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Interesting comment TerryW. I had not thought of it like that. With a big enough LOC (s) i could never actually pay off the loan, just shift the account from which money was owed. So would always have 100% loan for property.
-Unless i desired otherwise.TerryW,
In which case i take it the normal approach is lend the trust 20% from LOC. Get the trust to borrow 80%, so that 100% of interest costs are incurred by the trust for the property.The concern i have is more in relation to paying the principal portion out of the LOC. As any interest on this would not be tax deductible….so the LOC would then have some good debt and some bad (breaking the nexus??). Just trying to avoid if i can and wondered how others had achieved it.
Trusts, Can i ask
If i set up a trust. Buy a house (using trust). Pay deposit from LOC.
1) Any money the trust loses stays locked up in trust. But can i carry the loss forward into subsequent years until the trust makes a profit?
2) Can i claim the interest on the 20% deposit from LOC as a tax loss against my personal income?
Seems a little more complex than that. Property is student accomodation
– After 5 years i can certainly remortgage (starting at interest only for first 5 years again) BUT
1) Fee involved
2) Banks no longer accept student accomodation as security for itself. So i dont wish to remortgage !!Next spot of interest would be Brisbane
Most common advice i have heard in this regard is
-Family trust, under a company banner. With family as beneficiaries (+ a company as a beneficiary)
1) For the asset protection
2) Reduce land tax
3) ability to redistribute wealth (ie to kids – or lowest earning partner)
4) planning for future (ie your death)Certainly agree capital growth is key. But with little or no ability to repay a loan then we need to be cash flow positive from day one – or at least close to neutral so that all can see that servicing the loan is straight forward – (OR no loan at all !!).
Meaning we need to buy a house with reasonable capital growth prospects AND be low priced. Two places spring to mind.
1) Tasmania (CG ??)
2) USAOf course the second option is a lot more involved (especially in regards to property management). Also, issue of being able to use any capital growth to re-invest (unless in USA again).
10% growth on 40k is still 10% growth.
Good Luck with it all
Well the first city of interest would be Gladstone.
Taking into consideration entry and exit costs…and CGT tax etc.
There is no real info on the web site on which to be able to form an opinion. What are the trends in regards to burials vs cremations? Sounds to good to be true….need a lot more info. Would tread very carefully if i was you
Scott,
could you expand a little. What is ebitda??– Good question
So many ways to do the numbers!!!
– For arguments sake, lets pretend that
1) your loan, at time of purchase, was also 45k. And purchase costs = ZERO
2) Council valuation is correct
3) Going to disregard income / loss during years 2002 until now (we dont have the info, otherwise we would deduct it off the CG)CG = (250000-115000) = 135000
Money in = 70k
Time = 8.5 years
CG / yr = 135000/8.5 = 15882
As a % of Money in = 15882 / 70k = 22.7%Of course in the real world. You made losses in the early years (helped to a degree by a tax break, depending on tax bracket) – should take these off the CG amount shown. Also, i'm betting you didnt start with 70k in (ie 61% equity). But you gradually increased your equity over time by making principal payments.
– Of course unless you sell, these gains are tax free – and you can use the equity to do the same thing again.Going forward from here.
– This investment will pay for itself without any additional principal repayments from you.
– Alternatively your net yield (based on equity) is now (12254-8158)/(250000-45000) = 1.99%A property investor will tell you – entry and exit costs are high. So dont sell unlees you have to. Also the gain is in the capital Gain, not the net yield. (although what the future capital growth figures are is anyones guess).
Also note, if you cash out seeking a better return, you wont get 205000. As this will be subject to
1) CGT
2) selling costs.I'd be interested to hear any other comments. There does seem to be a lot of ways of crunching the numbers.
I'd love to have a copy of a lenders servicability calculator. In particular for CBA.
If anyone can help, that would be appreciated.
Separately:- currently all my loans are interest only (for the first 5 years, and then P+I). However i have been advised that for the servicability calculation, this is calculated as though i have progressed into the P+I phase for each of these loans. This is significant. The explanation being that you need to pay it back at some stage!! – i had thought to keep renewing as interest only when required. Then pay back on sale.
– Paying back 4k per year, per 100,000 borrowed, for 25 years is a big dent against what i could borrow.Comments?
i have no knowledge of Bayswater, WA. But the most common advice is buy, but hardly ever sell. It makes little sense to sell, incur all the costs of selling/buying – to invest in property somewhere else.
– This assumes that the new purchase performs about as well as your existing ip.– The time to sell is when you retire. So choose your investments very carefully.
Speaking from theory (not experience)
1) Cost it.
– Targeting what people desire in this area. So perhaps as you indicate, 12 x 1000m2 blocks. With house (3-4 bdrm)Work backwards
– What would the expected final product sell for (x12)
– What would it cost to build
– What will it cost to buy and hold land (12-18 months for DA, and then a further time frame to build – say 18 months)Is there a demand for houses in the area. Amenities? Transport? etc
This is not going to be a cheap excercise. Or a quick one. You need to do the numbers so that you can show the bank the profitability of the excercise. Unless you have a lot of money just sitting around then it is probably a commercial loan (higher rate) and they may want pre-sales.
here is some guesses at costings for you (based on 10 houses)
1) Land 2,000,000
2) Build 3,000,000
3) Holding costs 450,000 (150k+ per annum for 3 years – very rough )
4) Other 50,000 (Lots of things here, council, surveyor, architect – easily a lot more)
Total Costs 5.5M
Dividing by 10 gives you an idea of what you need to sell each house for just to break even.
– You might find a better option is to do the sub-division, and sell off the blocks individually
Good lucj with it all.Cheers
APerry
Can you advise how you managed to apply and be considered for NRAS accreditation. I have looked at a few NRAS oppurtunities, but usually conclude they are 30-40k too dear, and not in the types of locations i would like to build.
Are you in a group that is building >20 properties?
Also Thoroughly recommend Michael Yardneys book "How to grow a multi-million dollar property portfolio"- for philosophy of buying for capital gain.
Australian Property Investor Magazine
Also before you buy read
Saving Tax on your investment property by Noel Whittaker and Julia Hartman
I use RP Data for suburb histories (all sales in suburb over the last 12 months) ($10 for report). They are handy.
A friend uses PriceFinder, but they are costly..I bought a property in QLD. The contract price was 380k, subject to Building and Pest. I didnt like the report much and negotiated 10k off the purchase price.
However i still had to pay stamp duty on 380k !! I think your proposal would suffer similarly (ie higher stamp than required)
