Hi Sibo
Been trying to catch up on posts, and only just got to this one.
My alternative cashflow strategies will include investment in a livestock breeding program, which will return fairly awesome cashflows if all goes according to plan.
Cheers
MelCel,
A reply to your queries about depreciation. Say you have one house with depreciation of 5k. That will reduce your taxable income. So say you were earning 70k. You would be paying 47 cents in the dollar ONLY in that 5k above 62k. So your new taxable income would be now 65k. So you would get back 47 cents in the dollar for the 5k you had reduced your taxable income by (approx 2700 back)
Now if you multiply that… And you had 3 houses @ 5k depreciation each, your taxable income would be 55k. If you had ten houses @ 5k depreciation, your taxable income would be 20k. You would then fall into one of the lowest taxation categories. You would get a tax return of many many thousands.
I do not agree with Steve’s tip about being in trouble if you have to rely on depreciation/tax breaks… as a person who earns a reasonable income, I do enjoy the tax breaks I get. I would rather receive 15k back from tax than nothing. for low income earners, tax breaks might not mean much. Also, if you buy very old houses, you might not be able to receive much back in depreciation (although you can ask Chan about depreciation- he depreciates all his places- no matter what the age of them, and he says it is hugely worthwhile). Remember, that if you buy a place that is post 1987, you can receive a 2.5% depreciation allowance on the cost of the building. But depreciation (fixtures and fittings) will work even for pre-1985 0r 1987 buildings.
If you are a high income earner, you will be seeking tax breaks. It’s why RE is so incredibly popular- because we achieve huge tax breaks. It’s also why I have no issue with neg gearing, because the tenant, the tax dude and me pay for it- just like I’ve always done
))15k tax return is a good deposit on a new place- and you can get that every year- but ya might have to get together quite a portfolio to do so [guilty] If you have a positively geared portfolio, and you were earning say $20 (clear) a week X 10 properties, you would be earning 10k from them. So you would be paying tax on the 10k each year. If you were in the top tax bracket, you would have to pay about 4k back to the tax guy. That’s presuming your houses were really old and you decided not to depreciate them (400 bucks on a QS (X 10 properties = 4000 bucks) can add up and eat into your profits.
It’s really a numbers game, and I think newer properties, with depreciation allowances, for high income earners, can absolutely provide a positive outcome.
When people talk about making a profit on RE- as in pozz gearing- it really depends on the individual’s circumstances. $20 profit a week per property can become $12 a week after tax. That’s enough to buy a gourmet sandwich and a milkshake. Using tax is an equally viable way to build wealth. I think some people see neg gearing (growth properties) as only useful when you sell- thereby realising the CG. Not so- each year you get back some of the pofits on your losses!! [happy3]
kay henry
Well said Kay Henry!
I read so much against -ve gearing yet what you say works perfectly.
I think the 2 or 3 +ve cf to balance each -ve cf property seems to work well.
CobraTHanks everyone for your excellent contributions.
It makes perfect sense to me now.[biggrin]All this discussion about -ve gearing is all good and fine when you can claim a deduction against all your LOSSES, but this assumes that it will last forever.
I recall reading one of the RDPD books about the US govt removing negative gearing and then the bottom fell out of the market because of all the people losing $1 to make 50c had to get out. Guess they could stand losing $1 and making nothing (go figure?).
They said back then that the govt would never do it. Lo and behold, they are talking about it now here in Australia. It may be unlikely to occur but they said that about the GST when Keating was in power and lo and behold what have we now?
I always view -ve gearing as a bonus and not to rely on it to make a property +ve cash flow.
All comes down to minimising yours risks whilst maximising your investment.
But at the end of the day it’s peoples choices………
Hotrod,
I agree that there will always be tax changes. There has been the 2.5% exit tax in NSW. Some people panicked about it. I just see it as everything changing. If one expects to invest for 60 years and not have any tax changes, then I think they need to be a little more flexible and open to change.
When I first started investing, I was on a grand wage of 17k per annum. My then girlfriend was on a wage of 13k. Neither of us was particularly cluey about tax. Obviously, we couldn’t get much back in tax returns either because we barely paid any tax! But at the end of the day, we did well out of those two little investment units we bought- out of little things big things grow, as they say. It all depends on what you’re looking for. I don’t expect the taxation system to work solely in MY favour. Perhaps there’s other priorities that ought better be looked after- public school, health, transport- and even public housing!
So basically, I don’t solely rely on taxatio to assist me. I rely on chucking my wages into the mortgage. I am happy to *pay* for my investments, and don’t expect anyone else to pay them off for me. The tenants assist and so do the current tax laws, but RE is my asset, and I take responsibility to pay for it
kay henry
So Cel
What is a QS (pardon by ignorance )and I have seen the words LOL on other posts in other forums and have often wondered what they stood for. Pardon my ignorance once again.
Cheers[worried]Originally posted by elves: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”
A QS is a Quantitative Surveyor.
Rgds.
Lucifer_auLOL – Laugh Out Loud …most common
ROFLMAO– Rolling On Floor Laughing My Ass Off“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorThanks guys for enlightening me.[biggrin]
Originally posted by Lucifer_au:A QS is a Quantitative Surveyor.
Rgds.
Lucifer_auSo back to the original question. Has anyone signed up to her companies strategies? Do they work? I recently had an appointment with one of her companies consultants and was cautiously interested. Any other feed back!
Just a short note to clarify that the $2700 is for life time membership to Margaret’s company. The initial consultation is free and having a investment projection done is $396. Hope this clears this up.
Originally posted by redwing: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”
Lomas is a finace planner and she would always get customers worrying about risk and probably 130 in 3.5 years is too much. So I think she is just trying to cater for people who worry about risk.
Bigboof
pmostert
Your right it cost me ‘nothing’ to speak to them, however, the adviser said he could not ‘re-structure’ my loans as i had the loans set up as he would have advised anyway and his power-point presentation was reduntant becuase it was only going to show me the benefit of structing the loan the way i had it..
We did go through it though, just faster than usual..
I liked Margarets books, however i personally would not pay the $2700 plus yearly costs..thats just me though.
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI went a wealth net seminar last Saturday in Sydney,500 plus turned up close the doors. Margaret was guest speaker as was Scott from Depreciator.Magaret is the face and her hubby does all the accounts, Paper work,Contrats and so on. Still You need a team and that is exactly what they are.
Ciao.
Originally posted by MiniMogul:I agree. Lomas is about exciting as an Anita Bell book.
And of course Steve isn’t God, God has his own web-site
God also has pop up windows…
Thanks MiniMogulmarkk
Happy Hunting
http://www.kentscollections.comI went to see one of Margarets franchises and was very disappointed. They seemed eager to get some money off me for their program (which was basically using an offset account and a credit card) and then they monitor it and tell you that you’re “doin’ great!”
We never got onto the buying property side of things as they couldnt give satisfactory answers to my earlier questions.The other MAJOR thing that I have managed to pick up that is not well covered in her books and others may have missed with the whole depreciation thing is “Depreciation recovered Tax”
Which I think is payable when you sell the property. ie you buy a brand new unit for 100k, and then depreciate it over 5 years to say 60k, then sell it for 180k, you then pay CGT on the difference between the depreciated value and the sale price, in this example the market value went from 100 to 180, but you end up paying CGT on 120k, which is the gain + the depreceiated amount.
If you happened to depreciate the property at say 30c/$ and then have to pay tax on it at more than this, you are actually losing money.I would love to hear from an accountant if this is the case or if I have mis-interpreted somewhere.
Thanks all
Pete
I’m not an accountant, but I’ll answer anyway.
You’ve got part of the story, Pete.
1. Depreciation claimed on the building has an impact upon CGT calculations, but not depreciation claimed on the Plant i.e. Fixtures and Fittings/Depreciable Assets. And in most cases the depreciation claimed on those items in the first 5 years is greater than that claimed on the building.
2. If an investment property purchased after May 13, 1997 is sold, depreciation eligible to be claimed on the building must be factored into CGT calculations whether it has been claimed or not. So you might as well claim it.
Very few accountants know this obscure rule. I mentioned it in a seminar I gave earlier this year to 100 or so accountants and I don’t anybody in that room knew about it.
Buggered if I know how the ATO would enforce it.
Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auRight, so I was half way there, it’s just the building depreciation that you have to pay back. Hmmm… at the end of the day any advantage you can get from the ATO I guess is a good one.
Thanks Scott.
Pete
Hi Guys,
Margaret Lomas books are great… though i dont think she is that great all all, she may own quite a few properties and all, but her system and strategy to me, seems a little complex, when everything is negative geared, but using, ATO rulings, tax breaks, depreciation… just to turn her properties +ve geared… (still though if she ever sells, she will be liable for the phantom dollars (depreciation claims and expenses)
IMHO i liked her books to read, for motivation and ideas.. but her strategy, a little complex, though it will hurt in the pocket at a later time, i guess…
though shes not, or anywhere near a Jan Somers, who has lived through several property booms and recoveries.. and who has been through whole complete cycles…
though interesting to see how Margaret Lomas will go, if there is a interest rate hike….
but anyways… good luck to her as well, as she has achieved quite well and done well…
Cheers,
sis
))
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