Forum Replies Created
Brad,
Post tax +ve cashflow by ” a narrow margin ” is great if the desired outcome is buy and hold for capital gain. But what Steve is all about is producing income via positive cashflow not waiting for your tax cheque to bring you in front.
Personally I think there is a lot of merit in the type of investment you mentioned because your +ve cash flow cannot be taxed.Just hope the narrow margin is not too narrow. The main prob with post tax cash flow is that your depreciables run out after a while. A good 2.5% building allowance goes on for 40 years though.
MJKBrad,
I think what that is called is a “rort” (spellchecker).
MJK
When assessing capital gain depreciation ( chattels ) is taken into account as profit but building allowance ( 2.5% of building cost ) is not.
MJK
It may be a bit difficult if the Spouse owns half the property. Wouldn’t you have to split the rent for Tax purposes.
MJK
One of the main reasons investors fail is because they sell too early. Believe me I know.
MJK
The market is HOT HOT HOT but if its capital gains your after you need to find an area thats in the early stages of growth. I suspect not Melbourne or Sydney. It may be better to wait if your a believer in the hypothetical Crash ” we have to have”
MJK
Everybody is entitled to their opinion but it is still only an opinion. It would be better to analyse the Australian economic facts. EG low inflation, good GDP, low interest rates , low dollar.
MJK
Powderfinger,
We can now call you a “Buyers Agent” can’t we.
MJK
When the prices get too high for mums and dads and first home buyers in Melb and Sydney the interstate migration to Brisbane begins. So Brissy may be more insulated to hypothetical downturn than Melb and Sydney.
MJK
I would have to say that Fitzgeralds’ book “7 steps to wealth” is a must read.
MJK
The Australian economy is significantly different know than it was in 1988-1990.
Today interest rates are 6% compared with 17%.
The economy is strong against the rest of the world not weak.
USA is emerging from mild rescession not going into one.
COOL yes ! Crash no I don’t think so.
There is no rescession being factored into the Australian economy in the near future from what I can tell.MJK
Actually, I’ve had agents suggesting rental increases on my Brisbane properties. But buying in those markets now would be a seriously negative cash flow proposition.
Personally I believe that capital growth and rental growth are counter cyclical to each other on the whole. It when the building of new properties slows down that the rents rise,any thoughts?MJK
There is another major difference that most residential investors fail to realise initially ( including myself ) and that is that interest rates ar higher on commercial loans. Typically 1% higher.
You usually can only borrow 70% although savvy clients with a good track record possibly could do better.The interest rate offered is often linked to the quality of the investment.
Commercial is a whole new ball game and needs serious research by the first time punter.MJK
A question from an absolute shares novice. If one had considerable funds available from a LOC at 5.97% they would be able to invest directly into shares without margin lending wouldn’t they. That is they are secured by property.
If so, could they invest through dealforfree without using margin call or would they be better off using another access medium ?MJK
The ATO ruling is that you can only claim interest from the time the property is available for rent. Any interest you pay while building is counted as part of capital ( purchase price ) and is taken into account when you sell. In other words it becomes part of your capital gains tax assessment so you can show a smaller gain.
Probably not the answer you wanted to hear but thats how it is.MJK
Kezza,
Your rents look pretty healthy. 200 per week for a one bedder is good. Was looking at a Melb one bedder getting only 150. I dont think your units will ever be 11 second rule properties because they are within 15-10klm radius of Brisbane so what you will be achieving is good capital growth at the moment.
I think if four agents are telling you the same thing its probably worth listening to. Dont try to turn an inner city investment into an 11 second rule investment. Remember that the +ve cash flow guys on this website are investing in rural areas and NZ.MJK
I suppose when it comes to units there’s always another one around the corner so competition for tennants could be stronger. I wasn’t aware that there was a problem with vacancies in Brisbane area. I own a few houses in Brisbane and have never had any real trouble finding a tennant, bearing in mind that the houses were purchased between $130,000 and $175,000 don’t require high rentals to cover costs whereas expensive 250,000 plus units may well do thus making them less attractive top tennants. Maybe you could tell us a little more about the current rental you are getting so we can get a handle on where you’re at?
MJK
I like to raise the rent buy $5.00 per year. 5 Bucks never killed anybody but it helps to keep rents up to date.If a tennant is on a 6 month lease I raise it on the second renewal. If they are on a 12 mth lease I raise it every renewal.But you must be surte you are not too pricy. Generally most investors dont increase when they should. And your realestate manager with always take the soft option and not go for theincrease because it involves effort.You have to tell your manager what to do. IMHO
MJK
I think what Crashy means is that the interest on a home loan is dead money and that it is. Perhaps at the moment if rent is cheaper than your interest bill you could save some money. Put this extra cash aside as a bigger deposit and buy your house when the market corrects. The problem you face is that if it doesn’t correct you would have been better off diving in now.
My personal veiw is buying your home in a year or so with a bigger deposit may be worthwhile. Buying at the peak of a boom is pretty tough.
Investing in tax deductable investment property is total;y different to buying your house.
MJKYou can use your equity as a deposit. The Bank will evatuate how much equity you actually have and allow you to borrow against it. You need to speak to your banker/broker to get an idea of how much they will lend.We can’t tell you how much, only that you should be able.
MJK
