Forum Replies Created
- mattnz wrote:In Australia they are much higher now, Sydney has a multiple of 9 and Melbourne 8. You have to wonder what NAB's economists are saying behind closed doors about how overvalued the Australian market is. I
They are still lending 95% LVR for Australian property so they musnt be too worried.
number 8 wrote:With all due respect to the above, be careful the way your capitalise interest.Further to this, to capitalise interest on an IP, you will probably need a private ruling from the ATO. You will need to prove that the reason you need to capitalise interest is to hold onto the asset, and that the reason is not to minimise tax. Talk to your (good) accountant about this.
Luke.
You should talk to a mortgage broker about this one (there are plently of good brokers on these forums). Surely there is someone out there who will lend money to you.
Luke.
It is definitely possible. Steve McKnight is using a SMSF to buy USA foreclosure property as well.
Cheers,
LukeSorry forgot to add, are you in NSW? Getting approval for granny flats is easy here but they can only be 60m2 maximum. I am not sure about other states but check with your council.
Luke
Check out this construction cost calculator- found at http://www.bmtqs.com.au/ConstructionCostCalculator.aspx
The per square metre price of a granny flat will be higher than the per square metre price for a four bedroom house. You could either get a project builder to build your granny flat (there are plently of companies I know of in Sydney who can build you a kit home granny flat) or you could get a draftsperson to do up the plans and then get a few quotes from different builders to build it. I would say it would cost between $80k and $100k to build a 60m2, two bedroom granny flat including services connection, drafting of plans and council fees.
Cheers,
LukeIt sounds very risky- If you dont have the $120k to complete the renovations, what are you going tp do if you can not find tenants or the valuation comes in low? You will be stuck with $700k of debt and no way to pay it back. You need an exit strategy in case things go wrong. Finding tenants, getting it revalued and making a huge profit is not an exit strategy.
I think a private investor will want more than a 15% return on this project, unless you have prior experience in this type of thing (which from the sounds of things you do not).
I dont mean to be a pessimist as we all hate those, just throwing ideas around.
Luke.
Or ring Jamie- he seems to have helped you quite a bit so far.
Cheers,
LukeIf you borrow 100k to buy the block of land for 100k (100% finance, assuming you have other equity), then you would pay approximately $35k interest on the loan @ 7% interest only. This is quite conservative as rates will likely be higher than 7% in the coming years.
So if you sell for $110k in 5 years (that is the $10k growth you have said you would be happy with), then you would have a loss of about $25k. I do not know many people who would be happy with that.
You may say that you have $100k cash so you wont have any interest costs and that $10k growth is profit to you. But if you just leave that money in a savings account, you would end up with $25k interest over 5 years so you would still be effectively losing $15k.
Cheers,
LukeAnthony/Terry-
Can you set up two trusts- one business trust and one porpoerty trust, and then distribute the profit from the business trust into the propety trust too offset any losses incurred in the first few years of operating the property trust?? Will this have any asset protection implications i.e. can any creditors of the company recover money from the property trust because the profit districbution may make it look like they are linked??
Luke
For a bank to lend money to a trust, they require a personal guarentee from someone that they will repay the loan in the event of a default. Therefore, if the trust defaults on a loan, they will not pursue the trustee but rather the person who has guarenteed the loan. This is why they seek a perosnal guarentee on loans to trusts so they can recoup their money.
I am not really sure on the asset protection side of things, but you may have a problem if your family home is in joint names as if either of you are sued then you may lose it. It may be better to have the family home in your wifes same only (assuming she is not working or doing anything that may get her sued) or in your name if you are engaged in the more risky activity.
Cheers,
LukeYou need to check the council rules about subdivision. Even if it is a large block, you might not be able to subdivide depending on their minumum block size requirements. And if all of the houses are on large blocks, would there be much demand for a small subdivided block of land??
Luke.
You definitely need to check with council as to what their planning guidelines are. A big block may or may not be worth a lot depending on where it is. 1000m2 of land on a city fringe suburb may not be developable, however an identical sized block of land in an inner suburb might be able to be split into 4-5 unit sites.
Where is the block of land you are looking at located??
Cheers,
LukeSorry- good point by xdrew I meant!!!!
xdrew wrote:Catalyst .. But if the banks wont let you borrow on it .. they probably also wont lend against it. It falls short in all sorts of ways from being an ideal investment base. That remains my problem with them.Very good point by Catalyst. If you can not use the property to leverage into more property, then it would very likely be a poor investment. Any capital gain you do get might be trapped in the investment and you would not be able to get a LOC established against it to fund another purchase.
Cheers,
LukeYou are able to rent back a property from a trust that you are a beneficary to. However, the rent must be market rent (not a discounted rent) as you must show the ATO that it is a legitamite lease and not just a tax evasion scheme. Furthermore, you can rent out the property as 'Fully Furnished', which means you will be able to claim everything from depreciation on your furniture to the cost of buying toilet rolls and pots and pans.
In regards to negative gearing, you can not transfer losses from a trust to an individual. So negative gearing does not work with trusts, as the loss is 'trapped' inside the trust and can only offset future income of the trust. You had best speak to a good accountant about this, as there may be ways of getting around it (such as transferring money from a profit making trust into the loss making property trust).
Cheers,
LukefWord wrote:Sure, prices could fall but that doesn't fuss me. And I'm not anticipating price falls of 30, 40 or 50% either. I'll rather take my chances at a better financial future (at the risk of losing everything) rather than wait around, do nothing, and be screwed anyway, wallowing in self-pity and poverty in my golden years as inflation causes the death of a thousand cuts.
Well said fWord!!!
fWord wrote:MRW wrote:may as well keep this discussion going.I have no idea who this guy is, whether what he says is valid or not. Interesting read though.
Who knows!—
MarkInteresting read, and judging by the comments, there's a lot of people out there waiting for the Australian property market to fail. It very well may, or it may not. One thing is for sure: the ones waiting for the crash have virtually nothing to lose and potentially a lot to gain if the bubble bursts. All they need to do is sit around and talk. It doesn't take guts (nor the smarts) to do that. Talk is nothing without action.
Those with money in the market are the ones who stand the chance of losing a lot. That said, I am betting my future and my entire portfolio that there is no bubble to burst. Sure, prices could fall but that doesn't fuss me. And I'm not anticipating price falls of 30, 40 or 50% either. I'll rather take my chances at a better financial future (at the risk of losing everything) rather than wait around, do nothing, and be screwed anyway, wallowing in self-pity and poverty in my golden years as inflation causes the death of a thousand cuts.
Well said
Derek wrote:Too many small and very old units in Glendalough for my liking.But if you can pick up a reasonable sized unit in a building that is in good condition, then I think you will be a good chance for above average growth.
Luke
I think you will find that using a trust does not increase borrowing capacity. This has been discussed at length on these forums- Terryw and Richard Taylor might be able to comment more on this.
As for trusts, anyone can create a trust and there are steps you need to go through. A good tax advisor or acocuntantand a solicitor will be able to help you. Discretionary Trusts with a company as a trustee seem to be the way to go.
Cheers,
Luke.
