Forum Replies Created
Good Luck
Don
I agree with Terry.
Interest only non deductable debt first, I would also add to look at deals that allow you to increase your equity faster. i.e. renos, small subdivisions, do stuff yourself, development's. This will allow you to increase your equity faster and obviously move you to your goals faster.
Good Luck
Don
Hi AndersB
I beleive there are stamp duty concessions for owner occupiers in Queensland but I am unsure if this only applies to the first ever owner occupied place purchased or any place purchased for PPOR. Check out the office of state revenue website http://www.osr.qld.gov.au . I am sure that there would be something there to advise you.
You could also talk to your solicitor who set up the contract for you. They should be able to tell you in about 15 seconds if the stampduty you paid at purchase was discounted for PPOR or not and what if any your additional liability to Office of State Revenue is.
Appart from that I think Terry is right, just rent it and declare all income and expenses on your tax return.
Don
Hi Ray30
Congradulations on the purchase of your first investment property.
If you check the fine print on the contract it normally states who is responsible for insurance between signing and settlement.
I have just checked a standard REIQ contract (Queensland). And under the heading of "risk" it states that "The property is at the Buyers's risk from 5pm on the first business day after the contract date". Therefore the buyer is responsible for insuring the property as they have the "insurable risk"
My suggestion would be to insure once you sign the contract regardless of the lenght of time between signing and settlement.
Don
Hi Bundydog
Depreciation is made up of 2 components, Furnature, fittings and Equipment (ovens, cook tops, rangehoods,carpet, hot water systems, window coverings, dishwashers, air conditioners etc) and special building writeoff. Given the age of the houses you are intereste in the you would have no access to the special building write off, but you could depreciate the Furnature, fittings and equipment, how much you can access for these depends on the age and initial cost, and only a quanity surveyor can estimate inital cost and useful life left.
If you are after a broad guestimate then I would use 10% per year of the estimated cost of the item (this is assuming that they appear to be reasonablly new condition. If they appear to be really old then you will not get any depreciation for them. I use this approach to determine a depreciation guestimate
Don
Hi Micman
One of the goals of property development is to reduce non tax deductable debt and increase tax deductable debt.
With this goal in mind, I would pay as much as you are comfortable onto your PPOR (Reducing your non deductable debt) and then set up a Line Of Credit for the investment property(s) and borrow 100% uning your LOC as a deposit (increasing your deductable debt).
Don
Madeinitaly
I would like to know a few more details. Are you handy with renovations or rejuvinations.
Do you want to buy your own house soon or in the near future,
Would you feel confident in identifying a block of land, negotiating with a builder and sub contractors,
are you interested in doing subdivisions.
Don
Jason
A deposit is put up to show the seller that you are genuine and are prepared to loose some or all of your deposit if you do not follow through with the purchase. Deposits can be up to 10% of the purchase price but in thery thay can be as low as 1 dollar (not normal) but it shows that you have something to loose by not following through. Standard contracts allow for a default fee if you are unable to follow through (I think it is .25 of 1%) but as far as I am aware these are rarley charged. I routinley offer $1000 deposit on purchases of any value and have had no issues.
Don
Lostie
Who is responsible for insuring a property while it is between contract signing and settlement can vary depending on the standard contract used and any special terms on the contract. It is not purley the seller to settlement date. For me, while ever you have a vested interest in the property then you have an insurable interest. By entering into the contract to buy then you will have costs prior to settlement on that, (bank charges, legal fees, stampduty, mortgage insurance etc) therefore for the cost of insurance for 1 month it is well worth doing even if the contract says sell has insurable responsibility to settlement date.
Don
Nucopia
There are many things that determine the price of insurance premiums.
The value of the property insured value of contents, risk of the suburb, rental income, size of public liability, claim history (these are the major ones as I see them).
Based on all these your premium is determined.
Given the information you have given above I would expect the property in NSW would have a higher cost or is in a higher risk area or a higher level of contents insurance. To quote an example I moved from Sydney to Bundaberg and my MV insurance cost reduced by $80 per year.
I have landlords insurance for some properties in different locations throught Queensland with CGQ and around $500 is what it costs me for each of them, so to get 2 for this in WA seems pretty cheep.
Don
Jenny
I would probably continue to have the property shortfall grow in the LOC until you wanted to go for the next IP and then have your current property and your PPOR revalued and increase the LOC at that time. Not much point rocking the boat unless you wanted to do something with it.
Don
Hi Jase and Flick.
The house is looking a million bucks. What's your estimated date for completion?
Don
Hi Winzer
I would be surprised if you have any recourse (unless it was written as a clause in the contractz). That's what a pre settlement inspection is for.
Without knowing what is under the house one man's trash is another man's tressure, have a garage sale and see if you can make some bucks from it.
Don
Brook
As far as I know they can do this if no offer doccuiments had been signed (no contract with them until the offer doccuiments are signed). Out of curiosity had they signed any offer doccuiments yet.
If doccuiments had been signed you could approach the banking ombudsman to confirm if they have acted appropriatley.
Don
Well done Amanda
I love hearing about people making a great profit
don
Hi Charlie
I use a clause "subject to successful due dillagence review" you can then put a timeframe on that due dilligance that should allow you to see if council will approve prior to going unconditional.
If the selling party knows that you are intending to build units on it then "subject to council approval" makes good sense.
Do however check with your solicitor for appropriate wording.
Don
I agree with CRJ
If you have the intention of buying off the plan and reselling at the time of completion then you are doing this as a profit making venture. The ATO will want their pound of flesh. Better to be register up front and keep the monkey off your back.
Regards
Don
Hey All
I personally hate paying the agents fee but see it as a necessary evil and if you get a good one as stated above then they should be able to get the fee back for you.
To quote an example we had a property on the market. We didn't have much interest for about 4 weeks and would be prepared to take a price 30k less than our list price (we were committed elsewhere). Then one day we finally got an offer (it was 30k below our list price) and I said we'll take it. The realestate agent suggested that there was more in the deal and asked if he could see if he could get them up a bit. With some tooing and froing and about 10 phone calls, we got an extra 10k above what I would have taken, so in essence they paid for their fee.
The key for me is that the realestage needs to have specific skills, they are the ability to negotiate, understand the buyers motivation and what ability they have to get the price higher, this is why I employ them. I don't have these skills. With this said I still ask for discount on commission on selling and have been successful on a number of occasions with this request.
Don
Ettie
Well done for buy in Perth a getting signifiant gains due to rising market. I had a look at it 2 years ago and thought it was overheated. Obviously I was wrong.
I personally like the idea of getting out of Perth. Given it's capital growth in the past 3 years it would be hard to immagine that it will continue for the next 3 years (but hey I thought it was oveheated 2 years ago). If you maximise your sale price by targeting the house to a particular market and can enter another market at a reduced price by good negotiations then you may be able to mittigate the exit and entry costs.
With this said could you draw on the equity in the Perth properties and still fund a purchase or 2 in Queensland?
It depends if your personal investing philosophy is a buy and hold or one that looks to maximise returns.
Good luck with your decision.
Don
Hey Johann
The best tax advantages as I see them are:
The depreciation (plant and equipment) and capital allowance (building) are the highest that they will be so non cash deductions are at their maximum. It is also worth noting that you get 6 months depreciation in the first year's tax return regardless of when it is completed. This may be well for you if you purchase at the end of the year and can have the house built and ready for rent before the end of the financial year. You can effectivley get 6 months tax deduction even if it is only rented for one week. (it is also worth noting that if it becomes ready for rent on the seond week of July (just into the new financial year) that you also only get 6 months depreciation even though you have rented it for almost a full year. (Pays to have it completed just before the end of the financial year).Another advantage is that if you buy land and have a house built within 12 months then all the interest is tax deductable.
Other advantages (not of a tax nature are) newer houses generally attract a higher rent, If you buy well and build well then you should receive an equity gain at the end, and finally if you can do some of the work your self, tile, paint, landscape, fence turf than that will increase your starting equity even more. Really helps when you want to get into another deal ASAP.
Good luck and let us know how you go
Don
