In NSW the land tax office will NOT send you a bill prior toinitial lodgement of your assessment.

It is your responsibility to lodge the initial paperwork that acknowledges ownership from then they will asses what you owe retrospectively and then will send an annuall assesment.

If you don’t lodge the initial return then any land tax will simply accrue on the property and this will come back to haunt you at the time of selling. Also there are severe panalty rates for the late payment of the same.

Best to talk to them and pick up the liability sooner then later so that it doesn’t build up.

By the way I HATE LAND TAX. The other day somebody mentioned that they have a seperate department just to read and file all the complaints about land tax that are submitted with the payments of the same.

Cheers

There is an advantage in QLd. As mentioned by steve for land tax purposes entities are grouped together but in Qld trusts are treated seperately and trusts get the threshold.

What this means is you get a $200k+ threshold for each entity and thus avoid land tax in Qld.

Cheers

Hi Bill

I don’t disagree with the thrust of your argument but I do want to highlight that the markets you refer to are generally very volatile markets.

It has always seemed to me that country areas are much more prone to market turbulance, with a complete lack of demand when the cycle turns against property. From personal experience I don’t find that the median properties in Sydney (the only place I invest) corrects to any major degree. The market tends to simply sit at the same price for a long period. I have allways put this down to property, in the main, being an emotional purchase and because the median houses are generally ppdr’s, people will simply sit and wait it out. In fact the best bargains I have picked up are just after the market starts moving and all these long term sitters suddenly see an oppurtunity to get out at slightly more than they paid (forgetting completely the purchase and sale costs actually make a lose in current dollars as a result). By this time, in real terms, thay are bargains with the real move still to come.[]

Westan – absolutely agree – as far as people thinking they are going to trade property they are only fooling thenselves. Generally they entered the market to late and have bad experiences with holding property. Speaking personally I have made money because I have held, in fact been in the IP market sinnce ’85 and have never sold a property. Why would you sell and pay 25% tax on the CG and then still pay all the transaction costs ($25k stamp duty on a $1mill purchae)

Cheers

Retain

The realestate agent is only working for himself. You will be able to draw down that equity in the years to come like you had that money sitting in the bank.

In relation to using it to get the next one, try and not cross colaterise. First go to the back and borrow the equity, tell them its for reno. Then you can use this money as the deposit with another loan for the remainder of the new properties purchase price.

Cheers

Paul

Excelent contribution and finally establishes some credibility and some relevance as to where your comming from and heading to.

Firstly why did I say it is an idiotic question. The focus of retirement is a personal thing. You may see retirement as driving your motorhome to the sun. Personally I see this as work as I would must rather walk on a plane fly to Cairns or whereever and then rent the appropriate vehicle for the type of exploration I want to do. Other people may see the whole concept of not working unacceptable not because they can’t afford not to work but their whole fabric is related to the work.

What I am getting at is horses for courses. So maybe the question should be more do you have the discretion to do what you want when you want.

I would still suggest that you need to think about your loan set up as you are paying non deductable interest on the $200k, unless your accountant is doing a swifty.

From what you have outlined and no doubt the issue with the bankruptcy you are debt adverse but you could have used debt effectively some 3-4 years ago to really jump your capital base.

In relation to vacancies, yes I see your point re the difference between motal type investments and other commercial investments but your preparedness to jump in and run the motel is exactly the same as a vacancy factor in the other type of investments. Don’t get me wrong, I think it is prudent that you have that view as this is the correct sort of contingency planning that any investor should do.

OK where am I at? Well I have a range of investments which in total generate an income before personal tax but after all expenses of $1.4mil. This is obviously sufficient to retire on but it actually takes quite some management to ensure that everything stays on an even keel.

We generally have holidays somewhere in Australia 3 times a year and an overseas hol 1 a year. We also visit Brisbane for weekends as we have friends up there. This year we are doing a month in Europe.

Having said all this I don’t consider myself retired as when I am in Sydney I work 4 days a week from 11:00 – about 15:00.

By the way my investments started slowly buying an investment property in an outlying suburb of Sydney -ve 2 years later I bought another still -ve but by then my capital base had grown by $150k (1987) I have been buying property ever since. W e also established a business in the early 90’s financed by the equity in the properties.

We work out our level of debt to ensure that we don’t have to much but also not to little. As if you don’t have sufficient when asset values are growing you are effectively sitting on your hands. With this strategy in place we gained $5.5mil in equity over the last 3 years.

Currently we have very little debt as I have not bought any property for the last 1 1/2 years this reflects some of my conservatism as I don’t see the value in the current market.

I hope this is relevant to your question Paul. In regard to your Motel you mention an income of $132k with you and your wife drawing $48k what happens to the other $36 or is the tax you are paying. What are the expenses that you still need to cover over and above the $132?? or are they all leasee expenses?

Cheers

Hi Del

I like you have my Superfund pay my life insurance. This makes the life insurance tax deductable but because it is the superfund the tax deduction is only 15%.

Terry the link you included is not working could you please correct it as I am interested in researching further.

Cheers

Hi Susiemac

Firstly I agree with Quentin and for your first property get it managed for a while to get the hang of things. You can shop around and get a good management deal. If you do manage it yourself then the most important thing you need to educate yourself about is the tenancy act of your state. This sets out all the rules re notifications etc.

In regard to water the tenant is not up for any statutory charges ie service and sewer but is liable for water usage as long as there is a meter and you are being charged for water based on the meter. This is part of the tenancy act.

In regard to the rental on the bottle I think you are going to be up for it. One avenue you may want to explore is make the tenant fully responsible for the service. To do this I imagine you would need to cancel the service and get the tenant to reengage the service in which case the tenant will be liable for both the rental and the gas. Might be worth speaking to the gas supplier as to how this may be achieved. By the way what is the gas used for?

hth

Hi AD

Well done. Iam somewhat curiuos as the partnership seems somewhat lop sided. How come the profits were not based 50/50?

Cheers

Hi hillary

Why do you say bigger cap gains. In my experience the cap gains on commercial property are very much tied to the rent and the business climate.

What this means is that this type of property can actually go backwards considerably. Either because rents have to be discounted or because of vacancies (which can go for a year or longer) the property can not be sold without giving a major discount.

The other reason that the capital gains are smaller is that there is a limited market for this type of property and the majority of players (buyers and sellers) are in the know.

Another reason that com/ind has less cap gain is the building constitutes a much larger value (in comparison to the land) in the initial investment. The building then looses value as depreciation occurs. Remember land appreciates buildings depreciate.

Obviously there are exceptions such as developing a large lot inot smaller factories etc but I believe on the whole the capital gain is on a completely different basis then residential.

Cheers

Hi gazza

My personal opinion is that the property market is way over heated and that at this point of the market you can actually make loses over the shorter time frame (0-5 years). If you are willing to venture out of the main capital cities then at least you can pick up a property with cash flow but the flip side is you will wait a very long time for any real capital gain.

As I have said this is my personal opinion with my investment phylosophy for both +ve cash flow and the massive capital gain that can be achieved if you buy at the right time. (notice I did not say right place – apart from cap cities)

Getting back to your question there is a saying

‘past performance is not indication or gaurentee of future performance’

Potentially that property will have no capital gain left in it for some year, posibly as much as 5 years. So why rush the purchase just to know that you are going to loose at least 5 X 52 X $49 = $13k

Consider that if the property does not go up then you are actually loosing in real terms (inflation and costs).

I have now not bought any property for the last 18 months, with the last three purchases making $300k within 6 months. These properties were originally sold of the plan 3-4 years prior to my purchase, would have been -ve cf (and still are) with the original purchasers selling for the same price as they purchased and one even loosing $2k on the original purchase price. All have actually lost as the stamp duty and other costs were not recovered.

Now these properties would have been marketed along the same line that has been spun your way and obviously if the original owners had not become impatient then they would have eventualy made 30%, but that is over 3-4 years of ownership with the cap gain only in the space of 6 months.

Having said all this, the final decision is yours but if you do decide to proceed then make sure you can hang in there until the next boom which will be 8-10 years away.

Good luck