Clive,

I’m not sure about the process for registering for Qld, but in Vic you need to fill in a form and lodge it (free).

Don’t quote me, but I think that there is no registration required in NSW, but the contract needs to include certain parameters that meet the requirements of the Code.

If you are serious about wraps then I’d recommend paying for specific advice from soliciotrs from each State. This may set you back a few grand, but it is an essential cost.

Finally, it’s OK to have a plan like the one mentioned above, but if I were you I’d do a few wraps closer to home to get the feel for the system you will implement before trying to take over the world.

Have you purchased my wrap library yet? If not, for $3k, you’ll find the answers to questions that you’ll come across. You can always reinvent the ‘wrap wheel’, but I’d recommend leveraging off my knowledge and save yourself time and money in doing so.

Regards,

Steve McKnight

Hi Alf,

Thanks for your feedback.

You write:

quote:

---

how about a negative geared property with a positve cashflow?

---

With respect, isn’t this an oxymoron, like ‘finding an honest policitian’ or ‘male intellect (so my wife implies [])’?

Really, the ‘negative’ in ‘negative gearing’ implies a loss or outflow. In most cases this is cash – or at a minimum depreciation savings to offset other taxible income.

With respect to the depreciation, it is possibile to have some cashflow up to the point when all your tax liability is wiped out. But if you want to replace your salary with passive income, then -vely geared property is not a strategy I’d suggest trying.

Regards,

Steve McKnight

SJ,

I think that it would be a good idea to get some advice from a Qld solicitor re: latest changes to property investing rules in your State. There are new regulations in respect to the number of properties you are allowed to transact in a period without an appropriate licence.

In fact, I’ll try to get a solicitor to make a post about this on the forum when I get back to Melbourne (I’m currently in Mackay until 15 June… what’s with this bad weather? [])

In resepct to a few of the comments that you have sought help on, my feedback is as follows:

Structures

There is no right structure that fits best for everyone. However, unless there are unusual circumstances, I’d be very surprised if a unit trust was the best way to go.

This is because a lot of the flexibility you can enjoy with a discretionary trust (such as a family trust) is lost with the fixed entitlement depending on issued units.

As such, I strongly suggest that you receive another opinion on this matter and I’d make sure my adviser was either a tax lawyer, CPA or Chartered Accountant.

Having said this, structuring is important, but it is just one of many issues that you will need to overcome as an investor. In fact, depending on your circumstance, you may find that you could do one or two deals in your own name before needing an expensive structure.

The question is… what do you have to protect and how much are you prepared to pay to protect it?

Advice

For what it’s worth, my tips on structuring are more based to asset protection rather than tax minimisation. I’m happy to pay tax so long as I am earning cash profits. More so, I’m not interested in making a loss to try and wipe out my tax bill.

Re: your adviser, from what you have written here I have to say I have one eyebrow raised. Not withstanding that I was not privy to your interview, the idea of one entity per property is quite perplexing!

Perhaps you could encourage your adviser to post his/her thoughts about this on this forum?

Finding an Adviser

It might be wise to shop around for another opinion.

I suggest you go to http://www.wealthtipsonline.com.au and download the free report that will help you find a good adviser.

You can also post your general questions here and I will help where possible and within limits.

I would also like to point out that the issue of structuring, include the exact structure that I use to protect assets and also legally keep my tax bill as low as possible is outlined in detail in my Wrap Library.

For more information about the Library, visit:

https://www.propertyinvesting.com/files/content.asp?cid=wrapintro

Regards,

Steve McKnight

SJ,

I need a little more information before I can provide a meaningful reply…

1. What are the professional qualifications and background of your adviser?

2. What State do you live in?

3. When you went to see your adviser, were you seeking advice about asset protection or tax minimisation?

4. Precisely what do you get for your $800?

5. Any idea why a unit trust was suggested?

Based on your answers I may be able to help your further.

Bye,

Steve McKnight

Mark,

Re: the long settlement… we asked for it!

We will be doing an 80% lend on this deal, which is our standard finance terms that allows us to continue to borrow money.

In this case, the lender that we are using is the NAB.

Can I ask who you have sourced at 80%?

Thanks,

Steve McKnight

Rob,

Vic & NSW: immediate
Tas. & Qld: After 12 months
SA: Wraps illegal
WA:?????

Regards,

Steve McKnight

Hi,

Of the 40 or so wraps that we did 3 three years ago, 50% have now terminated as either moving out (and we have resold, re-wraped) or they have cashed us out.

This large atrition rate is primarily due to our poor classification and qualifying techniques over potential clients – something that took time to fix but which is working better today!

Funnily enough, the remaining 50% seems to have been our best clients.

Investing is a learning process… and there is no doubt that I’m still learnig today. I don’t pretent to know everything and I’ve now doubts that in ten years from now I’ll look back and shake my head and the mistakes I’ve / I’ll make.

Oh well, sometimes the best lessons have to be experienced first hand.

Cheers,

Steve McKnight

Hi Dianne,

Firstly, I think that the information provided by the replies you have received all contain good advice.

To be honest, it is difficult for me to comment on your deal beyond very basic indicators. But sometimes these are best because they tend to cut through all the hype and emotion associated with the ‘sell’.

If you haven’t already done so, I suggest you get and read my free newsletters and work through my laws of success.

The first thing I do on any potential deal is the 11 Second Solution. In your case, $2,433 pcm works out at $561 per week. Hmmm, this seems very high.

In any event, $561/2 = $280.50. Then *1,000 gives $280,500 – this is still much less than $365k.

I also get nervous buying an expensive property because:

a. If the property is vacant then the negative cashflow may be extensive. I realise there is a guarantee… just be careful about the clauses that write this up as legalise.

b. You could buy one property for $365 k, or 7 * $50,000 properties. More properties reduces both your interest rate risk and also your vacancies as you spread your exposure over 7 properties rather than one. Ie. all 7 properties would have to be vacant to have the same exposure as one $365k property being vacant.

c. I’d compute how far interest rates have to move before your ‘budgeted’ +ve cashflow is eaten up. 5.65% sounds a little optimistic given the change in interest rate landscape. If you buy on a 60 day settlement, then the rate may be closer to 6.5%. Watch out!

As for other questions – make sure you do your ‘due diligence’. If you have purchased ‘Property Secrets Revealed’, then use then PATTERN Templates included therein and also the negotiating strategies to try and get the price down a bit further.

Bottom line… this isn’t a deal that I’d do as a buy & hold. Too expensive and the risk is isolated across one deal. Even capital gains are now uncertain given the change in interest rate climate.

But my opinion is clouded because my niche is smaller regional properties – not CBD stuff.

Do your numbers very carefully and be sure to factor in ‘buying’ and ‘selling’ costs to get a realistic idea of how much you will make for how much you are risking.

Bye,

Steve McKnight

Hi,

One of the many things outlined in my Wrap Library is the treatment of Land Tax (in Vic.)

Basically, if you know what you are doing you can avoid having to pay it at all. The solution has nothing to do with asset structuring – just about knowing the SRO system and how to use it to your advantage.

Regards,

Steve McKnight