A few years ago my husb died leaving me 4 kids under 8 to raise. There wasnt anythign much in the way of super but we were left with a lovely home.
And so I used the equity in this home to buy 2 houses. The income on both these properties matches the repayments. I bought them to secure our futures.I work 2 or 3 days a week as a teacher but I am still on the pension.
With the rise in brisbane housing these houses have increased in value. One house has increased 100%. OK this is wonderful news right. However when i tell centrelink they will inform me i am ineligible for benefits as i excede the asset limit.
The only answer i can see is if I work fulltime and get off centrelink. My kids aren’t yet at highschool and so working fulltime would probably see me basket weaving at the funny farm.
Anyone have any comments? I dont want to rip off centrelink but I do want to try to see to mine and kids future.
Thanks
MillyFor many years I was on the sole parent pension as my marraige broke down when my children were quite small. It bacame a comfortable rut and my life went on hold during that time as the money is barely enough to live on (someone told me the government KNOWS you are ripping them off if you are on it longer than 6 months). I was lucky I was living rent free.
Anyway my point here is that once you have gone beyond the Centrelink thresholds, don’t look to stay chained to that pension. It is truly a mental prison that cages your thoughts and minimises your horizons.
Sounds like you have the basis already to continue into a great real estate investment career. On these boards there are plenty of hints on how to make your current investments cf+ to bring in income to live on. You can probably build on your current portfolio while still holding down a part time job or a at-home job and still look after the kids. The opportunities are out there, spread your wings[biggrin]
______________________
I know I can, I know I can
Thanks for your comments Gramyre.
I am really content with having just my 3 houses but I can see that I shall be forced to be a property mogul afterall. [thumbsupanim]
It’s a Hard Life Milly [biggrin]
All the Best..[thumbsupanim]
Maybe speak to some of the Brokers on this site re: your financial structure..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI would probably get new (v.low) valuations, then go to centrelink and get things changed.
When *not* if, they find out, they will totally screw you for back payments which will drain you financially.
You may find out that you may be best to sell an IP, and get the home loan down.
Talk to an accountant who knows about centrelink issues prior to doing anything
Would certain types of Trust Funds work in this situation? Since the person isn’t gaining an income from the two IPs I was thinking of rolling the properties into a trust. Of course this might be quite nasty to start with since there will be plenty of fees involved in this situation and I am not sure of the assets test of those with trusts, but is it still an option?
sizzling_duck,
It doesn’t work
Milly,
I can understand you were comfortable – a couple of assets, enough work to keep your brain engaged, your kids growing up & centrelink patching the holes.
However perhaps you have been getting too comfortable. Maybe it’s time to start looking beyond the day-to-day towards the next stage in your life
It’s best not to rely on government payments long-term in any event – you simply can’t rely on them to keep the same rules. Better to build up your assets and create a bigger safety margin for yourself.
Cheers,
Aceyducey
Thanks Aceyducey
I have in fact taken the bull by the horns and intend to get hopping on some new projects. I feel reasured that I can get advise on this forum, since I really am a novice.
If i can convince my kids I will subdivide my block. Selling off the back yard would pay for my IPs.
Also my father has some land. I have convinced him that mowing at his age is bad for his health and that I, with great generosity, will build a duplex on it so he no longer has to mow. [biggrin]
Originally posted by Milly:
Also my father has some land. I have convinced him that mowing at his age is bad for his health and that I, with great generosity, will build a duplex on it so he no longer has to mow. [biggrin]I like the way you think Milly[specool]
Cheers
MelMilly, do not sell your valuable assets as one person has suggested. It then kills your centrelink as well as hitting you with a big Capital gains bill. Firstly go get yourself a depreciation schedule on each of your investment properties. This will allow you a tax break on each house and is tax deductable in itself. Secondly by drawing the equity out of your houses up to 80% of current value you get money to buy more(increasing your tax deduct from stamp duty and fees)and giving you more income so you actually may not need centrelink at all.
An example of what I’m doing for my sister is perfect for you. Borrow an extra $100k from your existing properties. Convert your current loan to Interest only (which you get no tax break on your own house so why pay it off.), then get the new loan as P&I on which you get a tax advantage.
This then buys you three properties which are neutral to positive and leaves enough for renos and maintanance too. So your end result is 5 investments not 2. Breaking even or better, with capital growth potential if setup right. This then kills Centrlink but as its already been said, thats a mental chain on your future.
A good accountant will get you the best deductions apart from your deapro and you are set.
Lets go further….all property on average doubles in value every 7-10 years. South east qld has been a rare example of 100% growth in 2 years I know coz i have 17 there.(yahoo). So at the worst of the average your 5 x $100k properties are now worth $1 mil. Sell 2 then paydown the others so they are super positive( 3 x 33k loans or 2 owned outright and 1 x $100k loan) and forget centrlink forever.
Just a thought.
DD[buz2]
Hi DD,
Some deeply thought out advice you gave Milly.
Just one question, are you recommending not paying off your own house? I am interested to know why you feel this way as most people seem to advocate clearing personal debt ASAP. I would just like to hear a differing point of view.
Cheers,
Sue [biggrin]
P.S. Good luck to you Milly, you seem to be on the right track, you just need to take it the next step. Go Girl [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
Thanks diclem and DD for your comments.
yes DD i too an interested in your idea of not paying off PPOR. Everyone I have ever heard has urged me to pay off my house. I completely forget WHY they tell me to do that.
The bit about depreciation schedule i will certainly look into but i have a feeling they relate to new buildings or new fittings. My IPS, like my PPOR are all 100yr old queenslanders.
Again thanks for taking the time to respond and advise
Milly“collecting houses is more fun than stamps”
Originally posted by Milly:Everyone I have ever heard has urged me to pay off my house. I completely forget WHY they tell me to do that.
For investment purposes, interest paid on a PPOR isn’t usually tax deductible. This is why people are more enclined to pay off their PPOR and refinance so that most or all of the interest incurred on their loans are for their IPs which are tax deductible.
Yeah thats one thought but look at it this way. All funds goto expanding your property base while effectively(IO) leaving your own house on hold. This means that whenever(now or later) you put funds to it you do not get any tax benefit. This means that now being the cheapest time you will ever buy property, is the best time to funnel money into IP’s. Push the envelope until its tight then ease off with sales when your IP’s have greater capital…down the track, and you still have same mortgage on own home.
Easy call for me. I could have taken small chunks off my mortgage in the last 2 1/2 years but have waited until the 6 IP’s in the same loan could give me enough equity to make it a small payout to release my home.
A year ago we leached $210k out of the big loan for deposits, bought 6 houses last may and made a killing. Now a year later we have had the 6 ip’s revalued and have effectively got extra capital of $190k out by now only having to put $82k in to release the home.
This means that by getting as many IP’s as possible our choices and options are 10 times what they could have been as a “wage slave” pumping my small tax depleted income into my own home.
As far as depreciation schedules, 1) they are suitable for all properties as all properties have fixtures and fittings, and 2) even a $72k purchase in August last year in Tassie(now revalued at $100k)got me a $3k deduction in year 1. So for the $600.00 you pay per deapro, you get at least 10 times that back over the course of the 10 year schedule.
We always use the fastest deductable schedule, you get 2, as who knows if we will even have the property in a year, leave alone 10.
Fear will kill you if you let it.
DD
Don’t sweat the small stuff,and it’s all small stuff!!
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