Forum Replies Created
Furnished homes appeal to short term renters.
New furniture can be well depreciated but it does mean a higher maintenance requirement. I just went around to one of my furnished IPs to replace a $20 kettle
Why are you doing it and what do you hope to achieve by investing with another person?
I would only do so if I had no other options.
Ciao,
Sorry Xenia, I was wasting time sleeping.
What are your longer term goals?
Once you have them articulated the answer will be clearer.
Do you currently have a high income? If so then unencumbered IP income will be taxed pretty high.
I would need more info before making suggestions.
Ciao,
Don't pay off either.
Change all loans to IO.
Save money for your next investment in a high interest account in a lower tax paying spouse. Not much point in an offset attached to an IP but you can do it if you prefer.
I imagine you might want a PPOR soon. If so you shouldn't pay down either IP cos if you redraw for a PPOR then it wont be deductible. So use a seperate account either a high rate one or an offset. But pay nothing above the interest on your IPs if you plan on buying a PPOR.
I would run some figures before making a decision.
If you wish to get into an IP sooner then using the cash for a to pay out a loan means you have to start the whole savings process again. You may be able to afford to buy then start an accelerated repayment plan to kill the personal debt and then keep it running for the next deposit.
I would answer this question after finding out your exact situation and working out what your priorities are.
Either choice can work.
Ciao,
I would rather slam my old fella in a car door than work for that mob.
They are the bottom feeders of mortgage salesmen. Notice I didn't say brokers, they don't provide much choice of loan – just hard sell one product with a big fee attached. Any real broker can do the same thing for free without the hard sell.
madproperty wrote:Thanks Simon soungs good but I have a few questions.
Regarding deductibility – just to confirm the 20% deposit plus costs from the LOC and the 80% loan on the IP will be tax deductible?
Won't paying the rental monies and my wages etc into my home loan make the other loans non deductible because the expense incurred is not offset against the rental income directly?
Thanks for your help mate
All loans used to buy the IP will be deductible. The 80% loan and the LOC (20%+) will both be deductible.
Do not pay anything into your home loan. Pay it all into an offset account against your home loan – draw funds from here to meet your interest bill each month.. This will reduce your non deductible debt.
You do not need to link rent to the IP loan. As long as you can show the loan was used to buy the property then it is deductible. It isn't any more complex than that.
Ciao,
Easiest way is to run your figures past a broker. He has software for all his lenders and can tell you who will lend the most or at the best rate – whatever is most important to you.
Use the LOC to source a 20% deposit plus costs and then buy an IP. Borrow 80% against the IP using a seperate facility. Usually I suggest a pro package which gives you a rate reduction plus no setup fees on the loan. Both loans will be deductible ie the LOC and the 80%.
Make all loans IO and pay all your funds into an offset account against your home.
How does this sound?
Ciao,
Are you sure you don't have the equity for a deposit? I suggest you speak to a decent broker and fully explore your options before signing up to a more expensive option.
Ciao,
Commercial deals are not like residential finance. There are few standard deals. You really need to speak to a good commercial broker.
Typically rates start a bit higher than resi loans with LVRs around 70%. If the LVR rises then so does the rate – markedly so.
Depending on what security you offer we might be able to combine a resi mortgage with a commercial one to reduce the rate and fees.
If you need a commercial broker to take a look please email me your situation in 3-4 paras and I will pass it onto the guy my clients use to take a look. He will let you know if it is doable or not. I don't make a practice of offering my services but this is unusual and urgent.
All the best mate,
In your situation I too would recommend you look for more expensive properties that have potential for high growth rather than amasiing a large number of cheapies.
I would also speak with a professional about setting up a high growth share portfolio to get the investment ball rolling to build a large deposit to secure the first place.
I am thinking that if you can build a $100K deposit fast then you could be buying Sydney blue chip residential stuff at $600K+
If you email me I can give you some names and ideas – I am not looking to solicit business from you or to steer you onto someone paying me a fee!
Do a search for DHA and find a huge thread on it.
Ciao,
I am in Newcastle and would love to know of hese places.
Why didn't you insure the property as soon as contracts were exchanged?
Some people did great doing this at the beginning of the last boom. Then as people saw them making money they started going in. The more cautious waited longer until they were sure it worked and then they bought in. These were the ones who were hurt the most.
Then a year later when the places were built they came to me asking for finance on a property worth less than the amount they needed to scrape together to settle with.
The people who made the most were the developers and so many shonky companies started up and dissappeared.
Please be very very very careful.
Don't use any of the companies experts. Use your own solicitor, valuer and mortgage broker. Use clauses in your contracts. I have seen a lot of hurt suffered by people believing in salesmen. They don't even sell properties. They sell you a dream. I bet their presentations include pictures of nice cars, happy families, fancy homes and holidays. That is what they try to sell to you.
I wouldn't do it myself. I think something I see over and over again from new investors is that they search the internet looking for fast ways to make money. They really believe that they exist.
I can tell anyone here how to make a lot of money through investing in a number of ways. None of them are fast.
Please be careful.
GlobalMark wrote:Dear Richard,I agree with what your saying there is a lot of irresponsable lending going on in Australia and around the world. You only have to look at the sub-prime issue in America to see where our future could be heading.
However, in this situation $700 cash in hand means that she is not delaring the income to the tax office, so in this case a low doc loan would be appropriate as they dont have docs to submit but they do have the income to support the loan.
In addition, we are making all of these comments without knowing the return on investment or the vacancy rate of the area. This and many other factors need to be considered prior to even thinking about getting finance.
Kind Regards,
Mark Leith
Property Advocate
Global Buyers Agent
http://www.buyersagent.com.auMark,
Sorry to keep disagreeing with you …
A LODOC loan will need an income to be declared. If a person is taking cash and ripping off the ATO and fellow taxpayers then declaring that income will expose her to data matching by the ATO.
Alternatively if a person was to lie and declare a higher income to meet the loan then the ATO may even ask for the taxation shortfall.
If declaring an income is an issue then a NODOC loan may be more effective.
Ciao,
Some fair points there and better reasons than it sounds like going to the races.
Investing and trading are worlds apart. In fact I will just leave a quote here which I use to remind myself why I choose not to trade.
"The Stockmarket exists to move wealth from the impatient to the patient."
If you ever get the urge to do some learning on equities investing (not trading) I would encourage you to read the book Motivated Money by Peter Thornhill which can be bought online at http://www.motivatedmoney.com.au he explains buy and hold investing far more eloquently than I.
Ciao,
How long do you intend to hold your IP?
GlobalMark wrote:On the other hand from what you and others have told me you really need to keep tabs on shares on a regular basis and unless you have a passion for shares this would seem like a lot of hard work.
Another assumption.
I haven't sold a share for over five years.
I buy high yielding companies that have a history of tax effective dividend growth and capital growth and hold them.
I check them every month or so out of curiosity. Certainly that is easily done from anywhere in the world. In fact if being OS is a concern then you would find shares easier than property to keep tabs on and effect decisions on than property.
Perhaps it is my advanced years but you seem to have a pretty solid bias against a major asset class that my posts will not be able to budge.
I reckon choosing one asset class over another is like trying to play the white keys only on a piano. You wil make a tune but wont achieve the best results.
Maybe when you are as ancient as myself you might take a look at them. I hope you don't kick yourself then.
As my last word on the suject I will include an article that some people have found illuminating.
Lastly let me ask you… Do you have a passion for property or a passion for making money? Mine is the latter.
Good luck to you mate.
Many investors are dyed in the wool property investors collecting a portfolio of positive or negative geared properties to fund retirement – hopefully earlier retirement if we choose well.
I am of a firm believer that the markets are cyclical having been through three cycles since I began my investment journey in 1989. I hope that the younger readers might take some heed of what I have seen and be better placed to enjoy the next boom than I was for the last few. If people tell you “That this time it is different” do not believe them. It is never different!
The aim of this article is to compare the stock market to the property market. I will be using Managed Funds as my example as they equate to a parcel of well selected stocks rather than individual stocks. Individual stocks may not follow the actual market closely however if diversified into a pool of stocks we can use the effect of a boom to our advantage.
I am also writing for the “Buy and Hold” investor who collects assets and holds them for the long term believing that “time in” the market is easier than attempting to “Time” the market as a trader might.
Property Investors buy properties when the market is less buoyant, when it is a buyers market – as I suspect we are at in today’s cycle. The majority buy when they are confident of the market. They are confident because all their friends and the media claim the market is hot and profits are being made. Some will make profits but many will time it wrong, buy at the peak and watch their investment stagnate or fall. Fortunately for some, they will not realise any loss unless they attempt to sell. As the property market is less liquid many people prefer to buy and hold – in this respect time will heal most poor decisions.
The seasoned investor will buy when demand is low. He will have his choice of the market and will be able to buy when he feels a vendor is motivated to accept his lower offer. He will hold his property for the medium to long term and either let time increase his value and/or he will add value in a number of ways such as renovations, development, subdivision etc.
Why hold all your assets in one class with just the one boom every 7-11 years?
I propose that we can treat the stock market in much the same way. Buying on weakness and allowing time to add value to our portfolio. Unfortunately there is little we can do to add value ourselves.
Imagine buying a $200K managed fund as opposed to buying a $200K property. We have exposure to a different market cycle which means that we can be buying in either market on the downturns of the cycle and thus extending the “buying season”.
One can gear into the equity market much like properties. Although the interest rate is fractionally higher (8ish% as opposed to 7ish% currently) it is actually a far easier loan to get with lending being assessed on the stock or fund being purchased and the deposit raised. Your income is not assessed.
Thus with a stock “rated” at 70% as most blue chips are, for every $30K you have you may buy $100K worth of stock or managed funds. This compares favourably to the 20% – 80% ratio of non LMI property lending. Buying costs are lower with the abolition of stamp duty on stocks and agents fees can be reduced by using an online broker.
Going back to my earlier example – one can buy a $200K Managed Fund for no upfront fee, no mortgage application fee, no inspection fees, legal costs or stamp duty. Normally with an IP one allows 5% to cover these costs.
Minimum deposit required is $60K. Repayments are as for a LOC and a minimum might be around $1080 pm. However this may be capitalised as long as the overall equity position remains under that specified for the fund.
Other advantages include ease of sale. MF may be sold in approx 24 hours with low fees compared to a property being marketed with a 3% sales fee plus legal costs etc.
Whilst this may sound like I am comparing MF favourably to property I am not. I am merely suggesting that one should seek to be able to buy in both markets.
Management fees are less with the MF and there are no tenancy issues. Although a property may provide a lucrative Depreciation Schedule one should also remember that Managed Fund distributions may have franking credits attached which also give taxation relief to the owner. A franking credit is basically a tax credit that comes with the share to recognise that the company paying that dividend has already paid tax at the rate of 30% on its income.
One major advantage of property is that, with LMI, one may actually gear into it with as small as a 5% deposit. The property is not revalued by the lender and as long as the borrower makes his repayments he can be assured of keeping the property. However should one gear the maximum into equities then a fall in value could see the lender requesting further funds or selling part of the holding to address the imbalance to the equity position. I personally choose to only gear to 50% to allow a large buffer before this might happen. To my advantage is the liquidity which means that I can reduce my holdings when I suspect that the share market boom is at an end and have my portfolio at a healthier position in preparation for a buying season.
So perhaps a portfolio can have several properties and then several holdings in Managed Funds or Blue Chip shares.
I have not described Speculative shares here as I do not feel they can be likened to property. There is certainly a place for them but only with amounts one can lose without stress to the financial situation.