If they've closed up shop there's probably not much you can do.

They have probably declared bankruptcy for that company.

Lesson learned; don't go for rental guarantees; they are usually built into the price of the property when YOU buy it, and it is usually above market rent, so when it runs out in 2 years, you are left with a property that rents far lower than what they were paying you.

If your loan allows you to make redraws, or there is an offset account attached to it, then I would throw the whole amount on the loan and decrease the debt, and you will be able to access it for another IP when the time is right.

If not, maybe pay $40k into the loan, and keep $10k in a high interest on-line account such as ING Maximiser. This will give you some funds to access in case of an emergency, or the hot water service blows up or something like that.

In my opinion, decreasing ALL debt is a good policy, whether it is tax deductible or not.

Of course; always decrease the non tax deductible debt first.

There are some who advocate never paying down property debt, but I don't agree; your LVR and cashflow are the critical factors in your financial health.

If you are earning a high wage as you say and paying little rent, you could probably easily save enough for another IP deposit in a year.

EljayC wrote:

Hi everyone,
I am very new to this site and all this finance stuff. Was not sure where this post belonged so chose this one, hope I got it right

Here is my dilemma, any suggestions/comments most appreciated.

I have been asked if I want to relocate with my job from Canberra to Newcastle.
I have a property here in the ACT which has a loan of $180K on it.
Because the rentals in Newcastle are pretty good I would probably rent there. As I have 2 dogs, this could be hard so may end up buying a little later on.

I really don't know if I should accept the position. There is no difference in pay, but they pay for my removal etc…..

Here are some details:

My mortgage payments on the ACT property right now are $290 per week
Probable rent on the ACT property $320.00 per week
Possible rent to pay in Newcastle $250.00 per week
The ACT house was built in 1988.
And I have lived here since January 2003.

I have no clue about tax implications etc.. and while I'm not struggling, I could not afford a big tax bill to pay off at the EOY. So I am here looking like an idiot hoping to be enlightened a little

What would you recommend I do to make this situation be in my favour in the $$ sense.
I only have 2 weeks to give them a yes or no. With the move to be mostly likely to occur in June/July.
I would also have to at least re-carpet one bedroom as it wasn't done when I had a water leak (due to costs at the time), a quick repaint and a tidy up of the backyard.

Thanks very much in advance.

Lorree

If you rent out your ACT house when you move to Newcastle, you won't be paying tax at the end of the year; you'll be getting tax back. Probably a lot.

All of the expenses and the loan interest on your ACT house will become tax deductible after you convert it to an IP, and because it was built after 1987, you can depreciate the building and the fixtures/fittings against your earned income tax as well.

You would need to have a Depreciation Schedule prepared by a Quantity Surveyor at a cost of around $500, but this cost is also tax deductible and will pay for itself in the first tax return.

You can also rent out your house for up to 6 years before you become liable for capital gains tax if you should wish to sell it in the future.

Another 'must have' is to get Landlord's Insurance as well as your normal Building and Contents insurance before the Tenant moves in. It is around $200 or so dollars for this, and it is a tax deductible expense.

Is the $210 offer unconditional?

If it isn't then you could make an unconditional offer of $205k, and maybe a shorter settlement – 30 or 60 days.

Of course; you would want to make sure you CAN go unconditional when you offer.

But as this is an IP, there should be no emotion involved in your offers; the numbers need to work for YOU, and if the offer you need to make goes higher than that, then no deal.

The other problem is that in a hot market, a lot of auctions will go higher that the asking price as the emotional owner/occupiers fight over the properties. Don't get caught up in all that. Make a profit when you buy.

Do your research, know your values, stick to the numbers.

Sorry everyone; I just realised that they made only $1,000.

$20k profit on the before valuation to the sale price; $330k – $310k = $20k.

Then deduct the sale costs of around $9k, and the reno costs of $10k = $19k.

If they had to do all the hours themselves and had no help from Action Squad, that's $1,000 for probably 3 months of no weekends and dirt, dust and crap.

Yeah; good one.

Who pays the other workers?

It sounds like a reno organised by the TV program?

A  property that returns 20% in today's Aus r/e market?

Nope.

It's a scam.

Maybe a listed property trust may do it; but not direct property.

I guess if you added the rent return and the cap growth together you can get 20% return.

If you have any cash, and have non-tax deductible debt, then clear that debt. So, the PPoR, and/or other doodad loans.

Try to arrange it so that you can redraw the cash if you need to in an emergency; either through an offset on the loan, or a LOC.

Forget the Leap Year.

It's a weekly rent; not daily. Have you ever seen a property with a permanent rent advertised by the day?

Just multiply the weekly rent by 52, then divide by 12.

$200 x 52 =  $10,400 / 12 = $866.66

That should be the monthly payment.

How long did you own the property? If it was more than 1 year, you are only up for tax on 50% of the gain.

Many accountants are not pro-active unfortunately; they sit back and wait for you to come to them with ideas etc. I'm surprised there has been problems for 14 years; didn't you say something?

Also, after you find a NEW accountant, ask them about a variation on the taxable income for this year. There may be nothing they can do, but a good sit down with them and go over everything is required.

Get ALL the finances in order and organised for when you go to see them and hopefully work out a plan of action.