Forum Replies Created
Did anyone read the article by evan thornley in the last BRW of the year?
Interesting comments on his thought about the fact that the economy is booming mainly on consumer debt and that it is going to end poorly.
I think that this is one of the things that the reserve bank is worried about so rates will probably go up.
Josh
PS thanks for the info on the nnewsletter. Just signed up.
Mark,
Just a question thats kinda off topic, but have you ever thought off keeping the house (renting it out) and using the extra equity from the rehab to put down a deposit for the next one?
I don’t know if the numbers add up and if it will work but it’ll save all the transaction costs and you’ll build a portfolio.
Josh
Hi peter,
I’m kinda along the same lines as mel. If you decide to invest of the equity of the reno later, it can be done but you then lose out on time. When compounding time is you’re best friend.
Not to burst your bubble or anything but a ppor is rarely an asset. As you mentioned yourself, If you aren’t going to sell, the only way to access money is to borrow agaisnt it.
Unfortunatly it is a bit hard if you don’t like living in it at the moment, however, if you want to retire well it does generally mean you do have to sacrifice somethings now for more returns later.
Josh
Hi allen,
you would have to talk to an accountant to see if this was possible or not but you might consider buying an ip through a trust. theoretically the ipisn’t owned by you so that shouldn’t affect the rent allowance and also and income can be distributed between you and your wife that allows the best minimisation of the allowance.
I have generally heard that if you invest and rent you will be ahead if you can get around a 7% return, but this really is dependent on people saving the difference between the rent a morgatge repayments which it seems you wont have a problem doing.
However you have to take into consideration the 7g fhog (although you can still use this later if it still exists) and also the other benifits not monetary of owning a home.
Josh
Another way you can consider is after all expense (inc your own wages) is to see whether the return on capital is acceptable for the increased risk and compared to what you could get elsewhere.
Josh
I have heard this before although I have never check it with an accountant.
I understnad it has to do with the initial purpose of the loan, regardless of whether the use changes half way through.
I don’t know whether it is reciprocated for an ip becoming a ppor.
Josh
are there any tax benifits from working overseas whilst having a neg gear prop? I don’t know whether your overseas income is deductable?
(i have no clue about this area but it was just something i thought of.)
Josh
plus a 3.6% yield isn’t a lot.
Hi robo and mel,
I’m not sure whether moving from your current ppor to another ppor would make the ppor #1 loan a tax deductible loan even if you did rent it out. I believe that it has to do with the intent of the loan.
Best to check with an accountant but I heard that this was so.
Josh
Yeah, what mel said!
I mean you’d get a better return on paying of the ppor loan as it isn’t tax deductible you are saving more. ppor loan has to be paid with after tax dollars so at the highest tax bracket you are saving kinda twice the interest rate. ie 14%, hard to beat.
If you find it hard to get pos cash props, pay down your ips to be positive and use the equity to buy more props later. (mel has some good ways to do this, cause lets face it we all wanna be like mel.)
Josh
Bowen, North QLD, Home of the BIG mango[
]Simon,
I thought having an offset account on an ip loan would be useful to have whilst saving for rates and repairs etc. (If you don’t have a ppor loan otherwise it would be better sitting there)
Josh
Agree with wayne, biased one sided sensationalistic journalism.
I bet he’s never heard of the all ords accumulation index.
Well I think the article proves I’m putting my money in the right place.
Josh
I’ve heard that the cgt discount from trusts may soon disappear and that trusts will become more like companies????
Anyone else heard this??
Josh
5 bucks is still pos cash flow, If you are looking for a higher return then finding a better ip iss the only way to go.
The only question is that finding them might not be easy.
Josh
sorry I forgot to write that that is what pin was writing about.
With finding pos cash flow it will depend on how much cash you put in. ie If you bought an ip and paid it all in cash it would be cash flow pos from day one.
With the 11 sec rule the rent is roughly yielding 10%.
If you want to borrow all the money from the word go you basically need a higher yield to be pos cash flow from go. After all costs you can work out what yield you need, perhaps 15%.
I think steve did the 11 sec rule so that he wouldn’t have to carry a calculator aroung with him to work out whether something had a 10% yield or not.
Josh
quote:
you said:quote:
The only downside with that is we have never saved a cent because we have been of the opinion it is better to get rid of debt. We have redrawn on the mortgage a number of times for renovations, o/s holidays etc as the redraw facility seemed like the best way to access large amounts of cash we needed.I hope you were using an offset account!
If you had an offset account linked to your investment loan you would be able to spend the money in your offset accout and still get the tax deductions from your investment loan…that sounds like you are redrawing on you ppor loan which the interest isn’t tax deductable.
If you use an offset account with your investment loan and withdraw against it for non investment stuff like holidays, it can affect the ‘intent’ of the loan and the tax office does not like this. They can stop you from deducting all of the interest.
Josh
Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
Risky I don’t really know your personal situation so I cant really say sell or buy but as karen said you do have to weigh up all the other costs.
Generally prop should be a long term proposition but…..
Personally I might think about saving that lump of cash for a deposit on a pos cashflow ip, that way hopefully you may end up being close to neutral one day.
Josh
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