Forum Replies Created
Wow – how cool is it to make media releases! [8D] I hope they run with it for you Stuart.
Until recently, the way I looked at fixed and variable rates was this…
Variable rates simply reflect the current market, and fixed rates take into account the views and expectations of the market by all the experts (bank economists, foreign exchange dealers, etc…) based on all available data. Theoretically you should be in the same position either way (in the long term) – except you pay a premium for taking the no risk fixed option. You are buying a guarantee.
Its like saying the fixed rate = variable rate + a small ‘insurance’ margin. So if the fixed rate is less than the variable rate you should be thinking ‘good deal'[
]So I believed that variable is always better than fixed (even if fixed is cheaper, it is because all the available data suggests that variable rates will fall!).
BUT [
] – one of your newletters changed my thinking recently when it said that property investors should consider fixing the interest rates for a portion of their loans as a way to minimise interest rate risk (a major risk with a large property portfolio).I was wondering if anyone can suggest what overall % of loans should be fixed?
Generally if you have bought half a property (with another person buying the other half with you) without any formal agreement (formal partnership for instance) then by default you have what is known as an informal partnership and the capital gain would be split evenly between the 2 of you.
So you will need to include 50% of the gain in your tax return, and your informal partner will need to include 50% in theirs.
However, if there is a reason as to why it should not be 50% each then this is fine too – eg. if you only put in 20% of the initial capital then you should only be taxed for 20% of the gain. Similarly, if you have only been receiving say 30% of the rental income you should only be taxed on 30% of the gains.
Hope this helps! [
]Great post Mini, I have read Who Moved My Cheese as well…
If you can adapt to what is happening around you, rather than being static (afraid of change) then you will prosper. Thinking ahead… you have to wonder where will the money go TO when it comes out of the property bubble? Perhaps our strategies should factor this in too?
The contrarian investors view (to which I and I sense many others here subscribe) goes something like:
Superannuation funds, shares, and managed funds are dogs at the moment. Everyone wants a SMSF because they can do it themselves better than a fund manager can (have you seen the ads for seminars along these lines in the papers?) Property on the other hand is HOT HOT HOT – just like my taxi driver said when he told me about his property portfolio (good pt Westan). Every 2nd show on TV is the Block or Renovation Rescue number 637. So shouldn’t we now be selling property and buying shares in anticipation of when the bubble bursts and all that money flows back into the sharemarket?
Buy low and sell high is the saying, not buy lowest and sell highest.[
]I’d love to meet you all there beforehand, but unfortunately wont be arriving until about 10.30pm fri night. If I walk in and there is a noisy group in the bar – I’ll know it is you guys though, ha ha [
]Can’t wait – can you?
Very interesting Ishita, thank you for the summary.
I can fill in a couple of the gaps you mentioned:
Protection is not grandfathered means if someone is suing you, you cannot simply set up a trust and ‘protect’ your assets. I think. [
]Streaming (to maximise concessionally taxed income) is the same as income splitting, but relates more to the tax status of different kinds of income. eg. if some of the income generated within the trust is interest from a bank account within the trust, there is no tax advantage. But if some other income is generated within the trust from share investments, it could have franking credits. Not only can you split the income between the benefeciaries, you can choose who will receive the specific income with the franking credits in this case (or depreciation in the form of property income).
Financial planning – 4 asset classes are Cash (like bank accounts, term deposits), Fixed Interest (bonds, corporate or government type investments), Shares, Property.
Last but not least, in order to move your assets into a new family trust it will trigger a capital gains tax event (as the trust is the new owner, you effectively sell your property to the trust). This can cost you in terms of stamp duty, and if you have owned the asset you want to add in to the trust for a while and there is a large capital gain – it could mean a lot of tax! This is often the case with property, the only opportunity at the moment for some people is if they are sitting on shares with a loss – these could be transferred into a trust with no CGT.
Hope this helps.
Danczer, your first post and no one has replied[
] I’ll have a go for you… (and no the questions are not naive my friend – it sounds like you have a nice opportunity to create a win/win solution here.)My first query is: Why does she have to pay any CGT when she is selling her own home (principal place of residence)? It is exempt from CGT, and obviously if she is building on her new block she can simply sell her current home, THEN move into the new one (so there is no issue of the new one becoming her PPOR before she sells the current one).
However, if there is some CGT event triggered on sale (for some reason) then my understanding is that she must still pay CGT either way (not sure of the timing though if she is mortgagor, it may be deferred whilst she still retains title and you are paying it off – this is a question I would like answered myself).
She would basically be wrapping the property to you, so the payments you make to her would be taxable to her. Normally she would be able to offset this with the interest payments on her own loan but this is where she/you will need to confirm with her accountant as I suspect this may in fact be denied because she has borrowed against the home in order to build her new home (which will not provide any income, and hence the loan interest is not deductible). I could be mistaken – you need some really good advice here. Has anyone out there wrapped their own home to someone else and may be able to add to this?
My tip would be to do your numbers first, make sure the deal is worthwhile based on your anticipated outcomes (eg what can you rent it for and is it positive cashflow). You also need to be clear about how you get an income from all of this…(you don’t mention it above) will she stay in this house until her new one is built and pay you rent, or will you have a new tenant (gets rather complicated as really you are the middleman and she is potentially the seller and tenant, I had to draw a diagram!)
Let us know what happens [
]Hi everyone,
I was frustrated with my building insurance (through a mortgage broker) because when it came to be renewed there was a $100 broker fee attached to each property (x4) and I had not received any service (I know this is prob. not the case with all ins. brokers). The premiums quoted were similar to yours listed above.
I didnt really know what to do, then discovered that my landlords insurance people also do building cover and the cost was about 1/3 to 1/2 of the premium quotes I already had (and it could be arranged through my property manager easily as they already handled the landlords cover (and don’t laugh those who may have seen my other post re this![
])Anyway, it is through EBM Insurance Brokers in Melbourne – the RentCover Plus people, if you want to check it out (they have a website, I am not affiliated at all etc…). My only niggling thought is that you get what you pay for, so if anyone has had bad experience with these guys or can point out why its so cheap please let me know!
]
] – one of your newletters changed my thinking recently when it said that property investors should consider fixing the interest rates for a portion of their loans as a way to minimise interest rate risk (a major risk with a large property portfolio).
]
]
