“130 Properties” is an indicator of activity and is a great selling point.
But I don’t read quantity as the key KPI for success.
LOL Brenda I have been known to put down $20.
And I am glad in one instance. The story of this is a little perturbing so be warned (those new people more so.)Story: buying proeprty interstate. Had someone look it over, decided ok lets leave deposit and get to due diligence. Person left a 50 depoosit, I remimbursed them. Real estate said ok, took money didnt give receipt. Made them stand there until I got receipt. Despite him putting it on contract. They new thought this would be ok. Contract faxed, signed, etc.
Due diligence, termites. Pulled out, right on deadline. Their solicitor was fighting me and mine over contract going unconditional. We refuted. Eventually they were threatened legally, and no leg to stand on. Backed off, then put it back on market. Solicitor expected my $50 refund. I didnt get it. I then went to the state for other reasons and called to Agent, guess what he went bust. He was part of the Real Estate Institue Association in that state. I had to send letter to trustee to get the $50 back….but I did.
Bottom line, although you pay small money make sure you get receipt no matter what. Make sure they are part of a group, can have more sway or comeback. Also, report any untoward behaviour, eg all moneies are to be deposited in trust accounts, and there are regulations about this. however, no point if they have nothing to get from them!
I thik I was lucky actually.
Elves
” a blind man may see what a sighted man may not”
Aside of her property investing method, I have to say that, the lady has 5 kids and has written 5 books and has 10 IP’s. I reckon that is some achievement!!
kay henry
yes and she has suppot and networks, that helps eh?
My brother has 7 kids.
Elves
” a blind man may see what a sighted man may not”
After seeing Margaret Lomas at Property Expo yesterday, she has given me more faith in a property venture that I have just signed up on. It is right up her alley (I mean that in the nicest possible way, Margaret!).
It is a new house that is not +ve CF unless you depreciate the building and F/F. It ends up about $20 +ve weekly after that. It is in a good area that is expanding rapidly and I fully expect some CG within 12 months.
Based on what she was saying yesterday, there is no need to have your portfolio full of older $40K country/regional properties to get you your $20 in the hand each week. If you can get a brand new house to do that, why not?
I will say here that I also follow Steve’s wisdom and think that a few $40K houses at $130 rent p/w can be good too as diversification.
That is why she only has 10 properties. They are more expensive than $40K but the chance of CG is so much higher if you buy in the right area. So she is covering both ends of the scale ie. +ve CF from day 1 and guaranteed CG (if there is such a thing) because she has bought good properties in good areas.
Power to you Steve and Margaret!
‘Eat rich food, barbeque a yuppie’ [greedy]
What I don’t seem to be able to realy ‘get’ is about depreciation. OK I understand that by utelising depreciation your IP can turn CF+.
But does that work only for high-income earners in the highest tax bracket?
Because there’s only a certain amount you can depreciate against your wages. It may work if you buy 1 or 2 properties, but for the 3rd, will there still be the possibility of claiming more?
May be I’m missing an important point, and will have to read more of her books (I’m reading the newest book at the moment but have only read 1 of her other books.)Depreciation reduces taxable income. The nett effect of this is that, yes, the dollar benefits are higher if you are in a higher tax bracket.
Sya you had an IP like this:
Interest $10,000
Rent $11,000Taxable income = $1,000
Tax (at top bracket) = $500 (roughly)But if depreciation = $500
Taxable Income = $500
Tax (at top bracket) = $250Less tax paid = $250
This number would be smaller if you were on a lower marginal rate.
elves,
Yeah, and I am the youngest kid of 7!! yay for that! :o)
elves, I just think having 5 kids is s lot these days. Of course, when one has a business, then one develops “support and networks”- usually paid ones, actually. You buy a network- not that hard if you have the dosh.
I guess I just respect that someone can manage so much stuff. Property isn’t easy, despite some people saying it is, but I think the majority of folks realise it’s hard accumulating and managing the rest of one’s life.
Buying property, writing books and managing a family is not able to be done by all of us. I just think she’s done well :o))
kay henry
Kay, I’m no. 6 of ten….. almost enough for a soccer team. [smiling]
Kay, and she writes mag articles and does radio shows.oH and your folks were busy. My parents stopped at 3, im mid kid. Always having to balance.
Depreciation: for business this is a bonus. You get to essentially write down a portion of the asset or equipment or fixture at a set or predetermined rate, usually you use one of two methods, diminishing value is one.
What these do, to save getting too technical, adn I stand corrected, is that they allow you to write off or down some value on paper, so that after a period of time, the item no longer has a value for taxation purposes.
for example, you buy a fax machine that cost $250. Your accountant would write this off on paper for an immediate claim, but if you bought a $2500 machine, your accountant would write the value down by one of two methods, and tax would determine the life of the item. Eg some items have 2 year life, some 6 years some might have 20 years. So over say six years the value reduces each year you own it, or proportionally. what you should be doing in theroy is putting that value toward the next replacement…but then when it runs out,you really go buy another to get the advantages.
You should have a depreciation schedule to maximise the taxation benefits for all fixtures, plant and equipemt etc. This gives you the on paper deduction and therefore can help reduce your taxable income
did I explain that right? lol
There can be a lot of money in them there depreciation schedules! thas why a lot of business buy the end of the financial year….
Elves
” a blind man may see what a sighted man may not”
Thanks Rubba, I get it so far, and this sounds good. So, I understand that by depreciating you can end up in a lower tax bracket.OK
But if I assume that now, because of this depreciation, I have arrived in the lowest tax bracket, then for my next purchase there won’t be anything left to depreciate (because I can’t get into a lower bracket) so there’s no use to even get a QS out. Is this right?
Until, of course, in time, this benefit wears off as the properties that you are depreciating age. And you’ll end up in a higher bracket again.
THen you’ll be ready to start over again with another newish property so you can use depreciation again to place back into the lower tax bracket.
Is this the way it works? I just want to make sure I understand correctly.[biggrin]Cel
My accountant told me to get a QS done, he said made his job easier and made all the right claims.
These usually do it by the methods above, and give schedules on both in a report.it can take years to depreciate an item, so it isnt all gone, but you can keep buying to keep it going if you want.
LOL
Elves
” a blind man may see what a sighted man may not”
Hi just my 2 cents worth.
Depreciation is an on paper deduction against taxable income.
The higher the taxable income/tax bracket the more tax saving and yes eventually you will run out of tax savings.
secondly, yes Steve AND HIS PARTNER bought 130 properties in 3.5 years.
They paid 20% deposit on each property and each property was very low value.
Margaret Lomas system is to buy approx 10 properties in 10 – 15 years with no deposit on your own.
These are two similar strategies but they work for different people depending on individual cicumstances.
Personally I will never have 20% deposits for properties( I can’t save them quick enough) but by using equity and depreciation can buy capital city properties gaining CG that pays for itself.
That doesn’t mean I’m not interested in country low cost high yield properties but they are few and far between ( anyone tried borrowing for country properties at 100% ?)
In fact i’m looking at a country 2 bed unit now – $200 per week 2 year lease for $115K – Which i intend to buy.
Sorry for being long winded but some peope seem to miss the fine print in Steve’s book
rgds
CobraCoincidentally, Steve’s tip today is:
TODAY’S TIP
Your deal’s in trouble if the difference between making and losing money is claiming a tax deduction for depreciation.I think I’m less confused about it now, just have to re-read what Steve has to say about it in his book, and also do some more reading by Lomas on this topic. Different points of view are good ways to learn about something.
It is true, that if one looses his/her job, or just wants to retire, then they’ll loose all the benefits from depreciation.Originally posted by Celivia:It is true, that if one looses his/her job, or just wants to retire, then they’ll loose all the benefits from depreciation.
Hi Celivia,
Any depreciation claims are offset against your taxable income and while you do not have a ‘job’ you still have your rental income to declare – as such you can still enjoy the benefits (albeit probably reduced) of depreciation claims.Derek
[email protected]Read my comments? Think I can help you? PM or email welcome.
I enjoyed Margaret Lomas’s book ‘how to Maximise your property portfolio’
“How to Maximise Your Property Portfolio!”
Building on the amazing success of her earlier books How to Make Your Money Last as Long as You Do and How to Create and Income for Life, best selling author Margaret Lomas is back to answer all her readers frequently asked questions.
In How to Maximise Your Property Portfolio Margaret explains to new and experienced investors how to manage and profit from a positive cash flow property portfolio. Her approach to investment can provide investors with an income from day one without the usual risks associated with negative gearing.
Written in her trademark easy-to-read engaging style, Margaret shares her commonsense financial wisdom, covering topics such as:
How the type of Property you invest in can affect returns
The issues to consider when shopping for property
Whether cash flow will continue and for how long
How to maximise each investment through optimal purchasing structures and tax benifits
Capital gain and cash flow
Choosing the best way to manage your property.
Margaret Lomas – one of Australia’s foremost property investment authors – claims that with a combination of commonsense, hard work and patience you can ensure you have an income for life. Her low-risk techniques have allowed her and her husband to build thier own extensive, profitable property portfolio. How to Maximise Your Property Portfolio wll show you how.I even went and saw one of Margarets Financial Advisers ( Tier 2 F/Adviser- Property ) not an overall Financial Adviser, the initial cost was approx $2700,to review your affairs etc, for me i’d want to recoup that loss ‘plus’ reasonably quickly. In an older post here someone added a link to some of Margarets Properties, mainly Apartments or retirement villages from my recollection..not my cup of tea
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Im reading Margaret Lomas’ most recent book. It has some helpful hints but is otherwise pretty standard issue. Does anyone else feel like they could churn out one of these books just through reading enough of the others? I have no practical experience is real estate yet but perhaps the blurb could boast ‘has read a lot of other real estate books’.
Regards SiSteve’s aim was to have the cashflow, so that he no longer had to work. To do this, you can’t buy properties for CG cos that defeats the purpose.
whilst you are working in a job that you don’t hate, a mixture of the two can be a workable solution. Personally, I’ve made far more money out of CG than I have out of cashflow, which was fine while I was working.
Now that I am not (working that is), I’m looking at ways to find the cashflow so I don’t have to go back to work. It probably won’t be in property though, as I would have to own many many country properties to get the cashflow to replace my (previous) job income.
In regard to your depreciation ‘cutting out’ when you’ve got no more income to offset, this is true, however if you are also purchasing CF+ properties, you won’t pay tax on the cashflow if you’ve got extra depreciation. Also, if you get to a negative taxable income (which I’ll be at for this year and last when I eventually do my tax return), you can carry that forward – that’s also a good time to think about cashing in a property if that’s what you’re inclined to do.
Cheers
MelWhat other sort of cashflow options are you looking at Melbear?
Regards,
SiHi,
I learned a thing or two from Steve’s book and have used it to set up a service whereby I can refer you to sources of positive cashflow properties in Australia. Some of these properties are more positve cashflow in the Margaret Lomas style (i.e. taking depreciation into account), are in areas expecting good growth and are available right now.
If you would like to take a look at these properties, please email me and I’ll put you on the mailing list for properties as they come to my attention.
Cheers,
Phil
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