Forum Replies Created
Thanks for your comment Richard…Will do.
Thank you to all above.
I have previously bought two investment properties.
I'm in WA and it is not my first purchase. What if I show the bank I have savings but would rather not use them and ask the seller for a second mortgage carry back. Could I do this? Would the bank be ok with something like this?
What happens then in a situation where I have good LVR, employment history, clean credit, servicability and little debt but have savings less than $20K and want to buy a home with a deposit of $80K. Technically the bank could say I can service the loan but do not have funds to pay the deposit.
Can I get a loan from the bank and apply a second mortgage carry back if the owner is willing? I only ask because we rent and want to purchase and have all the boxes ticked for being a good applicant for a loan but I don't want to use our savings for a deposit if I don't have to?
Rory.
My accountant wants to charge $770 for set up of a discretionary trust. Is this a good price?
What ongoing costs can I expect come tax time?
Good points. State Government is worth while pursuing if the need arises however Collin Barnett is all about mining and mining royalties and anti GST. If it makes his state wealthier and he looks good then it is approved IMO.
I will sit this one out for now and see what happens to the local real estate market.
Good question…
There are a number of issues the town faces in order for it to grow past 10K population and none more than that of a good source of water so the town can only grow so big without sourcing water from other means than naturally.
Recommendations to Council were:
Support a family’s based approach to FIFO workers as opposed to single persons approach. Ensure the worker and immediate family reside here.
Promote tourism nationally and internationally by raising awareness of the Cape Range National Park and Ningaloo Marine Park.
Restrict the number of workers allowed in holiday accommodation. Currently workers reside in hotel rooms from 3.5-4.5 star!
Vigilant approach towards crime as population grows
Release more crown land
Attract more competition in the building industry in order to drive competition up and consumer prices for housing down…
I argued Exmouth has a future in mining, construction (housing and civil) and tourism not simply mining alone. An influx of miners will mean inflation in housing prices – a false market much the same as what we are seeing in Karratha and Port Headland IMO.
What will Council do you ask? The Council members are new and predominately business folk with their own agendas. The majority will promote the mining industry and in a years time the town will become unaffordable for the average income earner IMO. So why write to them? I hope to broaden their approach towards growing Exmouth in a more sustainable way. I like to think they are an intelligent bunch but time will tell.
What r your thoughts?
That's the problem with generalising!
Ah…don't we all from time to time! "the product of the vine" that is.
Good call Terryw
It goes back to the type of investor to a degree – capital gains or cash flow. If cash flow then capital gains may follow later on but is not originally considered in assessing the deal.
Ok, my mistake. The oroiginal post has left out some detial, perhaps too much!
Thank you for questioning the example Anthony and clarifying some points Richard.
Richard in your answer to Q1 did the SMSF have all the funds available to purchase the property and did not borrow? I was also under the impression you could only have 1 investment property under each fund. Is this the case? Do you have a web address for your company in Quensland – I could find nothing in a basic surch?
What do you mean by an in-house related lender?
Q2 is how I saw one way of doing a property deal with a SMSF however are your saying Richard the bank will not give a loan for the original purchase of the property if the SMSF's investment strategy is to onsell using an Instalment Contract?
Can the SMSF borrow to buy a property from a conventional lender then once the property has settled, onsell using an Option's Contract?
Forgive me if I have this wrong. Assuming the SMSF has been set up to comply with Australian Super Rules, then the fund is entitled to make some sort of investment – in this case buy property. The fund may also be entitled to borrow funds for investing purposes against its holdings ($100K) and so buys a property worth $400K. Note the bank may require more capital from the SMSF (a question maybe a broker can answer?) In any case, the property is vendor financed giving it a positive cash flow as is the case with vendor deals.
The figures above are examples only. In most cases I have achieved greater returns when involved in vendor deals than 10% ($40K return per annum less fees on a $400K property on average). In fact, I would not enter a vendor deal only showing this return figure taking into account the up front and back end profit. The expenses are generally paid by the purchaser in VF deals although this may change from deal to deal. For example land tax and council rates were continued to be paid by the current owner in a recent deal as opposed to the purchaser taking on the costs. This was applicable given the deal was for land only and it was continued to be occupied by the current owner. Both parties were satisfied as is the goal in the VF game.
An opportunity cost is considered a cost incurred if an alternative investment was not undertaken. Not all investments are undertaken that are more financially rewarding than the current investment. This may be due to higher risk, no available capital, limited resources, etc.
Venture capital companies are not for me.
Anthony – I cannot give more specific details only that this was meant to provoke discussion. It is something I am looking at doing through my Super fund however I am seeking legal advice on whether or not JV's can be applied to a SMSF investment as mentioned by Terry. I would be happy to share specifics with you if the strategy eventuates. I have no basis to comment otherwise.
Sertainly technology has changed the game. Reputable people can be found all over the world to do business with. I undertook a vendor finance agreement with a company from Melbourne on a property in Tasmania and I live remote NW WA.
An exercise I recently went through was to build a team – as you would have it – in New Zealand knowing little about the Country and its people. I began reading a number of forums, building a contacts list, and then making contact through e-mail initially then skype. I now have a trustworthy and knowledgable team. My intentions were clear from the onset which helped get the right people on board for the journey.
I agree with Richard and Jamie. Investing is global as is your knowledge base.
I would tend to agree with "taking a breath" comment. Although there is nothing wrong with wanting to achieve and climbing the next mountain. Sometimes you need to let the weather clear before you can reach the sumit.
I recently sold 7.5 arcres of land on the NE coast of Tassie (poor location) after trying to find a buyer sinse 2007. The land sold under a lease option contract (vendor finance) and attracted no buyers for a straight forward sale. The lengthy timeframe did not stop me from finding a solution, and in the meantime, I experienced first hand vendor financing.
The father in-law once told me "it will work out" commenting on a personal situation at a point in time. His comments came through his life experiences. The personal situation did work out and now I carry the confidence knowing that lifes journey is unique…what ever the situation with the right attitude, it will work out.
Enjoy.
Had a look at the info Peter thanks.
Belwo is a response from a chartered accountant in NZ…
"They key to the structure question (and a Trust in NZ will work well if cash flow and tax positive) is to get advice from an Australian advisor on the impact of your capital gains regime (CGT) on any property holdings you have in New Zealand.
New Zealand (currently) has no capital gains tax and only taxes the sale of properties if you acquire them for the purpose of resale for a gain (versus your intention of long term investment) or will also tax the sale if you are in fact in the business of buying and selling properties.
It is difficult to remove your exposure to CGT in New Zealand if you still wish to have the ultimate control of the investment entity, In the case of a Trust the connection can be removed by you having a New Zealand Trustee, rather than yourself, but if you hold the power to appoint (basically the ability to hire and fire) then you will still be subject to CGT in Australia on any property sales.
I recommend that you get local advice on this in the first instance.
In terms of costs, if we assume a New Zealand Trust, these normally cost $1500 to $2,000 to establish and are set up by a solicitor.
Each time a property is acquired there will be an additional fee from the solicitor, around $600 to $700, but this can vary depending on what background work is done as part of the due diligence work on the property.
The Trust would complete financial statements and file a tax return in New Zealand, the annual costs being around $2,700."
Any opinions/thoughts particularly on CGT?
Nice returns on the project Saphire101, especially since you were not tied up in the ronevation. Cashflow is healthy in NZ at the moment favoured by low interest rates – 1-1.5% less than Aust. banks on average.
It's always nice to have a prospective buyer in mind before undertaking a project such as yours.
LOL! I like it.
That appears to be the common thread when talking to NZ investers when compared to Australian property. The NZ government has twice recently looked at introducting a number of investment taxes and CGT was one of those. Fortunately it has not been introduced however I believe it is only a matter of time.
Congratulations RickH on the purchase.
I am interested in what "buy" strategy you guys have in place when buying US properties similar to those above such as buy under market value reborrow and go again, use cashflow to build equity and repurchase or something else?
Cheers
Rory.
Jamie's way provides greater flexibility in your situation for further options down the track.
Hi Losty,
An option is to pay down the PPOR as soon as possible then redraw with a LOC to be used as a deposit for an IP. It will take time however.
Another option is to seek out a vendor who is willing to offer a Second mortgage carry back on certain terms as defined by you and the vendor. You will only pay for legal fees and closing costs. You do need a good cash flow though to pay the bank for your IP loan and home loan and to pay the vendor.
Pros: time in market quicker
Gives you the option to purchase
Better ROICons: Increased interest payments
Higher interest rate on Second mortgage (in most cases)
