Forum Replies Created
It depends. What is the target market? Does the target market have a car? Is there an opportunity to add a garage or off street parking (if it is a house maybe, if it is a unit then probably not).
If the target market has a car and every other similar property has a carspace or garage, then it doesnt seem to tick enough boxes to make it a desirable property and so is probably not a good investment. There is probably a good reason why this property is way below the median for the area.
Cheers,
LukeI would say it is legal, as long as you are paying market rent. Better check with an accountant first though. I have heard of schemes like this in various books, I think Jan Somers or Margaret Lomas recommended it.
One thing you could do is to both move into your own houses for say two months before you switch and rent each others house out. This way you can still claim CGT exemption under the 6 year rule.
Luke.
Be careful mixing business and friendship. Good friends are hard to find.
Luke.
Laurie,
If you are able to claim the FHOG then it may be worthwhile moving in for 6 months so you can do this (depending on your investment plan and strategy of of course). You can only claim the FHOG once and you will not be able to claim it if you have owned a PPOR before. So if you intend to move in to claim CGT exemption under the 6 year rule (I dont think there is a minimum time you need to move in for, you can move in for 2 weeks and it will still count I am pretty sure), then you may as well move in for 6 months and qualify for the 6 year rule plus the FHOG. You will not be able to claim the FHOG again because you have already owned a PPOR if you ever move into this property.
If your strategy is to hold the property long term and never sell (so hold it for 20 years or more), then you might be better off not moving in at all and claiming the FHOG on a more expensive property in the future. The more expensive the property, the bigger the stamp duty saving. If you are not going to sell in the short to medium term, then the CGT expemtion doesnt really matter.
Cheers,
LukeAhhhh, 3 replies to the same post in as many minutes!!!!
I just remembered that there are a couple who do a lot of vendor finance on these forums- Paul and Karen Dobson. They may be able to offer some advice.
Cheers,
LukeAnd you have to remember that you have to be prepared to pay at least 10% premium over the market value for a deal like this to get accepted.
Luke
Maybe contact the owner informally and see if he is interested- there is no point in organising a formal propsal if he has no intention of ever selling.
Luke
Ok, hopefully you come out in front. 6.88% is a great rate, I wish CBA would give me that!!
streamlineinvesting wrote:My interest rate is about 6.88% with BankWest, however that is just a basic P+I Home Mortgage. I believe it is on some discounted rate for a few months yet where it will probably shoot up eventually.Will try to refinance in a couple years and see what the best rate going around is at that time.
James
You will probably be up for some hefty break fees if you are on a honeymoon package. The banks usually load up the break fees on honeymoon packages to stop you from taking advantage of the discounted rate in the first few years and then switching lenders as soon as the discounted period finishes.
Luke.
Better than my interest rate- I am paying 7.1% with Commonwealth Bank. But I have easy access to equity via Lines of Credit so I am happy with my deal at the moment. I probably should shop around for a better deal, next IP I will be talking to a broker.
Luke.
thecrest wrote:Also, if I did buy a PPOR and use it as security for buying a commercial property, the bank will undervalue the PPOR and I lose about 20% of that equity's buying power, whereas cash is valued at 100%, not 80%.You can use a LOC to redraw up to 90% of the properties value (provided you are with the right lender of course). This will cost you LMI which I think you would be able to capitlize. Selling would cost you about 5% of the properties sale price, so really you would only be able to get an extra 5% from selling the property. This of course is ognoring the effect of CGT which if you were liable for would mean you woul be getting access to a lot less than 90% of the properties value.
I personally see the only reason in selling your PPOR while renting somewhere else is is the PPOR is in a very underperforming area and you would be able to get much better growth elsewhere, or if you had another venture that you needed the money for such as the Motel investment that Crest pursued. I dont see any point in selling if you are just going to buy a similar property as an IP.
Cheers,
Luke.I looked in the yellow pages for the store, but no luck. Will let you know when I find it.
It is possible to get positively geared properties in capital cities, but you cant just go to the "Positivley Geared Property" shop and buy one. You need to create one by doing something out of the oridinary to bring the property up to its highest and best use- then you can gain maximum returns from the property and make it positively geared.
Luke.
Yes, I belive that you can claim the CGTE for up to 6 years from the time you begin renting it out. So you can rent it for 5 years, move back in for a few months, then rent again for another 5 years, move back in for a few months etc etc etc.
Luke
It can be done- but I am pretty sure that Steve McKnight did most of his deals using vendor financing on properties that were worth (as D suggested) 40-50k. He didnt adopt a buy and hold strategy and aquired 130+ quality properties in the 500k range. He either bought and sold these cheaper reural properties quickly for a profit or onsold them with vendor financing.
Luke.
Very good suggestion by Derek and a strategy that most users of this forum adopt. It provides maximum flexibility for future purchases.
Luke.
You will be able to claim expenses on your house (including interest on mortgage repayments, council fees, insurance, etc) on your tax return. This will mean that if your expenses are more than the rent recieved, you will recieve a tax refund when you lodge your tax return.
This is a good option if you have high mortgage repayments and a high LVR, and also if you can find a place to rent that is cheaper than the rent you will recieve from your house. You will also be eligable for Capital Gains Tax Exemption provided you do not move out of your home for more than 6 years and you do not claim a second property as your PPOR.
Have you switched your loan to Interest Only?? This will make you repayments much less than if you are also paying off the principle, and may mean that you can stay in your home if you do not really want to move.
Cheers,
LukeLMI protects the banks to a point, It doesn't help them a great deal if someone defaults on a mortgage and then goes bankrupt. They still carry plenty of risk even with LMI.
cturner22 wrote:Hi Luke
So do you thinks its value for money? For me, I thought it was an affordable beginning as I wanted to join the RESULTS mentoring program, but Im still organising my finances and did not have the funds available
ThanksYes, I definitely think it is good value, I have been reading heaps of books, have purchased 1 IP about a year ago and am reading myself for another soon (will make an offer tomorrow, fingers crossed) so am not a total newbie (although still have plenty to learn!!!) and I have got plenty out of it. The US tax leins thing by itself was probably worth the money, and I am pretty sure this next investing in the USA pack will be really good as well.
Luke.
I joined last year in November. It has been quite worthwhile so far- there have been online video seminars on USA Tax Lein and Tax Deed investing, a 'Getting Started in Property Investing' seminar and a few other videos. There has also been other reading materail and monthly videos about a bunch of other things. It is quite expensive, $70 per month, but it is better value than paying thousands of dollars for seminars. You also get two free tickets to the annual property conference, and I also got two tickets to a Peter Daniels day (which I though was a total waste of time- tey just tried to sell you gold but that is another story).
Anyway in summary- worthwhile if you are just starting out. And it definitely launched in December ast year.
Only problem is that we are still waiting for the USA investing pack, which must be coming out in March.
Luke
