Forum Replies Created
Investabit,
The tough part about small business without the grand marketing is convincing the public you are worth the dollar spent. For what it is worth, anyone who puts their name on the line, as you have, clearly shows pride in their work. From my point of view you are placing yourself in the public domain and are standing up to compare your qualities with anyone who comes forward. I hope business is well for you…..
You have just entered the financial maze of life, assuming you are young, the choices get even more interesting as you make more money….
Go to your local propertry guru, you need a complete 3-4 hour options session……
Check out some ideas that you may have to consider…..
The following gives you an idea of the complexities of financial advice.
1. Plans in relation to health, income insurance, Trauma, Life/TPD (term or whole of life)?
2. Asset protection-general insurance (house, contents, Liability, Indemnity etc)?
3. Tax Deductible Debt v Non Tax Deductible Debt
4. Fee’s and charges charged by banks and other related industries?
5. Your own home and tax benefits- Owner occupied exemption, CGT exemptions
6. State and Federal Grants for homeowners.
7. Mortgage Broking concerns- interest rates, variable, low doc, LOC, fixed (short v long-15 years), 100% offset, investor loans- tax deductible set up, Records to keep for tax deductions, Consumer credit code, LMI, Capacity
8. Purchasing costs of a home- government search, conveyancing, P&B
9. What is capitalising interest? Sub accounts?
10. Are you in the property business?
11. Business structures, Sole trader, Partnership, Company and Trust ( Bare, Discretionary, Unit, and Hybrid).
12. How does A= L+OE apply to a property business?
13. Why would you buy a house in a trust? This is often not good contrary to the latest hype.
14. Investment property seminar –interstate, are they deductible?
15. The benefits of Holiday homes.
16. In who’s name for taxation and capital gains purposes?
17. Is interest payment tax deductible prior to a house being rented out? What about repairs after the property has been tenanted for income purposes?
18. Land tax- name on title, joint tenants, tenants in common, % effect v taxable income v Capital gains tax
19. Joint ventures?
20. Expected rate of return v inflation (opportunity cost)
21. Commercial v Residential v Public Trusts v Syndicates v Trust
22. Do you want to retain your present home/ what are your house plans or areyou planning to move within several years?
23. Rent v Buy, Shares v Property
24. Employment situation and taxable income?
25. Non -Tax deductible debt: credit cards, hire purchase and leases of domestic nature. What effect do these have on your mortgage or loans available?
26. Depreciating assets v appreciating assets – What are these?
27. Free cash flow- How can I improve this situation? How do you structure yourself to afford more property.
28. Income Tax Brackets and Capital gains Tax.
29. Age profile and the ability or risk that may be taken?
30. Should I pay off my home?
31. Mortgage repayment calculator? What can I afford to repay?
32. How can paying off my home be accelerated?
33. Negative v positive geared, The upside and downside to both of these?
34. What is OPM, leveraging, equity, and collateral?
35. Where to buy, unit/house, rental yield, new/old, price range, pool etc
36. Management issues with properties. How to avoid these?
37. Can someone house share with me to help pay the mortgage?
38. Strategies and tricks?
39. Co-owners with friends is this a bad idea?
40. Depreciation v Repairs v Capital Improvement
41. Loan cost write off
42. What is the Cost base for CGT and the trigger date?
43. How a line of credit can be so wrong?
44. Pre-paid interest and variation to PAYG ( form 1515).
45. How Lenders Mortgage Insurance (LMI) is of no financial concern.
Sorry, but this is Why you cannot have such a large open ended question solved on this site. A question such as the above will get a response that may cover only one of the above topics – If you went away to make a decision based on one, two, or even three of the facts above then you are short changing yourself and the ability to make a valid decision for your future.
STG have the old system that does not calculate your interest daily, rather it is a static figure that is calculated at the beggining of the year. This is not good if you have a large amount of money in an offset account.
You have lost me?
I was simply stating that a depreciation schedule does not have to be completed by a professional (nil cost to you if you are capable). Just like your taxes…….
Why don't you see a local broker so you can compare all the financial institutions? You may find / hear something you really like? You asking this question today, suggests you are keen to source the best product.
Yes, you can do this but will require a ruling from the ATO. Your reasoning behind the change of name would have to be good, such as an in-house argument b/w you and wife on whether you keep the property of not.
I had a similar situation for myself, three years ago. When I looked at all the pros and cons it stacked in favour of selling the PPOR to release the funds and pay down the new PPOR debt. I was than able to have a large pool of cash to make very good acquisitions. Not saying this is you. but the numbers should be done carefully to see if there really is a difference in selling or keeping the property. You have many other personal details that bare not disclosed on this forum that also my have a direct bearing on what you should do….
Absolutely No need to use a LOC unless you have multiple properties and want to capitalise interest and adjust credit limits.
A regular loan with an offset account will do exactly the same for the vast majority.
http://www.birchcorp.com.auThe way I explain arrangements like this. The ATO are real people, if it looks and sounds like a scheme to reduce tax they will penalise you. You can play hard, but play fair. They will look at if you were in the country, took a job, joined the gym… I think you can see how they can establish what is real and what is not. I will say no to the one month, but there would be also be a few cases where this was actually legitimate. i.e Moved back to country, started a job, bought furniture, divorced husband and moved back out of property…….. sounds like bad luck, but this might be the one off case.
In my view, the valuation can be completed now and would satisfy the ATO requirements of an accurate assessment, i.e. Carpet will not depreciate over the next two months (effectively one by the time you get the formal documents from the quantity surveyor).
I went to an auction 1 month ago, I will not bid….. I cannot ensure all my finances are in order (takes two big weeks) only to go to auction to be out-bid by $1000 or like. I agree with above, in that many people will not participate at auction, yet have the cash.
This is how my story played out. After the auction was passed in I approached the agent twice, to let him know I was a serious buyer and was asking for a price from the vendor that they where happy to settle on….. I phoned 3 hours later only to find the property had sold for $1.25M. The agent had not told the vendor I existed. I was willing to pay $1.3M…… (only $50k) hmmm.
GOM,
I do not know all your personal details(age etc), but, I still see super as a lost opportunity. while money disappears into the super hole, it cannot be used until retirement. If you have excess cash, then spend it on appreciating assets, this will effectively do the same as putting it into super. A negative geared property appreciates at a far greater rate than the savings on tax via salary sacrificing. This is the power of leveraging.
Yes, there is significant savings on salary sacrificing, no arguments from me.
Here's another thought, I am the planner that could make money on someone saving into their super, but why is it I advise, in many cases the opposite.
Limited Recourse,
I agree, but, when you see the gains you make with the money you saved by using your super, the tax on the way out (death) is minimal. i.e. the insurance bill is the cost of another house and for the privilege of not using my own cash-flow, my children are now sitting pretty….
Thank you again, and it looks like you have a nice little strategy for the astute investor. All the best with this…..
Thank you all for the contribution, I am very grateful for your time in putting this extended response together.
Re: The Wrapee: Is the Stamp duty concession for First home owners still available? and if you are not a first home owner does this mean you have to come up with the deposit, as well as stamp duty, or is this bundled within the contract price?
Yes, you are so right. Pass all these beachfronts to me. I will do the awful job of living by the sea. I am willing to sacrifice for the entire forum.
Thank you,
A couple more questions if that is okay,
1. How much are the vendors repayments above the interest rate applied to your money borrowed (is it more than a P&I repayment). i.e. what sort of margin is the monthly cash flow based on?
2. Who pays the stamp duty?
3. Do you charge LMI (and what is the banks view of this arrangement). Or is this more or less something the banks do not want / need to know?
4. Are the deposits received above and beyond the purchase price? i.e. clear profit?
5. This may tie in with the question above, the end profit, is this price negotiated on the present days value or is it taken on the value of the real estate on completion of the contract?
6. I noted somewhere you increase interest rates throughout this period of the contract, has this been established up front and is it in your best interest to keep these projects turning over? i.e. increase rates to a high level?
7. How is the FHOG achieved when the vendor is on the title and pays the stamp duty? Is this akin to building a granny flat out the back of Mum and Dad's home and applying for the FHOG?
8. Can this deal be done if you have 100% borrowed money? Similar to Q3 above? But is it profitable at a high LVR?I am a little raw on vendor financing, and I hope this helps Mrs Property as well?
The end of 2003 was close to the end of the property upturn. Do not be discouraged about the 30%. That is typical contrary to what you read. Talk to us in 20 years, but you do not want to be telling us you once owned a property on the water that is now "X" dollars (three times the price of today). Seven years is not what I would call the long term. One of the keys to investing is delayed gratification…….
Salary sacrificing, although giving you greater after tax dollars is a mis-conception to gaining wealth for a majority. Young people and anyone with time (at least one property cycle) should not decrease cash-flow by locking salary sacrificed cash in a restricted environment. When you roll through the numbers on a scenario of leveraging dollars external to super vs salary sacrificing and no leveraging you will see a remarkable benefit in the former idea.
I often see advertisements plug the idea, if you place $100pw in a super fund the result will be $531,487 over 30 years (7% return) when you retire. They are correct… but if you place $70pw to cover the shortfall of a property that you have purchased for $250k you have leveraged and it is worth $2M after three property cycles. Further, rent will increase and unlike in a super environment you may withdraw the equity to place the money in another appreciating asset. This can show you how investors may have differing views that can all be right, and they are right in some shape or form, but the key is to look beyond the common theory so as to achieve better results……
This isn't to say salary sacrificing is not a good tool, but it should be used where applicable and cautiously. i.e. For high income earners, people approaching retirement, apart from the investments that already have been established earlier in there life, they could salary sacrifice up to the maximum contributions limit, whilst setting up a transition income stream. Very useful in this example. Others on lower incomes ,nearing retirement, may not take an income stream. Yet they may salary sacrifice as suggested by many people.
Another thought, it takes an income of over $277,000 to go over the 9% SGC limit of $25,000.
Paul,
What are the finer details of vendor financing, is there any chance in you running through an example if I purchased a $400k property tomorrow?
i.e. What does it cost to draw up the contract? How much do people pay? What deposit is usually required? what sort of time frame are we setting up for the deal? Any other tricks people can use?
It all sounds interesting, and experience counts for a lot.
Hi Terry,
Life, TPD and Income Protection can all can be paid from your super. Trauma sometimes called critical illness is the only one that must be paid out of pocket. Like you mentioned above, it can be very important and costly, This is where super monies kick in, particularly for those who are just making ends meet or require there own wage / salary for for investments, children or like…
