Forum Replies Created
That video was both hilarious and educational! Should be compulsory viewing, imho.
I’m not spooked, I’m bemused. And of course, we’re talking about negatively gearing property only.
Approx 70% of individual investors use NG to fund their purchase. Around 1.6 million taxpayers used NG year ending 2010, generating a net rental loss of $6.5 billion. In my opinion, not a huge cost compared to providing about one third of the housing stock required for people who want/need to rent ~ one third of existing stock @ $ 3 trillion = $1 trillion?
Genuinely, what’s the alternative? Remove NG and with no new investors in the market, would history repeat, a la 1985, without a corresponding increase in supply? The estimated undersupply of homes nationally is already about 200,000, but I can’t see government embarking on a social housing building spree anytime soon. Didn’t the Henry Review recommend NG be retained?
However I am sympathetic to the view that NG does encourage investment into an unproductive asset. Perhaps it should be quarantined to new builds only.
Affordability IS an issue in my opinion, but isn’t it the inevitable end result of capitalism, growing population/demographics, lax lending previously…etc…all things that are hard to tackle/unwind?
Personally I’m close to neutral geared, so not bothered either way. The projected tax payable on my rental income in future years is horrifying, but that’s why mr ato gave me NG breaks upfront – fairly likely over time that income will exceed costs.
But what’s scary is a) no-one *really* knows how to stop speculation/lower house prices without affecting other things;and b) it’s in the hands of politicians!
But we do live in interesting times. I am hoping the govt hold onto the default policy…do nothing!
Hi Red Man,
It seems relatively straightforward to me – have a word with your insurers, ask them if this situation is covered, first up. Your course of action will depend upon the answer to that question, in my opinion. Normally one might have a claim against the agent – shouldn't they have withheld money for the carpets? – but as they are in receivership, you are facing an uphill battle. What is the old manager proposing you go to the tribunal for – just the damage to the carpets?
Is it possible to replace just the damaged part, or is the whole property to be recarpeted? What is your excess on your landlords insurance policy? How will a claim impact you upon renewal, if at all?
Get talking to the agent and the insurer!
Good luck
Swampy
I was faced with a similar dilemna. I realised that there were two seperate issues here – wanting the emotional security of living in a "family" home, and investing. I realised that with rent only around 2% of the value of the place I'm renting, and interest alone being double that, it makes better sense for me to rent, while investing elsewhere.
However, that applies to an expensive suburb of Sydney.
Google "renting while investing in property". You will find in depth discussions of this out there. Basically do a simple analysis of whether your ideal PPOR type property would likely increase more over 5 – 10 years compared to an IP, and can you handle the possible instability that comes with renting.
Shape wrote:Scott No Mates wrote:Whilst you've got the income, you should still consider salary sacrifice as this is taxed at only 15% not your marginal rate. Why lose an additional 30%+?I dont know ONE single "property investor/ stock investor" that pays the "normal" rate- i personally have ever only pay tax rate below 28-35%…and im not just talking about -ve gearing… There are plenty of any way to lower your tax, super may work for someone whos 45-50 who can access this fund in 10 years time…but not when your 23….find a better accountant
1. Salary sacrifice 2. PAYG adjustment 3. Insurance Bonds 4. Depreciation 5. -ve 6. Interest in advance 7. Trust 8. Shares Rolling lost 9. Health insurance- Medicare Just to name a few from the top of my head…May not work for everyone; but sure doesn't hurt to ask your accountant. Regards MichaelMichael,
On the basis that the only stupid question, is the unasked one, then "What are insurance bonds"???
Cheers
Swampy30
Hi mgerbi
Well this is an Australian based site, so can't really help you out on the finance side of things (although someone else on the forum might be able to help)
However some things are universal. If you're just starting out, you need to be creative and think outside the box if you don't have much cash. So, off the top of my head, how about researching the market and finding good deals, and "selling" the deals to investors?
Educate yourself as much as possible – the internet is a great source of info, so are libraries. Join or start your own investors club.
Is there anyone else in your life who you can do a joint venture with? The biggest myth I fell for is that you should do it all yourself – no, it's much better to have a more experienced mentor if you possibly can.And if it's financing that concerns you, find out as much about it as possible! Do hypotheticals – if I were to buy this proerty, what would all the costs, mortgage payments, mortgage term, minimum deposit, etc, be? How long before you can remortgage? Worst case scenarios, best case scenarios, coring and conservative scenarios.
Speak to people! Chat up local agents, chinwag with your banks finance officer, chew the fat with your friends, colleagues, bosses – you get the idea! Someone will say something or propose an idea you find interesting, then, you're cooking!
Personally I find the research/investigating part of the property process the most fun!
Bon voyage!
Sydey99
Oh dear, you got yourself in a bit of a pickle with this! Never mind, just learn from it.
Firstly, it looks like the agent made a mistake. They are only human, remember. However this is a very basic cock-up that a good agent should not make. A tenant can only be "moving in" once a lease is signed (i.e. they are committed) and keys handed out. Do you think the agent is any good? How have they performed for you in the past?
Equally you made a mistake, in my opinion, by advertising the property thru Gumtree when you're paying the agent to manage it.
Two parallel processes only lend themselves to confusion and error. Do you not trust the agent to do their job? Personally I wouldn't have looked at the application from the working couple, because once an application is accepted, the property is off the market, or else you're just messing everyone around.So in regard to your second point, what did the agent say re why no tenants? Was the property marketed before the last tenants moved out? How many applications have they received? What reasons were there for rejecting any applications? Surely as a landlord you know there are many reasons why tenants might not get rental approval, working is not the only requirement.
My advice would be either accept that your agent is ok, and this mistake is a one off, and talk to them about waiving your fees this time, or look into ending your agreement with that agency and finding another who is more competent
Whichever agent you use going forward, work with them, and manage them (and the process) more closely.
Good luck!
My opinion only, but…
The advantage of cross securitizing is to your bank. The disadvantage is to you.
The only reason to cross securitize is if it can be done no other wayThe advantage of de-seciritizing is flexibility – you can sell an uncrossed property when you want/need to, rather than having to have all properties in the "cross" valued, and you having to provide financial details – again – to prove you can still service any remaining loan.
The disadvantage is time (it can take weeks to discharge a mortgage) and money – in break fees, if applicable, and legal costs.Hi Mick,
Disclaimer:- I have only the barest knowledge of trusts, having just started looking into them myself, so check anything I say. (And no doubt someone more knowledgable than myself will reply soon.)
Firstly, be very very careful. The first thing I was told about trusts was, do not set one up just to lower your tax bill. The ATO will not allow it. There are legitimate reasons for setting up a trust, like asset protection (are you likely to get sued?), and estate planning (passing assets to children) among others.
In laymans terms, trusts are created by the settlor. Settlors are not allowed to benefit from the trust – settlors are usually solicitors or accountants
The trustee looks after the affairs of the trust, making the day to day decisions. Trustees can be individuals, groups or a company.
The appointer hires or fires the trustee, therefore is the most important role in the trust. Make sure you "trust" your appointer, the appointer in theory has control over all the assets, by being able to choose a trustee.
As all a trust does is distribute income to beneficiaries, if those beneficiaries are just yourself and your wife, then you are still going to pay tax at your top marginal rate. So you'd need to look at whether creating a company as beneficiary, would be appropriate, which is totally outside my knowledge.
My understanding is that if you transfer investment properties to a trust, you pay CGT and stamp duty on the transfer as though you had sold (but check this!)
Also did you know that you can't offset losses of a negative geared property against your income if you own the property in a discretionary trust? Also you lose CGT exemption of your PPOR if it's held in a discretionary trust.
There are so many options, so many factors to consider, that my thoughts are, this is definitely an area where it is worth it to pay for professional advice, especially given the likely sums involved and the consequences of getting it wrong. How many advisors/accountants have you spoken with? Perservere in your search for an accountant/advisor!
Jambv,
I am in the exact same situation as you, but my IP is in Sydney. I had a chat with 2 agents, and their advice is that it is preferable to sell the property with vacant possession. Their take is that tenants will pose difficulties with regards to access (too many viewings spoiling the tenants' quiet enjoyment of their home), and also tenants may not present the place at its best.
However from my point of view, as a buyer, I'd also personally prefer to look at a property with vacant possession, just so I'd know there were no issues with vacant possession. But that's just my personal opinion
Bottom line is though, which sector do you think your IP is best suited to – owner occ or investor? When does the current lease expire? You could always put it on the market now, with lease in place, see if any investors bite. If not, market again once current lease expires and tenants have vacated.
Swampy30
Amit,
This is pretty standard with banks. You are changing the purpose of the loan to an investment (business). Business loans, even if on residential property, are seen as slightly more risky by banks, therefore they charge a higher interest rate.
Please remember, as an investment, interest on a loan is tax deductible.
Also, make sure you shop around to see if you can get a rate from another bank that is even better.
Swampy30
Hi Angel,
Sprechen sie deutsch?
Fortunately there are no restrictions on foreigners owning property in Germany. Anyone with a valid passport from any country can own property. However that does not grant you residency rights of any kind.
All I know re investing in residenial is hearsay that tenants rights are MUCH stronger in Germany compared to Australian/UK system. In some cases landlords bribe their tenants to leave, otherwise they'll never get vacant possession of their property back. But as I say, that's just hearsay – no direct experience.
Swampy30
http://www.landlordzone.co.uk/forums/forum.php – like propertyinvesting.com, only for uk landlords and tenants
http://www.zoopla.co.uk/ – good guide to property sales and prices
http://www.upmystreet.com/ – general neighborhood demograhics, crime stats, schools
http://www.environment-agency.gov.uk/homeandleisure/floods/31650.aspx – flood risk
http://www.lawsociety.org.uk/choosingandusing/findasolicitor.law – find a registered solicitor
http://www.direct.gov.uk/en/HomeAndCommunity/Privaterenting/RentingOutYourProperty/index.htm – UK government info on landlords rights and responsibilities
What sector are you interested in – resi, commercial? What part(s) of the country?
That's a very difficult question to answer specifically. You need to take into account build costs, selling fees (legal, agents etc ) and also tax, which is totally dependent on your financial circumstances.
What would you like to know – just a breakdown of costs?
S
Hi,
What types of property – units I presume? What is the purchase price?…what is the rental yield?. How much will you have to borrow?
These are the types of question you need to look at, not just the suburb/state
Swampy
Hi,
It's not impossible to invest in a different hemisphere, but…obviously, the property market in UK is completely different to Oz, different rules, etc. and of course there's the tyranny of distance.
I imagine finance would be a big hurdle – banks in UK are currently reluctant to lend to UK residents with good credit, not sure how the non-resident market stacks up.
Why are you wanting to invest in UK? Are you resident in Oz?
Make sure you have as much knowledge of the UK market as possible – not just prices and rental yields, but what's on the horizon (housing benefit cuts and caps, mortgage lending restrictions, flood prone areas, tax, to name a few)
Have a read of UK investing websites like this one http://www.landlordzone.co.uk/forums/index.php
And have fun – for me, research is the fun bit! It's a big adventure!
Swampy
Hi Julian,
I admire your aim of buying UK property.
The only buyers agent I'm aware of is Garringtons. As it's chief exec is Phil Spencer of Location Location fame, I would image they'd be at the top end of the fee scale – that's just an assumption.
They do say they cover the north west.What kind of service do you want? Full research of the area, sourcing of the property, and negotiations, or just someone to do a 'drive by' of properties you're interested in?
Unfortunately i'm on the South Coast (Bournemouth) or I'd offer my services
Swampy
Hi dammit
(Like the name!)
Wow, the world is your father’s oyster here.
No-one can tell you what the best way to invest is, but would like to put forward some points for you to consider
If your father does go for the 10 properties option, would he be able to get finance? He’s close to retirement age, some banks might knock him back
What kind of investing style does he aim for? Buy and hold, cosmetic renovating, self managed or hands on?
I would assume he’s looking for income – would that be right? In which case he’s look for high yeild property(s)
Where would he feel comfortable investing? Same suburb, same state or inter-state?
Houses or units?
In any dealings with family, make sure a formal agreement is drawn up – speaking from experience!
Good luck and enjoy the experience!
Regards
Swampy30
Hi Syoung33,
I don’t think you are classed as a resident if you are not in Australia for more than six months. Non residents do not have to file tax returns. Anyway you are operating this property at a loss so you can’t pay tax on a loss.
But check out the ATO website
http://www.ato.gov.au/individuals/content.asp?doc=/content/12503.htmPreviously declaring the property might have been to your advantage as some services (i.e. real estate agents) used to be GST free for non-residents. Alas the govt closed this loophole
Wylie,
I like your formula – even quicker than 11 seconds!
I would be the last person to knock CG or negative gearing, as it’s how I’ve gained my equity. Capital growth can be very important, and let’s face it, CG is what the majority of people think of when talking about property.
However I have personally come to appreciate that capital gains are not the whole picture. It’s a fact, as Steve says, most people only buy one or two -ve properties, and capital gains are somewhat more of a gamble than actual cash flow. (I know, I know, that could be argued either way!)
In the end, investors have to balance the current situation against future expectations
That’s what it’s all about; looking at each deal as a complete picture – not just cash flow or just capital gains
cheers
Swamp30
1. Salary sacrifice 2. PAYG adjustment 3. Insurance Bonds 4. Depreciation 5. -ve 6. Interest in advance 7. Trust 8. Shares Rolling lost 9. Health insurance- Medicare Just to name a few from the top of my head…May not work for everyone; but sure doesn't hurt to ask your accountant. Regards Michael
