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August 25, 2003 - 10:55 pm
Sorry, I just see principal payments as a mediocre investment of about 3% after tax.
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August 25, 2003 - 10:48 pm
I know Oscar (sb’m middle name I just gave him)isn’t really worthy of a reply, but I just thought I should say “I thought this forum was about giving advice on simple questions ‘like how does cgt work’ to inexperienced investors, so that they don’t have to hassle the poor overworked ATO call centre with such simple questions”.
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August 25, 2003 - 10:38 pm
Dang, I must have missed the “1” on the calculator!
But Rod, surely you end up with $71,353 in your bank account after all the dust has settled, ie $23,000 + $48353, which is 48353/23000 CoCR or 210%. The original deposit is part of the purchase price, and you get that back, plus the net gain.
J
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August 25, 2003 - 3:29 pm
>>Although it does not specifically offset that particular source of income, you can write it off again your overall income, and this includes the rent you are recieving. So effectively, you CAN write it off again the rent received.<<
You have lost me there dan. Can you explain the above with a bit more detail ?
Thanks,
Pisces133
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August 25, 2003 - 1:35 pm
Hi Dan,
I just bought 2 with no money down, BUT I did get snagged with Mortgage Insurance!
Bought for $50K but needs $5K worth of work to be done on it (int paint and new carpets). The RE agent wrote the offer up for $55K with $50K going to the seller and $5K to me at settlement as per the annexure on the back of the contract. The bank sees $55K worth of property. I went straight to a Mortgage Broker who has established contacts to do the rest. All up the loan and costs will be $58500.
I CERTAINLY recommend getting as much deposit as you can beforehand, but no money down can be done – and there are many (perhaps smarter?) ways of doing it.
Cheers,
Shell.
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August 25, 2003 - 10:37 am
Come on Steve, or anyone who has read the book and knows how to use a calculator, can you please explain the (suspect) maths in Appendix B.
Thanks, J.
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August 25, 2003 - 10:25 am
quote:
IMHO,contact the ATO about CGT on your IP

Geeze Shane, if you can’t offer better advice than that then perhaps you shouldn’t be offering any. Have a read of many posts in this forum that explain how cgt works! Humble? you’ve got to be kidding.
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August 25, 2003 - 8:39 am
I wouldn’t mind having a look at Karratha and perhaps Geraldton at some stage.. just need to do some homework first.
I think as long as you can make money out of tents in your back yard – GO FOR IT!! []
Kimmy, feel free to email me anytime [email protected]
Cheers,
Shell.
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August 24, 2003 - 11:25 pm
As Noel wrote: they just have so many staff in the phone help area, they can’t all be full bottle. I guess you’ll just have to get confirmation in this forum!
I’ve received bad/ wrong/ potentially very costly from my EX accountant so we’re not safe anwhere!
It was about the old capital gains tax method, so I did the research myself, and I then started educating accountants about it, including Noel Whittaker!
Anyway, I’m trying to wean myself off this forum, I’ve got to get back to work!
Regards, Jim.
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August 24, 2003 - 11:04 pm
Just to clarify, Mel, Noel was writing about the inaccuracy of the telephone advice, ie I wasn’t implying that Noel’s advice was inaccurate.
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August 24, 2003 - 10:27 pm
Just another thing: I wrote principal for your PPoR, which would be equivalent to an offset account against the loan for your PPoR, except for one important thing: If there is any chance you might wish to change your PPoR into an IP in the future, then keep your PPoR loan Interest Only for as long as possible, with what would have been principal payments going to an offset account. Same reasons as I’ve posted above, and just about everywhere else!
PS all you mortgage brokers out there: How easy is it to get an IO loan/100% offset account combination for your PPoR (or any property for that matter)?
J
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August 24, 2003 - 10:21 pm
quote:
I know buy not paying our mortgages off it will be better for Tax Deductions. I suppose we never something that will yeild more than we pay in interest rates.
Any suggestions?

Hi again Judith, as I wrote earlier, an offset account is a nice place to park your excess funds for a while, but remember that your are only saving tax deductable interest if the loans are for your IPs. This effectively reduces the “investment” in your offset account to about 3% after tax. If you end up with a loan for your PPoR, then it’s a different story of course. Your investment in paying off the principal for that loan will be 6% after tax (ie the full interest rate of your loan) (I’ve used 6% because I’m paying 5.97%)
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August 23, 2003 - 12:02 pm
How come so many people are taking Diamond_Gus seriously ?
Pisces133
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August 23, 2003 - 11:42 am
Sue, what do you mean by ‘commercial’ ?
Shops ? Office space ?
If so, where have you been looking ?
How big a project do you think you can handle ?
Your comment ‘Everything is just so overpriced and the rent doesn’t even come close to covering the repayments to the bank.’ just isn’t correct.
The secret is to look for something which one can improve upon. And of course one needs to put some money in upfront until the project is up and running. After that one can refinance in such a manner that all one’s money is returned.
They are not hard to find. I would be happy to go into a lot more detail.
Pisces133
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August 22, 2003 - 11:28 am
Hi Judith, You can’t just increase the mortgage on your rental property and have it continue to be tax deductable. The purpose of the loan must be to purchase an income producing asset. The only way you will be able to end up with full ownership of your PPoR and all debts deductable is to sell one or two of your IPs. You could then purchase your PPoR with what’s left after all the selling costs and Capital Gains Tax. You’ll then have good equity to borrow for new IPs. The ATO takes a very dim view of anyone trying to up their rental mortgages to fund private purchases.
If you really want to keep the IPs and buy a new home, then you’ve no alternative but to borrow with a non-deductable PPoR loan. It would probably have been better to keep all the IP mortgages Interest Only and save all your principal payments you would have made in an offset account to fund your PPoR.
J
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August 22, 2003 - 9:05 am
Hi Ronulas, saw your question looking forlorn and unanswered, so I thought I’d put my $.02 in. My Q/S report on my new 3 br house cost $450 in 98, (probably a fair bit more now) but it was well worth the cost as it was new. You won’t have any building allowance, and it may be difficult to establish the age of all your fittings. It would probably not be worthwhile unless you have quite a few dollars worth of new or near new fittings. You can easily find out the recommended life quite easily for things like carpets etc from your accountant/ tax guide etc.
For me it was worthwhile because there are so many little thing the Q/S expert knows about with new properties, and it’s such a breeze when it comes to tax time with the report done for several years after purchase.
I’m not very experienced at older properties though, so others who are might have a better idea of its (q/s report) worth.
J
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August 22, 2003 - 8:21 am
Thanks K, I always thought it to be one of those “urban myths”. I know my hardwood home gives out some incredible crack noises occasionally! Some builders use Cypress pine, which is supposed to resist termites (theoretically cypress heartwood, so I’m not sure how you are supposed to tell if youv’e been given heartwood[?])
I’ve read that they have new treatment for wood now that is acceptable for building houses. Probably not cca treatment, as that’s allegedly been found to leach arsenic to the surface.
Pity we cant use all those nasty organochlorines that we used to!
J
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August 22, 2003 - 7:49 am
Sheesh! 32 people have read your question and 32 couldn’t be bothered answering it! Its just a simple way to multiply your weekly rent by 500. This tells you the cost of the property which would give you appx 10% gross rental return with that amount of rent. (10.4% to be exact, because there are 52 weeks per year, not 50)
Hope this makes sense Kim,
J
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August 22, 2003 - 7:03 am
Hi Kimmy,
I’m in Broome too and am checking out places near Perth. I did as much on the ‘net and papers as I could and am now in Perth checking them out physically. From this, I can get a real feel for the towns and also have a chat to the locals as well.
It has paid off, as I have just found 2 very +ve geared property and the sellers have accepted my offers today[]
As for Broome/Derby/Hedland… well, the numbers don’t stack up in Broome (my investment is just breaking even) even with the caravan park, the strata and council fees means that the 11 second rule won’t work. In Derby you’ll be hard pressed to be +ve geared (but its possible you could find a bargain) And Hedland has had a negative population growth by 11% and 16% for the last 2 years respectively. This is just what I’ve found so far in these areas.
Maybe we could catch up over a Boulevard coffee sometime?
Cheers,
Shell.
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August 21, 2003 - 12:27 pm
Try to use your capital loss to offset short term gain ie <12 months if you can. It seems such a waste when you offset it against long term gain, ie > 12 months, which is taxed at half the rate. eg 70k loss offset against 70k short term gain saves $33950 tax (@48.5%) but if it’s offset against 70k long term gain, it saves $16975 tax. (half of 48.5%). Easier said than done of course!
Just a bit of trivia (as usual for me)
J