Hi,

Call me old-fashioned, but this is a question you’d want to have answered before you bought, right?

What if you can’t develop and instead you’re left with the property and it’s -ve cashflow?

My advice:

1. Go to the council asap and work out what’s possible.

2. Compare that with what’s financially feasible.

3. Understand that professional investors don’t invest in a manner where there is so much uncertainty. Work out your plan, finance etc. as without a plan your success is more a matter of chance than choice.

It may not be too late to salvage the situation… but get active quick or risk doing your dough.

Good luck.!

Steve McKnight

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Hi,

The key is to find reasons why/how it will rather than be resolved that it won’t.

The idea is that, provided (1) you had access to unlimited finance, (2) you could meet the cost of additional borrowing from profits, and (3) the properties were +ve cashflow, you could continue to buy because you’d always be making profits.

The problem is that more debt means higher risk.

Hope this has helped to clarify the issue.

Cheers,

Steve McKnight

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Hi,

Very hard to say David as you only you know your investing plan.

If you are after +ve cashflow then buying the property would seem to push you further away from your goal. On the other hand, provided the market keeps appreciating then maybe it would be a good capital gains asset.

One thing I would say though is that investing to save tax is like eating icecream to diet. It’s a poor strategy that sees more people fail than it does succeed.

Cheers,

Steve McKnight

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Hi,

It’s not complicated… find a deal and then find someone who wants to buy the details from you. Given the substantial number of people who can’t find +ve cashflow properties, you should be doing OK quite quickly.

Ah, but don’t advertise on the forum here as (except in special cases that have pre-approval) it’s against the rules.

Cheers,

Steve McKnight

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Hi,

The best I’ve seen in Oz is ten year fixed interest rates.

What I do is know at what interest rate I can lock in my positive cashflow and still earn a good return. That way I can monitor what happens and be proactive rather than reactive.

Cheers,

Steve McKnight

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Hi,

I think that perhaps you echo a sentiment that a lot of people feel after reading the book.

Yep – it’s pretty hard, yet there are a number of factors that will time and time again prove that deals are out there. They are (in no particular order):

1. I believe the best way to make money in property is to find problems and solve them. As we move into a buyer’s market, there will be a lot more problems to solve.

2. As you’ve found – this +ve cashflow investing game isn’t easy. Those of lesser resolve will fall by the wayside, just like the ‘Andrew’ character that I outline towards the end of the book. Investing in property is already out of vouge, which isn’t a disaster… it just takes the hype away (a good thing in my opinion).

3. Despite being a bestseller, the majority of property investors still prefer the tried and tested approach to saving tax. Today, positive cashflow is better understood but is still a relatively niche market.

4. Don’t be afraid of change. Sure, the market has moved since I bought in Ballart in 1999… but the markey is always changing. Three years from now some people will be outlining how much success they have enjoyed while others are lamenting about missing out. You need to modify your investing approach to capitalise on opportunities in every market.

5. Focus on reasons for taking action, not doing nothing. There will always be valid reasons not to budge from a comfort zone, yet these same reasons are really invisible handcuffs that quite often keep people living in their own worst case scenario.

6. Finally, if you believe you can – you might. If you believe you can’t – you have no chance at all.

Thanks for your post. Hope you had a great Xmas.

Regards,

Steve McKnight

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Hi Ben,

Thanks for your post and welcome to the forum!

quote:

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1. Am I missing something as far as getting the best return on this property? It is a 2 bdrm + a 1 bdrm with seperate leases. Sorry if there isn’t enough info here as I don’t really know what other info would be helpful. It’s not completely dedicated as an investment property as I lived in the 1 bdrm part for a year or so before coming here.[/quote

I think that the numbers need to speak for themselves. If you are not getting the kind of return you desire (note: most people don’t ever set a required return!), then you need to take action, with the ultimate action being to sell the property and invest elsewhere.

quote:

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2. I want to use the equity (approx. $200,000) to buy one or two cheap investment properties in N.Z. Is this legally possible? What info do I need to read up on, and where can I get hold of it? I love N.Z and believe it would be a good place to buy.

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Yep – it is legally possible, but the laws are complex. In a nutshell, to aim a tax deduction in Oz for the interest you also have to bring to account the income too.

There are some creative ways around this, such as onlending the money to another entity and charging interest, and the second entity invests in NZ…

Be wary about investing OS though… the returns may be better but there are also more risk too.

Quote:

3. If I’m applying for this type of loan, do I need to be currently employed to qualify? Or is the main requirement that the property will carry itself?

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Hard to say… you could do a low-doc loan at say 70% on valuation, but it would be a lot easier and smoother if you could prove your income (ie. have a job).

Hope this has helped!

Merry Xmas,

Steve McKnight

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Hi,

I’ve looked at them at various times and found that they would be negatively geared on the basis of an 80% lend.

They are properties that would be better suited for investors seeking capital gains returns and not wanting the usual hassles of tenants.

For cashflow investors, the deposit required to make them +ve cashflow would mean that the CoCR would be too low.

Merry Xmas,

Steve McKnight

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Hi Vegemite,

I’d recommend paying an accountant to flesh out your options with you.

Depending on your situation, you might be able to gain some tax advanges by paying a dividend rather than taking it as a salary.

I think you really need some advice because:

1. It is not wise to operate a business and act as a trustee in the one company.
2. As outlined in WealthGuardian, it is not wise to buy appreciating assets in a company.
3. If you buy the house in your comapny and pay rent then it needs to stack up like any other investment. You may find that it is very capital intensive and a low CoCR.

Merry Xmas,

Steve McKnight

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Hi,

Doing things like this to access tax benefits is not a sustainable way to invest.

The points made by mortgage hunter are well made… indeed, this looks like a scheme which is only entered into for the purposes of minimising tax – and as such, if ever questioned, is likely to attract the ire of the tax authorities.

Personally, if you do this then do it out of love – not out of some way to gain a financial advantage. Family squabbles about money are messy and can do a lot more damage than some token financial advantage.

Merry Xmas,

Steve McKnight

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