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Hi,
Per ATO website:
Rental and other rental related income is the full amount of rent and associated payments that you receive, or become entitled to, when you rent out your property – whether it is paid to you or your agent. You must include the full amount of rent you earn in your tax return.This seems pretty cut and dry to me. As for expenses, you would then need to apportion based on floor space.
Renting out a room in your PPOR will also most liekly have an impact on your ability to claim the full CGT discount.
It would be sensible to discuss this with your accountant prior to making any decision.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
It’s been a few years now since I lectured at RMIT on a sessional basis… and I was more in accounting than Eco/Finance. Still, there’s a few people around that would remember my name.
In terms of where to get started – I think Terry’s comments about having some sort of saving plan organised, together with G7’s post about education is good advise.
In many ways you have to mature in your thinking so that you are ready when the right opportunity comes along. For example, in my case, to work out what I didn’t want to do (i.e. accounting) I first had to try it.
In fact, I believe that it’s necessary to reach a low point from which you promise yourself you’ll never return in order to create the motivation to keep going when the situation becomes tough.
Practically then, have a go at working out a five-year plan that pinpoints:
1. What work experience you want to have gained
2. How much money you want to have saved
3. What education you want to have mastered
4. Which people networks you want to have established
5. What life experiences you want to have enjoyedFinally, don’t let age stop you from having a red hot go. If you want it bad enough you will be able to find a (legal) way to achieve your goals.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
For an older property, if you look on the copy of the title you should be able to note the date of subdivision.
In most cases it is then reasonable to assume the property was built soon after.
This technique is handy for properties that are more than 20 years old.
BTW, if you are trying to date when electrical works were carried out, check the meter box as often there is some kind of sticker or notice of compliance where the tradesman as signed off and dated the report. This comes to mind as it was something I noticed the other day when doing a house inspection.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Thanks for your feedback.
Inadequate examples? Hmmm – perhaps more detail may have helped but I would have thought the broad discussion on what each of the Mappers did would have been a great starting point – especially with the mix of people and their diverse approaches.
In any event, thanks again for your feedback and best wishes for the future.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi there!
Thanks for your feedback and I’ll be waiting to here about the financial improvements that you are able to implement.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi again,
In the beginning, I’d spend a couple of hundred dollars buying books. Try to read widely to gain an a perspective of what has worked for others.
Authors that I would recommend are:
Kiyosaki (especially early books)
Allen (anything)
Classon (Richest Man in Babylon)
Burley
Somers
Lomas
de Roos
SpannIf there is any spare change then see if you can pick up a copy of my books too.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Jenny,
Is it really you??? What a pleasant surprise!
Welcome to the forum and thanks for your contribution.
Cheers,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
There have been some excellent tips posted, but I have to say that if you can’t find any good properties on the net then look for other ways to find deals.
Really, there is no substitute for getting in the car and going for a drive as my experience is that not all deals actually make it onto the net and it’s amazing what agent’s will show you when you land in their office and they take you for a drive.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I agree with Pete R!
I think people regularly mix up passive income with buying an investment that pays, and that has no problems nor requires much management.
In my mind the idea of passive income is anything that is not active income, and the key trait of active income is that it is earned as a specific swap for time and had no ongoing benefit once the time commitment ceases.
For example, in a job you are paid for the labour you contribute… when you stop working then you stop getting paid!
Passive investing then is a matter of working once to create an income strem that keeps paying without you having to keep working to drive it onwards. You will still need to work to maximise your asset and its return, but there is not set job description or correlation of time spent back to hours worked.
I guess then that, really, all jobs and investments should be able to be measured on the extent they are active, and thus to the extent they are passive too.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Maria0911,
When it comes to property consultants you generally have two choices:
1. A buyer’s advocate: These guys work on your behalf to find and then negotiate a deal on a property. The ones that I have seen are generally to do with the home rather than investment market, however over the years I have seen some investor-specific schemes come and go.
I’d turn to the trusty yellow pages and see what you can find. You could also ring some agents and ask if they know any names of people they have dealt with.
2. Using bird-dogs. A bird-dog is another name for a fellow investor who sources deals and then onsells the details in exchange for a fee. Naturally, this is far more atune to the investment market and this forum has plenty of tips and insights into the pros and cons of using that kind of service (do a search on bird dog and see what comes up).
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Stephan,
Read through the past few newsletters I have written (www.propertyinvestng.com/backissues) as I have recently written extensively about nothing down deals over two issues (Dec 04 and Jan 05).
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Daryl,
Do you have a specific need for someone local?
When it comes to tax and accounting, the laws are such that you should be able to use a quality adviser from your non-home town and still get a very good outcome.
I’d encourage you to have a look through the Tax and Accounting forum, which is where I have moved this post.
Good Luck!
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Gav77,
I think the problem you are encountering is a universal problem around Australia at the moment given the recent boom in prices.
Try as you might, Governments are taxing property as if an unrealised gain (i.e. increase in paper value) translates to a real increase in wealth.
The reality is that this is not the case. For example, while property values have increased rents have not. This means that many investors have large capital gains but poor income returns, such that higher land tax / courcil rates simply eat into their income rather than unrealised wealth.
I’d encourage you to find out on what basis the value has been determined and then to contact the appropriate department and ask about the objection process. While it may be very frustrating, it can’t hurt to know more about the way it all works.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello Techhowse,
Hmmmm – I see your dilemma.
As a parent, you don’t want to see your child make a mistake and as such generally advise the ‘safer’ road.
Having said that, this is your decision since you are an adult and are now more than old enough to understand the responsibility associated with making independent decisions.
My recommendation is to sit down and work out some kind of five year plan and to then look back and see which path will bring you closest to achieving your goals.
What I mean is that you would be wise to look at the consequences of either decision rather than the actual decision… does that make sense?
For example, deciding to leave Uni may give you more time, but you may then lose out on some key skills that you actually need in two year’s time. On the other hand, leaving work may mean that you cease having income which is critical to your investing needs (both in terms of deposits and also being able to borrow money).
Is there no way to stay at Uni and at your job (perhaps in a different capacity) and also start investing? For example, perhaps you could take your annual leave during school holidays and give investing your best shot for a month and see what happens…???… That way you could test the water without having done anything to radical up front.
All in all, keep thinking through the decision but have enough faith to trust your gut instinct as it is through refining your intuition that you will ultimately become a better man and a better investor.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I say:
“Hi, I know this sounds strange, but I’m interested in buying real estate that other people shy away from. As such, can you tell me about the problems you are having trouble selling at the moment?”
Using this approach helps me to avoid the properties that are solutions more so than problems, and ensures I don’t waste anyone’s time.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
It’s important to understand the difference between an investing and a lifestyle decision.
Unfortunately, it’s not a clinical or easy decision when it comes to choosing whether or not to buy a home.
Having said that, I would encourage you to treat the thought process of buying a home and buying an investment property as two separate decisions.
Speaking from a financial perspective, wherever possible I’d encourage you to defer buying a home as the interest and ownership costs are not tax deductible, and as such need to be paid from after-tax dollars.
Practically, this makes it very difficult to be able to afford both home repayments and also save enough to pay the deposits and closing costs on investment property.
To get around this issue, some think that they will be able to use the equity in their home, which is accessed via refinancing, as capital for investing. While this may be the case, the problem with this approach is:
1. There is no guarantee that property values will rise
2. You will only be able to borrow a percentage of your equity (usually 80%); and
3. The more you borrow the higher your debt and also exposure to adverse interest rate movements.One of the principles of the MAP was ‘Cost = Sacrifice + Delayed Gratification. Steve, the issue you raise comes down to this saying. In my own case, my wife and I rented from 1997 until 2004 while we saved an invested with the view of then paying cash for our house.
Perhaps, in hindsight, we would have been better to buy something cheaper as values have skyrocketed, but to do so would have meant less investing capital and as such would have slowed down the success of our investing.
In the end, the answer to your question needs to be “do whatever brings you closer to your personal and investing goals”. To the extent that you can’t have both, all I can say is that delaying gratification has worked very well for me.
I hope this has helped.
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Veronica,
Thanks for your post and welcome to the forum!
I’m delighted that you have enjoyed my first book and hope that you find the second book as interesting a read!
Have an outstanding day and please, post any questions you have on the appropriate forum.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi again Mandy,
To answer your questions:
Funding Growth
The three ways to fund growth are through (1) Savings, (2) Debt and (2) Realised Gains.
If you use debt then you may find that you reach a glass ceiling. Dave and I saw this limitation from the start, so we used savings (surplus of income over expenses) and realised gains (multiplication by division) to fund our growth.
That is why, although we have bought around 200ish properties over the past few years, we currently own around the 80ish mark. As a general rule, we only borrow 80% (max) of the purchase price and look to repay debt quickly (funnel +ve cashflow to repay debt and also use a P&I repayment basis).
I’m worried for people who have use/are using debt as it may leave them open to problems should interest rates keep rising or else costs of ownership increase.
Mandy, be very careful about funding further purchases from debt. Good on you for getting in the market, but don’t leave yourself open to unforseen risk. Do your sums based on +1/+2% interest rates to see what impact that has on your affordability.
As we are no longer in a growth market cycle, my thoughts are that it is better to go slower but using a sustainable system, than it is to ramp up using debt.
Finally, make sure you have a plan for your property. Don’t just let it plod away… the skill of investing isn’t just getting a return but rather maximising your opportunities.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
The critical issue of turning your PPOR into an IP is that you may lose your CGT exemption.
It may be possible for you in the short term (up to six years – see this link) to move into your partner’s property as the PPOR, then at a later date sell that and move back into your home as the PPOR, thereby gaining a CGT exemption for both.
If you want to rent your property out in the meantime then this is normally allowable, meaning that both the rent is assessable and the costs deductible. There is no requirement to set up a trust or anything.
If you do decide to set up a trust and transfer the property, then you will be up for stamp duty.
Overall, is seems that you are trying to convert the nature of the debt payment so that you can claim a deduction for the interest. This can certainly be done, but you should be aware that while it may (or may not) make tax sense, from an wealth creation perspective it is confusing to mix personal and investment assets.
You would be well advised to seek the help of an accountant to work this one out, as you may find the tax your are saving is not worth the additional costs. If you need an accountant then I can recommend Mark Unwin (03 9682 5288).
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
You got in John… that way you’re not second guessing the market.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
