern will stay intact.
Another example of an exit strategy is a ‘flipper’ who tries to time the market. Their exit strategy may be to hold a property for only 12 months and sell in a rising market and pay minimal cgt.
This is not my strategy – I want to buy and hold, but be able to access the increasing equity for further investing, so the right type of loan to allow me to do that is important.Cheers,
Marc.
[email protected]The capital gains tax is calculated at your own marginal rate.
If you sell after 12 months, you only pay cgt on 50% of the gain at your marginal rate. This can cut down the tax payable enormously.
For example;
Your marginal tax rate on your salary is 30%.
You buy a property and sell it after 13 mnths for a $50k gain (why sell it? – another story).
You are liable to pay tax on $25k (1/2 the gain) at the rate of 30%, which is $7,500.
In reality, the whole figure is applied to your total taxable income – from wages and other I.P income, which may result in not a lot of tax paid at all.
If you are new to investing bridgebuff, I suggest you read every Jan Somers, Margaret Lomas and Noel Whittaker book you can find. All the ‘nuts and bolts’ will be explained. Keep reading and gaining knowledge.
Also, consult with a property savvy accountant.Cheers,
Marc.
[email protected]This loan has been very popular here in the U.S of recent years, and there is expected to be massive foreclosures in the next 1-2 years when the rates convert back to the normal rate.
People will find they have loan repayments they can’t afford, and a house they owe more on than when they started with. Not only that, a lot of areas are experiencing a ‘correction’ so their house may have gone down in value.
A girl my wife works with had to sell her condo in San Pedro 2 months ago for a loss, and had to take out a $37k personal loan to get out of it. She will be paying that loan for years with nothing to show for it at the end. Very sad.Cheers,
Marc.
[email protected]Hi ttman,
If it’s within 7 km’s of the cbd I think that over the long term you should be o.k. According to some, the Melb boom ended at the end of ’03 (maybe earlier) so it may be the wrong time to be evaluating the cap growth.
Is maidstone surrounded by suburbs that have already boomed, or are being ‘gentrified’ recently? if so, you may find there will be a flow-on to your area as the others get too expensive.
A lot will depend on location and amenities in the immediate area such as transport, schools, shops, parks etc.
If it is neg geared, but you can service the cash drain without too much hardship you probably should keep it; treat it as a forced savings so to speak.
Also, have you had a depreciation schedule done yet? If not, there may be significant tax savings to be had which can improve the cashflow situation. Consult with an accountant who is property wise on this.Cheers,
Marc.
[email protected]Quite right Simon,
this was my point also, but not explained as well as you. I was trying to illustrate to summersky that a down market is not a reason to ‘jump ship’ so to speak in either shares or property.
It just happens to be up for shares and down for property -generally.
A good investor can make money in all markets.Cheers,
Marc.
[email protected]I was speaking to a r/e agent that I know here in L.A yesterday, and he said that this time of the year is traditionally a bit slower – less sellers, less buyers.
I guess the pattern is the same everywhere, but there are always houses on the market.
Get out there and find a bargain Daryl!! and if you find one – tell us.
Speaking of the agent in L.A; he said he has a client who owns 55 apartment buildings here in L.A. That’s not a typo – 55. And he is still out there looking for another.
I thought I was doing o.k until I heard that. Have to work harder I guess.Cheers,
Marc.
[email protected]
