Michael,

Sorry mate, I missed your first post.

The go-to legal guy in Tasmania is Nick Raeburn. Contact him on 6337 5555 (Launceston).

(be sure to tell him he owes me lunch for the referral!)

Accountants? Sorry mate, I do all my own stuff in-house.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Belladonna,

Sorry I have not answered your post specifically b4 now, but I’ve been busy on the product development side of things getting WealthGuardian finished.

Thanks for making your post and indeed welcome to the community. I hope to see more posts from you again soon.

Now, down to business….

Firstly, congrats on getting in the game. I wished I’d started at age 22 as I’d be a lot further than I even am now. Still, better to start at age 27 than at age 67!

Re: FHOG. Check this out as I was not under the impression you had to stay 12 months. I thought all the legislation said was that you must have an intention to live in the property… something that you have clearly done.

Also, well done on your financial situation. To owe no debt places you in a prime position to really get going fast.

Re: your unit. At the prices you are talking about it is still likely to be -ve cashflow / -vely geared. Can I encourage you to can your focus to +ve cashflow properties? You will find that it will be much easier to own 5+ when they make you money rather than cost you money!

Now for your specific questions:

quote:

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What can I do with the cash to earn some $$ without causing me major tax headaches & tying up the cash too much

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Hmmmm – be sure to understand that with reward comes risk. You might find that the best short term use of the money is to temporarily pay down your mortgage (check fees for redraw first) as you will get a better after-tax return doing that than leaving your money in a 3% term deposit.

In the longer term I’d look at wraps.

quote:

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2) My fixed interest period runs out soon – is now the time to lock it in to another fixed period or should I let it convert to variable?

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See comment above. But I think that if you worked out the after tax interest on your deposit vs. the interest saving off your loan by setting up a redraw facility… you’d be much better off with the latter option.

ie: you have $15,000 which at 3% per annum will be pre-tax interest of $450 p.a. You will pay 30% tax on this, so after tax it is really $315.

Let’s now say you have a loan of $130k at say 6.5%. The interest you pay on this (assuming it is interest only) is $8,450. If you pay off $15k, then your interest is $7,475… that is, $975 less, plus you don’t have any tax to pay.

Does this make sense?

quote:

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3) What tax breaks should I be angling at when I rent it out? How does negative gearing work?

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I have written an extensive article on negative gearing that can be found as per Nathan’s post. You actually have a -vely geared property as your expenses will be more than your income.

Negative gearing is a strategy that works well in times of capital appreciation, but the side-effect is that it will keep you in a job in order to earn enough money to fund the tax breaks (ie. make use of the depreciation) and also the -ve cashflow.

The way to owning more property in the short term is to continue to save and then look to buy properties around the 50k – 70k level that are +ve cashflow from day one.

My thoughts on super is that for someone you age and your plans, it would be better to contribute the minimum and keep control. Don’t let the tax tail wag the investing dog!

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi IB,

Thanks for your post and welcome to the property investing community.

You ask:

quote:

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What I am wondering is if anyone has quantified
how much it costs to get going with wraps.
ie. solicitors fees, accountant’s fees, etc.

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I’d recommend perhaps doing the first one in your own name… only to see whether or not you like the strategy and also to save the $2,000 odd dollars it costs to set up a good structure.

Re: solicitors fees. This all depends on where you invest. If in Vic…. it will cost you nothing for the contract, but it will cost you about $700 for the conveyancing. Same goes for NSW (I think).

In Qld though… there are a few lawyers who seem to charge like badly wounded bulls. I heard one firm charge $5,000 before you’d even purchased a property! Still, with more competition, prices seem to have started to fall.

Perhaps the kicker in all this is that all States seems to disallow you to sell b4 you buy in a wrap. This means that you have to settle on the property b4 you can onsell, so you will need to fund the deposit and closing costs and then receive back your buyer’s depsoit.

So, this all seems to be leading no where []

What I’d say is to allow:

• 20% of the purchase price as a deposit
• 5 to 7% of the purchase price as closing costs

and that will see you right.

Thanks again for your post.

Bye

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Dan,

Can you be sure if you have never tried? I wish I had $30,000 of income when I started seeking finance!

There’s always a way when you see the problem and work thru it.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
**********

Hello Belladonna,

What a lovely name!

Thanks for your post and indeed to all who have replied too (especially Ursh246….welcome to the community Ursh!)

We all have to start somewhere as the road to 100+ properties starts with one.

For me it was May 1999… I didn’t own any property at that time, nor did I have much of a clue what I was doing.

But I did know a good thing when I started, which is why I have expanded my investing model by replicating the simple theory that if you only did things that made money then you’d have to make money.

Like I was saying to AD on the phone b4… this is not rocket science.

From your post I sense there is a few issues with fear… both in terms of “can I do it?” and also “wow… you must owe a lot. What if…”

By way of encouragement let me reply by saying:

1. You can do it… anyone can. The problem is that people mistake passive income for doing nothing. It takes work, sometimes hard work, but I believe that (in my case) it has all be worth it. You are only limited by your vision (as I have to remind myself all the time).

2. Draw a distincition b/w good debt and bad debt. It doesn’t matter how much I owe if someone else is paying it back on my behalf. Sure, I owe several million, but I am worth a few million more (on paper anyway [])

I have never lost money on a property deal to date because I pride myself in the due diligence I always do b4 buying. It might happen… but prevention is much better than a cure.

What I am trying to say is that there is little luck in success, and what luck there is you create yourself.

quote:

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Is it realistic to expect that little ole me could actually set myself up to do something like this?

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If that’s what you want… then yes. Absolutely.

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi again,

Hmmm – could you please expand upon your problem of why you couldn’t settle? I’m a little confused.

As for property software… I can remember a post a few months back that outlined what people were using. I recommend using the search function and using the words “software” and seeing what comes up for the last 90 days.

Personally, I use MYOB (for the physical accounting), Excel (for budgets) and WAMM (for wraps).

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Please make future posts re this thread in the general forum.

Thanks

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

We have done well out of Nambour in Qld as it seems to be a region that is experiencing good growth.

I understand there is a multi-million dollar refurbishment of the shopping centre in town that is helping the local economy mushroom.

And then there’s the Big Pineapple just up the road that’s sure to pack ’em in []

Bye

Steve McKnight

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Remember that success comes from doing things differently.
**********

Hi,

I am just putting the finishing touces on a new product called Wealth Guardian that outlines the different structuring options when it comes to property investing. I expect this will be available by mid-late February.

It is difficult to explain trusts easily, since it is a confusing and complex topic.

Still, I’ll try to give an overview…

There are two main parties to a trust.

Because a trust is not a separate legal entity, a Trustee is the person or entity that is charged with the responsibility of buying and managing the assets of the Trust

The beneficiaries are the people or entities for whose benefit the Trust has been established.

When you buy property in a trust you do so in the name of the Trustee on behalf of the Trust.

The major benefit of a Trust is that it allows for control of an asset without actually owining it.

For example, setting up a Trust where you are the Trustee and beneficiary means you control it (as the Trustee) and also share in the distribution of profits (as a beneficiary).

The disadvantages of a Trust are that it is complex to understand and also expensive to create and administer (in accounting fees!).

If you’d like to know a lot more, then I’d encourage you to think about investing in Wealth Guardian when it is available as it is a 60 page workbook with an audio component too.

Watch this space for more info when it comes to hand.

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

You ask:

quote:

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…all i think i am heading in the right direction, what do you think ??

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I doubt your plan will eventuate in fincial freedom in the medium term, since you lack cashflow… but the real question is:

Are you getting what you want from your property investing?

If the answer is ‘yes’, then you are making progress towards your investing goal which I think is great.

If not… then reconsider what you are doing.

Bye

Steve McKnight

**********
Remember that success comes from doing things differently.
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