Forum Replies Created
Benny,
You’re quite right, it was Steve’s “Multiplication by Division” article in the May 2004 edition of Insider (on this website) which sparked my interest and my first post in this series. On reflection, I should probably have mentioned this to all so they could read the article first.
I agree with you there is no point going liquid if you have no plans for the money – unless you think the market is going to drop, of course.
Kind regards,
Michael
Monopoly,
I take it then that what you are against is selling an appreciating asset in favour of buying cashflow-positive properties ie you subscribe to the “never, never sell” philosophy?
Regards,
Michael
Derek,
Many thanks for your comrehensive reply. I will keep the Manly property and use the leveraged equity to purchase cashflow-positive properties. That way I will have a mixture of growth and cashflow assets.
Regarding depreciation, there may have been some confusion. The Manly property is more than 40 years old, so I have only been depreciating some fixtures and fittings. I have not yet read the tax article you refer to, but I understand there is essentially no building depreciation after 40 years.
Thanks again,
Michael
Derek, Yack, Terry:
Many thanks for your advice and concern regarding my query as to whether to sell my Manly property. I agree it is a good long-term investment. It may be, however, that we see no appreciation in the next three years. If this is so, even taking into account all the costs of sale (and purchase of another property), it may make sense to buy and hold cashflow positive property for the next three years, then buy back into a growth asset such as a property in Manly.
May I respectfully ask whether any of you have actually read Steve McKnight’s book?
Monopoly: you seem very scathing about cashflow-positive property investment. I agree with you that capital growth has worked as a strategy up until now. I have done very well out of it myself. The question is how best to use your cash and your equity, and whether your unrealised equity should be converted into cash (by selling the property), thus locking in your capital gain and also reducing your interest payments if you were to buy a property of the same value the next day. The main benefit, however, is that your serviceability improves and you can then borrow even more funds. Have you read Steve’s article on this subject?
KP: re your 11/11/04 post:
I have no other income in Australia. As well as losses being able to be capitalised and offset against any gains if I sell in the future, I understand they can also be carried forward to offset income in future years.
I was looking at investing in Belgium, but have chosen to stick with Australia.
I didn’t know about a Cashbond or Annuity. I have just refinanced the Manly property to access the equity. I have an offset account which works like a line of credit, but at home loan rates.
Who is Steve Navra?
Yes, I am able to purchase up to about $400,000 of new property, depending on the cashflow of this new property.
Kind regards,
Michael
Martin,
I work on yachts in the Med.
New Zealand does sound like it has some fantastic opportunities, though I heard you can only generally borrow up to 70% of the value of the property. I think interest rates on loans were higher too. Can you confirm?
I found the answers to my question re CGT on the ATO’s website as follows:
“capital losses must be offset against the capital gain before the discount is applied”
Kind regards,
Michael
Martin,
I used to live in Australia and acquired Aus citizenship. I like it in Australia and know the market better there than any other country – that’s my only reason.
Do you know of better places to invest in property? I saw some posts mentioning Canada.
I also saw that Steve McKnight is investing offshore. Do you know where? Do you know how one can find out? (I am still new to this site)
Kind regards,
Michael
Dear Yack,
I only get 29% back from the taxman (see my reply above to Brisbane 04 (Martin).
What do you mean by “ve+ properties”?
Have you read Steve McKnight’s book? I ask this because you seem dead set against his philosophy.
I confess to not having read any of Peter Spann’s books, but I believe he takes the opposite view to Steve, namely that you should go for capital gain and negatively gear. I have read another book on the subject by Sean O’Reilly “Anyone can be a Millionaire”.
At this time I believe it is better to go for positive cashflow. I agree with your timing for buying growth properties again in the future. The question is how best to use available cash/equity in the meantime.
Kind regards,
Michael
Dear Martin (Brisbane 04),
I pay tax at 29%, however much I earn, as I am a non-resident. On the other hand my Australian income is taxed from the first dollar ie I have no tax-free threshold nor lower bands of taxation.
So I believe my figures to be correct. I am just hoping I can find someone to confirm I have done the calculations correctly.
Kind regards,
Michael
Thank you all for your help and especially to Pete who provided a clear explanation of how serviceability works.
I am still puzzled as to how Steve McKnight managed to keep on borrowing so much with so much of his cashflow being passive, ie not from a salary/his own exertions.
Michael
