In 0-130, Steve mentions he prefers to keep renting & purchase IP. I’d like to ask people’s opinions on our personal situation, in relation to this view.
I receive a disability pension & my wife parenting allowance. If we purchased property, is there any benefit one way or the other, to us continuing to rent ourselves, and making that property our IP? Or should we make it our PPOR?
At the moment we don’t pay any tax to claim deductions back (unless the rent we receive must have tax taken out – does it?). We are also currently paying about $105 per week rent in government housing. You see, the dilema is – housing have told me if we buy a property, they expect us to live it ourselves and surrender the housing house. (Don’t know how they’d find this out unless folks told them, but ok.) This would then mean we’d have to pay more rent (although, we would then get some of that difference back in rent assistance).
Talk about getting dizzy… [xx(]
Allan.
Just Allan,
I would say that considering that you are only paying $105 per week rent, than I think it would be wise for you to continue renting as I believe that you are in a unique position.
$105 is cheap, and if you were to purchase a PPOR you would be paying something like 300 to 500 per week in interest alone! And the next year or so will be slow in Capital appreciation on your PPOR so I think I would advise you to buy a +CF Property!!
Cheers
Eternity
$105 is cheap, and if you were to purchase a PPOR you would be paying something like 300 to 500 per week in interest alone!Sorry – forgot to mention anything we buy will be from say $40,000 to $70,000. (So interest shouldn’t be high.)
Ok so on 70k at interest of 10% (using worst case)you would be paying a max of 135 per week. So yeah I think it would be wiser in your situation to buy a PPOR.
Remember: Buy under market value and get some instant equity so that you can revalue you PPOR and buy your first IP.
Cheers
Eternity
Allan,
How will you be affording to buy a property if you and your wife are both pensioners?
kay henry
How will you be affording to buy a property if you and your wife are both pensioners?Thanks, Eternity – and hi Kay…
To be honest, I don’t quite understand that part myself – yet! [
] What I do know is, a couple of lenders I spoke to several months ago, said we’d qualify for about a $70,000 loan. (They were in Sydney, so I didn’t follow them up any further.) Simon Macks has also offered to help, once we have a larger deposit and six-months savings record. (We currently have $5,000 in savings, with zero debt.)Also because we are housing tenants, apparently we don’t pay stamp duty on a loan. (Unless Johnny Boy cancels it in the meantime.) Then there’s FHOG – again – unless Johnny cancels it.
Then, from what others have told me, our ability to save is way beyond most people’s as well. With strict budgeting, we acheive savings of over $1200 per month. (Although, this doesn’t seem to matter to most lenders – they want to know how much you *make*, not how much you can save.)
Allan.
Hi Allan,
Where are you thinking of moving to? How soon?
Do you have a relative that could hold the title of the IP? so you fund it and everything but it is not in your name? (therefore you keep livinh where you are but dont loose any grants/assistance)Alternatively do you know of anyone else who is looking to buy? If you have a friend who is also interested in buying an IP you could both buy each others IP and rent them of each other – this way you have an IP and a friend for a land lord. Your friend lives in your IP you live in theirs. Caution here tho because one of you might want to move or want out and the other might not be happy with that – it is important to have this drawn up on paper so you can both refer to your obligations etc if a split seems likely.
What the mind of man can conceive and believe, it can achieve.
Allan :o)
Simon seems like a nice guy, I reckon
)You won’t be eligible for the FHOG if you buy an IP.
kay henry
This would then mean we’d have to pay more rent (although, we would then get some of that difference back in rent assistance).Allan
Be careful I dont know your situation properly but I am under the impression that if you buy your own house you are no longer entitled to rent assistance as you are now a property owner. Something to keep in mind.
Scott
“Together we combine our strengths and eliminate our weaknesses”
Hi Allan,Alternatively do you know of anyone else who is looking to buy? If you have a friend who is also interested in buying an IP you could both buy each others IP and rent them of each other – this way you have an IP and a friend for a land lord. Your friend lives in your IP you live in theirs. Caution here tho because one of you might want to move or want out and the other might not be happy with that – it is important to have this drawn up on paper so you can both refer to your obligations etc if a split seems likely.
Riffraff, this is probably a theory that doesn’t work in practice. The ATO will look at this and see that there is no commercial purpose for this arrangement, entered into solely to avoid tax, and deem it tax evasion. At the very least they will disallow any tax deductions. Investors would have been doing this years ago, otherwise.
2004: “What the mind of man can conceive and believe, it can achieve, if approved by the ATO.” [
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TerryTerence McMahon
HomeWin
FinanceWouldn’t your rent from the IP then add to ‘your’ income therby effecting a wage for you, especially on a + geared IP !
Tax time comes and you have to declare this income, don’t “blow” the low-rent situation you’re in now, by trying to duck and weave the Housing people you deal with and the tax man. ( over here you’d go on the DOLA register as being the property owner!)
Sorry Department of Land Administration a Government organisation.
You’re doing a great Job with your saving’s i’d definetly be getting proffessional advice, preferably on a referal from someone you know,, as there’s dodgy people out there giving advice.
And remember many a family fued has started over money.. be careful putting assets in a relatives name to save some $ and avoid the Taxman.
In saying that though i wish you all the best, just be careful, caveat emptor
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
1. My apologies folks, that it sometimes takes me so long to get back here…
2. To riffraff – Interesting suggestions to think about.
3. Kay – Yep, we would probably live in it long enough to appease the government.
4. Scott – About losing rent assistance – now this is something that really shocked me… I asked Centrelink about this very thing a week or so ago. Apparently if you own a dozen IPs, but you rent yourself – you ARE STILL eligible for rent assistance!? (As long as your income from the properties is low enough to still qualify you for Centrelink payments, of course.)
5. Redwing – Yes, incoming IP rent would add to our income – but everyone on the dole/pension/etc. can earn a certain additional amount before it reduces their payment. After that certain level, you then lose 50 cents in every dollar, and at the next level you lose dollar for dollar. Unless your a wife with kids, then it only ever reduces by a maximum of 70 or 75 cents (not sure now exactly) for every dollar at the top end of that scale.
As to ducking and weaving with the housing & taxation dept. – I’m not looking to “cheat” (and I know you’re not saying that). But I am trying to be make certain we’re not disadvantaged either.
Thanks to all… Oh – and I left out one of the figures, as I forgot about our current rent. (If we move into a PPOR, we wouldn’t be paying that rent anymore.) So the maximum savings that we could then service a loan with would be close to $1670 per month.
Allan.
Hi allen,
you would have to talk to an accountant to see if this was possible or not but you might consider buying an ip through a trust. theoretically the ipisn’t owned by you so that shouldn’t affect the rent allowance and also and income can be distributed between you and your wife that allows the best minimisation of the allowance.
I have generally heard that if you invest and rent you will be ahead if you can get around a 7% return, but this really is dependent on people saving the difference between the rent a morgatge repayments which it seems you wont have a problem doing.
However you have to take into consideration the 7g fhog (although you can still use this later if it still exists) and also the other benifits not monetary of owning a home.
Josh
Hi,
Hmmmm… intersting, yet slightly strange post.
I agree that buying a -vely geared property would be a mistake to you as you wouldn’t be able to offset the tax loss against other substantial income, so unless you could (1) afford the loss and (2) buy in a time of considerable capital gains – then I think you’d find it a struggle.
My advice, if you are solid in your commitment to begin investing is to consider finding a way to buy the property you are currently in from the government. I understand they offer good deals to tenants who buy them out – so that may be your point of best advantge.
Then, if you can make some money on that deal, you could use your profits to pay the rent elsewhere while you also bought a second investment property.
It’s a medium-to-long shot, but perhaps it’s got legs?!?
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Steve,
Allan and I have explored that one at the start and the property he is in is not an attractive proposition.
Whilst I have helped a few Government tenants into their rental homes, inc one yet to settle where she paid $150K for a conservative valuation with the bank at $210K (my guess would be closer to $240K), the deal Allan can get is nowhere near as attractive. Correct me if I am wrong Allan.
The more I think about it the more I think that there must be some short term pain in getting ahead. To do nothing means that nothing will improve – except perhaps his savings. I figure we all went through a similar agony of decision buying our first homes/IPs.
To buy means that he needs to surrender his subsidised accomodation. This might hurt his saving ability but I am confident that inflation and capital growth will work together to make this a great solution – given time.
Building equity means he may be able to do this all over again with a +ve cashflow property further down the track – provided we can find the finance! Allan has an amazing ability to save esp given his limited income – makes me realise how much better off my family might be if we could adopt some of his habits.
Just remember Allan that even the most avid collector of IP’s buys them one at a time!
Happy New Year to you all and sorry to get all philosophical – must be the season,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
] What I do know is, a couple of lenders I spoke to several months ago, said we’d qualify for about a $70,000 loan. (They were in Sydney, so I didn’t follow them up any further.) Simon Macks has also offered to help, once we have a larger deposit and six-months savings record. (We currently have $5,000 in savings, with zero debt.)
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