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I've previously packaged a car with a novated lease over a 3 year period. Loved the feeling of getting 'free fuel' – obviously you pay for it but not having to worry about how much a weekend cost was fantastic!
Pretty sure you can do between 1 and 5 years and I think the weekly cost doesn't change regardless of how long the lease is but the balloon (payout) figure at the end does significantly! Happy to be corrected on this one tho
Hi Engelo,
Geez mate, you've had a busy few months – well done!Totally understand xdrew
Hi guys,
Xdrew can I ask how you structure a portfolio of that size? Apologies if it's a no-go zone. I understand that there's no one size fits all regarding trusts, company, individual names etc but i'm interested in how larger portfolios are achieved.Regards,
RustyRighto, so when an option fee is paid, how much is realistic? I'm surprised the buyer has no legal stake in the property after paying the option fee (which I had been calling a deposit). Given the large amount of money I'm talking, I'm sure the buyer would want some security in knowing the money is purchasing something.
Would it be possible for the buyer to pay a deposit and have a very long settlement (3-5 years) or would this not be legal? Also if a deposit is paid is there any way the vendor can access it instead of keeping it in trust? Then they could rent the property from us after paying the deposit and pay the balance on settlement down the track.
Alternatively, they could pay the deposit and buy a 20% stake in the property and buy the rest out within 5 years but then our rental income, depreciation etc would have to be spit wouldn't it?
Sure, thanks,
If they did put down a deposit (say 20% for argument sake) does that mean that they would have a 20% ownership? Is so how is stamp duty managed?Hi Paul,
You're a wealth of information- thanks so much. I agree that it's an ask to get both a deposit and high rent because effectively they should have a share of the purchase.Thanks also for the heads up about the sub-leasing.
Rusty
Hi guys, – sorry, long post….
Paul, it seems you're the go-to guy in this area and if you don't mind I'd love your advice on our situation, too.
Like you Sandtracker, I have our PPOR on the market without a lot of success. Ideally we need to release some capital (at least 100K) for our new PPOR, and while we do have another IP that we can sell if we need to, I'd rather not because it takes care of itself nicely.
TBH I've never really taken to the wrapping thing, don't know why but I just haven't. ALTHOUGH today our agent told me that she has been contacted by a lady who has sold her house in Sydney and is relocating to the area (details are sketchy at best). They fell in love with our PPOR pics on the net (house is only 18 months old) but wants to rent for up to 5 years with an option to buy at the end because they're starting a family and she wont be working in this time. – I assume less disposable income.I'm not sure if this would be called a wrap or even if it would be possible. but without knowing much about her, assuming (maybe falsely) that she has enough for a 20% deposit which they may not, and a sale price of $560000, what would happen if I was to suggest:
-20% deposit upfront = $110,000
-As well as the 20% deposit, she pays us rent of $500 pw (rental appraisal has been $470 – $500.) Our IO repayments are 515pw but dripping in depreciation.
– Balance ($450,000) to be paid in full at the end of the 5 year period.The question is what would be the motivation for her to accept this? – pretending she had a $110k deposit????
*If she brought outright in this price range now it would be a little under $600,000 inc stamp duty – $110 deposit = a mortgage of about $490000 (around $650pw) whereas with paying a deposit and renting it would be $500pw. Saving of $150pw.
*She would, in effect be living in the home she is one day going to own, and obviously likes.
*It would keep her in the market and she can recieve the capital growth (if any) over the 5 years, by locking in at today's prices.
*If weekly income is an issue, she wouldn't have rates, maintenance to deal with.
Would it be unrealistic to demand market rent as well as a 20% deposit?The benefits for me would be:
-We are able to move on to our new PPOR without a major firesale.
– We can access the $110,000 downpayment that we need for our new PPOR.
– With depreciation the rent would cover the mortgage (just, without making anything, although that wouldn't be the aim here).
– The sale gets finalised within 5 years (although we do miss out on any capital gains)I know there are so many variables that its pretty airy-fairy, but once it's out there it's hard to take it back so I'd love to know what people think – is it do-able, would it be worthwhile for either party etc.
Am I dreaming?
Hi Engelo,
I was going to shoot a question to you but it looks like you don't have Private Message set up? If you do, flick me a message and I'll reply.Engelo,
280 views compared to nearly 1500, I think we have a winner! lol
Call me slow, but what does jksss mean??Thanks dcwwood. I'll do that!
Just a quick question….
When people talk of Positive Cash Flow, what sort of yield do you look for to achieve this? 8% and above or would it need to be higher? Does anyone have a minimum yield that a property needs to be to fit in with their strategy?
Obviously it depends on the property and it's outgoings but it would be interesting to see how others operate.
RustyThanks everyone, an interesting read,
I guess the key is to find properties that are not only CF+ (or neutral) but also have potential for growth, or ability to ad value to. So as Sapphire suggested, combine the first and second part of the plan and look for:
– Cash flow positive/neutral properties
– Growth potential
– Ability to add value
– Low vacency rates…. sounds easy… lol
Given the flat market I suppose I was focussing the discussion on high yield because it is difficult to predict capital growth.
It's great to hear different perspectives.
Dcwwood, my head's still spinning!All good points,
JacM, I'd be aiming for regional towns (or western syd??) with population on 5000+ if that was possible. I know it might be a stretch but I reckon it's doable. I'd hope to factor holding costs into the equation to receive a net of 10k pa. Again, maybe tough but worth having a crack at. A few might be what some might consider high risk, but the aim would be not to sell them. – It seems to work for Nathan Birch!Josh, neutral gearing would be ideal but the fear of a rate rise or two would push it into negative territory. I already have one IP that is neutral and don't want to be forking out each week for 8 or 10 properties – $100,000 pa doesn't go as far as I thought it would! I understand that Capital Gains is where the money is over time (as opposed to weekly rent) but hopefully we can achieve both in the long run be having some properties subsidise the higher growth ones.
I also agree that whatever plan you choose needs to be flexible so it doesn't restrict your potential to grow the portfolio – good advice, thanks.
I appreciate your comments.
Thanks Derek,
I did try one I found through Google but it punched out some random figures. Your post gave me a good ball park figure.
TaErr, that would be CGT as in Capital Gains Tax… not CTG – sorry dyslexic!
RustyNo worries, thank you for all your advice over the past 24 hours
Terry, the exemption I spoke of is not the ATO but the Office of State Revenue because as you mentioned Stamp Duty is state based.
According to our solicitor it comes under Section 274 of the Duties Act 1997, relating to ancentory laws and land use for primary production. I know it's on the OSR website – I found the emendments to the Act on OSR but I could only find the Act on another site (http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s274.html#person_directing) Click on the link for detailed info but this is the nuts and bolts of it:
274 Transfer of certain business property between family members
(1) Duty under this Act is not chargeable in respect of a transfer or agreement for the sale or transfer of land, a lease of land, or a transfer or assignment of a lease or permit in respect of land, used for primary production together with any other property that is an integral part of the business of primary production, if the Chief Commissioner is satisfied that:
(a) the transferor, lessor or assignor, or the person directing the transferor, lessor or assignor, is an ancestor of the transferee, lessee or assignee, and
(b) the land was land used for primary production in connection with a business carried on by the transferee, lessee or assignee, or by an ancestor of the transferee, lessee or assignee, (whether alone or with others) immediately before the transaction or the date of first execution of the instrument, and
(c) the business is to continue to be carried on by the transferee, lessee or assignee (whether alone or with others).We meet those criteria with my parents being the transferor and myself being the transferee. Also the amendment (2005) states:
– amendment to section 274 makes it clear that an exemption for the transfer of land used for primary production between family members does not apply if the person acquiring the land does so as a trustee.Like I said, it's all goobledy-gook to me but my solicitor said it's all good and will save me 65 grand so who am I to argue!
Hope this helps
Not at all, I appreciate the conversation. I will have a look at the paperwork tonight and get back to you. It's all gobbledy-gook to me
Hi,
St George offer a relocation loan which I guess is basically a bridging loan but they do not take income into account because there will be no 'end debt'. It works on the assumption that when you sell your existing place your new property can be totally paid off so your income isn't an issue. A mortgage is taken out on both properties and interest is capitalised until you sell. The major prob is that the loan is only for 6 months so I don't know what happens if you don't sell within that time frame because you haven't actually qualified for a standard loan.Personally I'd be a bit wary of not selling within that timeframe, especially in this market but it may be worth having a conversation about??
Well both. Parents are exempt from CGT and we benefit the state's Stamp Duty exemption.
