Forum Replies Created
- millions wrote:Hi Mathew,
My plans are:
– Get a new accountant, (i've got a couple in mind) before I do anything discuss my goals with them – unless they hold a financial services licence or a real estate licence they can only advise on tax issues – get the full picture not just tax
– No share purchases, offload the piddly amount of shares I currently own at a loss – great short term panic attitude, with quality companies paying dividends of over 8% this is a great strategy.
– No property purchases, do a minor reno on currently owned property, increase the rent on it, sell it for a good profit property markethas slowed due to the rest of the panic merchants or over committed out there – good luck
– Build 2 houses behind another property we already own this might go ok as the building costs may have gone down – depends on how many builders go bust.
– Get hubby to take 3 months off work, either leave without pay, or take his long service leave and travel around Aus probably best done when investments doing better – I would be earning the cash to buy cheaper good quality investments – how are you going to monitor the contruction of the properties?Hi
Like anything, TV, Newspapers, Get Rich Quick books (makes the author rich anyway), seminars, Uni, even paid for advice – if you haven't got the ability to think and decipher the information and turn it into useful knowledge you are lost from the start.
Everyone in this world has vested interests.
The one common rule is "people don't know what they don't know", therefore one has to find ways of reducing the level of "don't knows".
The way this is done can be many and varied – but if your a sucker you'll always be a sucker.
Think about this though – does your source of information have something to lose if they are wrong? Internet opinions are that – opinions.
When I provide advice to clients whether via educational seminars or in written format, the future success of my business is at stake – not to forget the Professional Indemnity insurance as well.
The issue at stake is whether you are looking to learn more or just find someone that supports your initial view on what may be a way to accumulate wealth or wanting someone to challenge your view and ensure that you have considered as many options and issues as possible.
Even the many non uni entreprenuers learn from their own and others experiences.
goodenergy wrote:I currently owe $50,000 on my family home and own outright a small investment property which is in my name.
I don't understand what a trust structure is? Can anyone explain it to me please? Is there a difference between personal trusts and or unit trusts?Discretionary Family Trust – ambigous ownership of assets – determined by capital introduced or the beneficiary loan accounts – benefit discretion of trustees on how to distribute income.
Unit Trust – ownership determined by who owns the units in the trust – distribution determined by who owns what proportion of units in the trust.
Which better? Depends on purpose and many variables – should consider various issues, income, estate planning, risk management, tax etc.
Is it only done prior to purchase or can I transfer this owned property to a trust?Property transferred to trust is considered a CGT and Stamp duty trigger event
Hi
Obviously the intent isn't clear as you haven't decided – doesn't matter anyway unless you are in the business of property developing. If the property is to be a rental – can't claim any interest or rates until the property is completed available for rent, anything before this date is capitalised to the cost of the property.
Hope it goes/went well.
mpertile wrote:Sorry, I meant corporate beneficiary (or if the capital gain is distributed to the corp beneficiary) – 7.33pm is obviously too late for my brain to function properly…The corporate trustee is for risk managment reasons – as individual trustee you can be sued if anyone gets injured on the properties – somtimes public liability insurance not enough and the insurance companies don't alway like paying out – the corporate trustee is a $2 company and limits risk – can have liability as director though only if negligence as a director can be proven.
If your accountant knows the game you distribute capital gains to yourselves – lowest rate of tax if property held longer than 12 months. Corporate beneficiries are the old way – watch the Div 7A rules. Investigate Limited Parnerships as the 30% beneficiary and lender back to the trust.
Get wholistic advice not just tax advice!
Be very careful and get a very good lawyer to provide advice on what risks are involved etc.
If you enter into a contract now and settle later – the property risk is yours – liability for any injuries sustained on the property, maintenance of the property, insurance of the property.
There are many issues – buying debt free?, not PPOR – investment, Estate -Will issues family won't be happy on missing out on the growth. All are friends until death and money are involved!
Try John Gregg from Greggs Lawyers in Spring Hill Brisbane – http://www.gregglawyers.com.au . He calls a spade a spade.
mixedup wrote:thanks Terry – this is all making sense
What have you/others found is better to do re the question of whether you have:
(a) one sub-account for all of your IPs (i.e. all rents, all expenses come to/from this one sub-account) versus
(b) one sub-account per property (i.e. for rent and expenses)
(c) some other arrangement: perhaps all rent into one sub-account, all expenses into another for all properties?Any advice from those who have experience?
Seems to me like option (b) may be nice, however from a tax perspective item (a) should be fine no? i.e. in one's tax return everything gets bundled up into one overall loss/profit for all your IPs? Or is there something I'm missing for which a tax agent would really benefit if you used a sub-account per property?
Thanks again
Depends on whether you are treating the properties as a "pooled" portfolio or whether you want to track the individual performance of each property. Option 2 should reduce your accountant fees as they have to break up the costs between the properties – make sure you don't pay expenses from the wrong account. This way if the ATO audits you can easily prove expenses are appropriate for each property and you haven't sunk any in that aren't really there to be claimed.
Qlds007 wrote:Hi PKYou can certainly access the available equity in your IP but the interest will not be tax deductible as it fails the ATO "Purpose Test"
One consideration would be to look to sell your IP into a Trust structure borrowing the total loan amount and therefore using the sale proceeds less the existing debt as deposit for your non deductible home loan. Be very careful with doing this as a trust cannot distribute losses – it has to retain them so unless you are a business owner that can funnel income via the trust to soak up the negative gearing this will blow this opportunity out of the water.
The transfer would trigger stamp duty and possibly CGT however in saying this doing the numbers in todays higher interest rate climate may still be worth it.
Currently we have over around half a dozen clents doing exactly this as I type.
Another option if you are both employees on PAYG salaries you could consider freeing up at least half the equity – if the investment property is owned in joint names – by selling half the property from one owner to the other.
Again the Stamp Duty, CGT and possibly family law issues (if you were to break up) will be an issue.
This is one I would seek professional advice on from an appropriately qualified adviser – there are more than just tax issues to consider, you have to consider estate planning issues and investment risk liability as well.
Hope this helps.
elkam wrote:JamesandHannah wrote:I've decided that paying off our 15k car loan first is the way to go.
The second stage would be to
1. Pay down as much on our home loan as possible to create more equity
or
2. Save up cash in the bank for a deposit
or
3. A bit of both
Of the options above what is better for us?Paying off the car loan asap first is absolutale the way to go.
Instead of trying to decide between your points 1,2 & 3 above, my suggestion would be to see if you can convert your loan to IO with 100% offset account.. Rather than explain the benefits again, just do a search on this forum as it has been covered many times before. Problem – maintaining higher level of non tax deductible debt by making it IO. Want to clear the "bad non deductible debt as fast as possible.
"The bank will only take into account the purchase price on the contract as marked price, no matter how much the 'real' market price is."
Can someone please explain this to me, just can't seem to get my head around it.The bank will only initially give you a mortgage based on the actual purchase price.
For example if you buy a place for $200K even though the "real market value" is $400K, the bank will only lend you based on the $200K.
Of cause after 6/12 months you can have the property revalued and increase the loan.You're doing really well.
ElkaJamesandHannah wrote:"First step is to have your PPOR revalued to see how much it's really worth (your bank will do that) and see if you can borrow against that value."How much does it cost to have my property valued, I understand that a bank can appoint one on there behalf or I could get a private valuer, is this correct? if so which is better for me?. Can I 'sweet talk' a valuer into getting a higher valuation or is it strictly based on recent sales data in the area?
I've decided that paying off our 15k car loan first is the way to go. definitely – high interest rate on depreciating vehicle
The second stage would be to
1. Pay down as much on our home loan as possible to create more equity – this is better as if you need to redraw it for the new property it becomes tax deductible debt – not the same if you use an offset – as long as you first check that you have a redraw facility and if there are fees for redraw
or
2. Save up cash in the bank for a deposit – pay tax on the interest at a lower rate than your home loan – no go
or
3. A bit of both don't bother!
Of the options above what is better for us?I asked the commonwealth bank about how much expected rental income they take into consideration when calculating serviceability, they said 80%, does this vary from bank to bank?
Does anyone have an idea on figures for "fixed living" expenses from banks might be for a couple with no children?
Yes we are "full doc" we borrowed 100% on our property.
Unfortunately selling up and renting to purchase an investment property is not possible in our situation.
"The bank will only take into account the purchase price on the contract as marked price, no matter how much the 'real' market price is."
Can someone please explain this to me, just can't seem to get my head around it.I read everything with an open mind and will not base my decisions 100% on advice from one person.
Thanks again, I'am glad I made this thread it has boosted my confidence allot as has got me pumped!, good to talk to people that don't question everything about property investing or call me crazy for wanting to take on so much debt.
You have achieved a lot at your age – much more than many people many years older! Congratulations.
An investment property is generally a good "equity sink" for future investments. Property market a little up and down in Brisbane – some opportunities to cherry pick from those who haven't managed their finances as well as yourselves.Would not recommend making your PPOR interest only – remember it is "high net worth" you are aiming for – not high assets – high debt – one little issue and the house of cards falls over.
Also to further support your position – have both of you insured your income? Do the sums – 45 year till your turn 65 multiplied by your $40,000 income – that is an asset over $1,800,000 let alone the debt and investment servicing potential of your income along the way. I had a client in their 20's be diagnosed with severe clinical depression – off work for considerable time – years – that would throw a spanner in the investment plan. Do it while your young and healthy and you can lock in much cheaper premiums for when you have even more responsibilities like children etc. Email me at [email protected]. Again congratulations and good luck!
Hi
The difficulty now is there has been a lot more renos going on in the investment property game – the original purchase price on the official records – department of natural resources – doesn't take into account the capital invested in renos prior to sale of the properties so whilst sometimes it may look like the prices didn't drop – from a true value point of view the investor may not have got back all the capital invested – purchase plus improvements.
We are in a 2 speed economy at the moment – the mining sector and then everyone else. Many parts of the economy are starting to struggle – lower retail sales whilst people change focus to debt reduction.
Often, if at all possible, most people will hold onto their properties for dear life – as they are emotionally attached to them – they will reduce their spending elsewhere to keep the properties. However, the ones that are sold during these periods would geerally be "forced" sales or "fire" sales meaning that the sale prices would generally be quite low compared to other unforced sales where the owner can hold the property if they don't get the price they want.
If you find out who had bought properties with no and lo doc loans these are likely to be the forced sale properties!
Some would rent their property out and move in with the relatives before selling the property!
Best of luck with your research.
Hi
To be a full time property investor – and survive – that is have money to eat and have a house to live in you would need a property portfolio worth over at least $2 million with no debt. As net residential property returns are about 2% this means you would get about $40000 from such a portfolio – hence you probaly need a much bigger debt free portfolio to really be self sufficient. Remember gross rent is reduced by all the costs like rates, insurance,maintanence, property management fees, tax etc. Most gross rent is only about 4 – 5% in city areas.
That is why there won't be two many replying to your query.
If you are buying land and not developing as they have said it does not produce income so any costs of purchase and maintenance, land tax, rates, insruance and interest if bought with debt has to be capitalised – added to the purchase price to offset the sale value when sold – it cannot be offset against your other income.
There may be one way but it would mean making a business out of buying and selling land – but this is technical and many things to consider like GST etc.
Any investments that you do not repa income out of along the way are much higher risk – ask the owners of Enron and Worldcom shares when they went bust – never received any dividends fro having money invested for years then the companies went bust and no money returned to shareholders. Property can be the same – if the area doesn't increase in value you have worn a lot of opportunity cost of not having the funds invested elsewhere.
I wouldn't be doing it as your sole investment – maybe as part of a larger investment portfolio.
This is a complex area of law.
Firstly, are you buying the property outright – or borrowing to purchase? If borrowing is involved there are very specific rules – you need to use a property warrant and the current ones available probably would not cover rural property. Also there is significant equity required at least 30% some 50%.
Secondly, unless it is leased to an arms length third party it would come under the "in house asset" rule – therefore could not make up more than 5% of the SMSF fund asset balance.
If the property is used for productive farming you may get it within the Business Real Property rules – but would need to seek legal advice on this.
There are possibilities but there are many little rules to be aware of – definitely one for high quality professional advice.
Best of luck with the adventure.
Haven't heard of it here but it seems like the old "vulture fund" approach where people with the money look for companies that have a good product but have been run poorly and swoop in when they are in difficulty and buy them out – smarten up management and list the company for investors to buy them out.
The difficulty with the property arrangement would be (without leaked private information) finding the distressed property owners who are willing to own up to it.
It seems like an interesting strategy.
troyhunt wrote:You also didn't mention the leverage factor which is important if comparing rates of return.I didn't get into the specific detail of return calculation, but when looking at investment opportunities one has to compare apples with apples and ensure they take into account not just gross return, but expenses, tax and other related considerations.
Leverage is an important part of the wealth accumulation process – as long as the borrower has the ability to finance the costs in good and bad times it can greatly improve wealth acummulation opportunities.
Yours in wealth and lifestyle
yarpos wrote:you appear to be saying stay out of residential property unless you get commercial type returns , say 8% +. Is that a fair summary?No, not at all, just these things should be part of the consideration in what rent to charge as well.
Residential property can be a great forced savings plan – which is what many need – without the requirement to make debt repayments many pull out when the next best thing comes along.
The thing I often see is that the landlord gets to know the client and then is emotionally connected to decision making.
Investable capital for many is a rare commodity so they need to make sure they make the most of it.
Hi Nonnie
Don't worry there are plenty of procrastinators out there! Nothing to be ashamed of.
There are many opportunities out there – hard to make decisions – causes procrastination.
In the end I can guarantee one thing – do nothing and your future will not improve from a financial security point off view, do something and you can at least say – I gave it my best and I am better off for it.
Don't die wondering what could have been.
Part of our role is motivating people to action and keeping them motivated through the situations life throws at them.
There are no guarantees in life other than death and taxes.
It is all about using your resources to the best of your ability and then being satisfied that you tried your best.
Yours in wealth and lifestyle.
The first thing to remember is that you are dealing with a group of people. With people come opinions, requirements and generally differing reasons for investing.
Beware of any Financial Services Reform Act legislation when considering these sort of things – as the promoter you may well be seen to be giving advice – to do this you need to be approprately licensed, insured and follow industry advice requirements.
If the goup is for property investing you need to consider whether you may need to be a licensed real estate entity as if can be considered the provision of property investment advice.
How are you arranging the investments – via joint holdings or a trust structure?
How do you avoid group members being pressured by on another?
If one wants out how do you deal with that?
Is there a buyback/buyout offer?
Have you determined the investment goals and objectives – income what level, capital growth – what rate. Is it long term investing or speculating.
How do you vote on investment decisions.
Who manages the money – is there enough audit processes to stop fraud?
Does the arranger require any Professional Indemnity or Officebearer insurance?
These things usually work one of two ways – great – or horrible – not much in between.
All I can say is be wary.
What is good value? The issue is often one doesn't see the results straight away, most sustainable wealth accumulation takes time and coughing up a big amount up front can be a big ask.
We have developed a different process for our clients who understand that they don't know what they don't know.
Our service is like a gym membership – a joining fee then a minmum 12 month monthly membership fee. During this time we work with our clients to help them on the way to a brighter financial future and hopefully a better lifestyle (that one is sometimes up to them). Generally by the end of 12 months they see the benefit of having a wealth mentor.
There is a flood of investment and wealth protection products / opportunities out there – how do you assess them and actually earn the income that feeds your wealth accumulation!
I often hear so many saying we can do this ourselves – the issue is – often they can but they don't for whatever reason.
Why do professional athletes have coaches/mentors? Because from time to time they need someone to motivate them to continue even when the chips are down. There is a fair amount of psychology in the job, it is not just about investments.
The first question to ask is what are you trying to achieve through the process – money is a means to an end – what is your end.
Life is a series of destinations, whatever you do needs to be flexible to deal with life's changing situations as you travel from the cradle to the grave.
I would be interested to know if you made a decision yet – if so – how and why.
Best wishes for your future lifestyle.
