Hi Guys,
I spent Sunday at the Masterclass in Sydney and throughout the day had a bit of an “Aha Moment”. Below is my current situation and I would like other peoples ideas on what they would do in my situation, please also provide a reason behind what you would do.
I’m a NZ Citizen and a Perminent Australian Resident for Tax Purposes. As much as I love Sydney I do not plan to live here for ever and will one day return to NZ to continue my life (no timeframe or restriction on this, only when it feels right to move back, but not for the next 2 years)
I own one property in Sydney NSW which I bought, renovated and have made a capital gain on. I’m currently living in the property and have just completed my mandatory 6 months to claim the FHOG. I charge my partner rent so I can still claim half of the depreciation etc. The sydney market is post-boom and prices (as I see it) are either going to stay stagnant or drop in the next few years. So my dilemma is, do I sell now and realise the full capital gain I have made so far, or use the extra equity to purchase one or two more IP’s. This property is negatively geared and will be losing a lot of money when I move out. My partner is not yet at the point that he can purchase a property so we will rent once moved out.
Current House Value $255,000 (valuation August 05)
Current debt $209000
Available equity $16,000
Annual Income $78,000
Potential weekly rent $200-210
strata $300 per quarter
rates $300 per quarterMy property investing strategy is to purchase +cf properties in NZ to create some money to live off when I return to NZ.
If I sell I’m happy to sell to an investor and sign a 6 month lease of above market rent of $220-230 per week (the extra money is ok otherwise i will have to fork out cash to move house)
If I can get $255K for the property I calculate I will have $46K after paying off the mortgage, minus selling costs of $5K = $41K. I do not have to pay capital gains tax as I have been living in the property for more than 6 months. (please let me know if this is not right) That is enough money to buy up to four cf+ properties in NZ, or three and do some reno’s on them. The other option I would then have is to pay back the $15K my parents gave me as my deposit for the first property.
I think I have included all of the figures and the situation, please let me know if you require more info on anything in particular. Your feedback would be appreciated.
Not sure here, but if you have rented out 1/2 house don’t you have a taxable cap gain on 1/2 of your proceeds including adding back your depn claim.???
Hi,
I dont know, I haven’t done my tax return for last year yet through, so I can still just not claim the loss etc, if the amounts add up, I guess I would have to talk to an accountant to figure that out.
Dohicky
Hi Dohicky,
I agree with gmh, if you start claiming your property is providing you with som e income and you start claiming depreciation on it the tax department will want its share when you sell. How much I dont know, you should seek advice on this with your accountant. I hope you havent lodged a tax return and claimed depreciation on your property yet if not seek advice asap, you maybe better off not claiming depreciation as you wont have to pay capital gains tax when you sell.Good Luck. Martin[biggrin]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.Dohicky, a valuers opinion doesnt mean you will get that. Perhaps advertise a lttle higher till you make your mind up. If you get a higher price it will make the decision for you.
Sounds to me like you have a choice to make. As Steve suggested on Sunday and on so many othere occasions. There niche is the purchase of multiple properties. And there benefits are quite substantial provided you do it right.
Also sounds like your tax situation is a little scary. you need to sort out your with accountant asap.
Remember to try and educate your self as best you can if you decide to go for multiple properties. In my opinion its the only way to go, like you I am priming myself to take the dive also. Which will be sooner rather then later.
all the best…
Thomashi guys,
I’d love some more input from others out there…
Ive talked to an accountant, If i claim the depreciation etc I will have to pay capital gains tax, so I decided not too, I’ve booked in to see the tax man on monday morning to do my return.
I’m a bit annoyed at myself for just paying $550 for a depreciation schedule!!!Thanks for the input Thomas, I have been told Sydney-siders generally increase their property value by 20% for the listing price of a property, so I’ll definitely hike it up for the suckers..oh dear, I mean potential owners.
[blush2]
I had a second “AHA” moment today at 1:45pm before going into a seminar at 2pm. I want to invest in NZ so when am i going to go there and do it? I was searching for cheap flights at the beginning of december and thought what am I doing? why am I putting this off for a month? (apart from the obvious work commitments) so on a whim and without checking with my manager, I booked a flight to leave sydney tomorrow. I’ve been delaying this for about 6 weeks, why not take the plunge! so now I have 2 days to find some deals in NZ. I found my manager this evening at a work function and he had already had a glass of wine, so it was a good mood to check if I can have the arvo off to fly to NZ. he agreed thankfully, so I’m also still employed!
I must stop rambling and start packing….. I’ll let you know how I go next week.
hi dohicky
I’ll bite.
first what did they tell you at master clas to do.
second did they tell you to hold or sell.
third. how if they did tell you to hold are you to hold this property.
answer these and you may have the key.
I as you will know from my posts not from master class or any class but will give you my .002 worth.
1. never sell, unless the reason is to make more profit and reading your post this is not the case.
2. you own property in the most expensive city barr toyko in the world so leverage off it.
3. you amd your mate are renting it at the moment find the current rent value and the equity that is in the property.
find a posi in darwin( a city, this was the easiest to type) with a return over 10% and use this with the rent to hold the property and as the equity increases draw it out nad invest in more posis until both are neutral.
4. simple question which will increase more over 20 years sudney or any nz city my moneies on sydney and remember investing is for the long haul
if need draw the equity out in cash but it in westpac and draw out in westpac nz posi there and link repayments to account here.
I look at problems ( usually they are used for me to draw the price down or cut me a position) but they are humps to get over.
maybe nz investors can help.
I never sell unless I have to.
currently I have a comm thats got offers of 1 mil I have 3 buyers who want it and still I won’t sell if I can get the lend I want.here to help
Originally posted by dohicky:I charge my partner rent so I can still claim half of the depreciation etc.
Given you have already received rental income for this property you are now liable for CGT when you do sell. The exact figure will be determined by the various entry and exit costs and then an apportioing process determined by the percentage of floor space that your partner used.
I suggest you download the various tax guides from the ATO and do some further research.
Bear in mind I am not an accountant but………I suspect as I said earlier – too late.
The sydney market is post-boom and prices (as I see it) are either going to stay stagnant or drop in the next few years. So my dilemma is, do I sell now and realise the full capital gain I have made so far, or use the extra equity to purchase one or two more IP’s. This property is negatively geared and will be losing a lot of money when I move out. My partner is not yet at the point that he can purchase a property so we will rent once moved out.
My ‘back of envelope’ calculations suggest your gain will be minimal especially after taking into consideration selling costs and CGT (as per previous comment).
Largely wider Sydney is a blue chip proeprty investment area in the long term. While it may be staggering somewhat at the moment there will be a time into the fture when this property will be worth considerably more than it is now.
Given this an investor, under normal circumstances, and who has considerable equity is in my opinion much better placed for the longer term.
My property investing strategy is to purchase +cf properties in NZ to create some money to live off when I return to NZ.
It seems to me that the ‘Masterclass’ has created a different set of thought processes and at this time you are caught in two minds. For me it is important that you consider your options carefully and do not make a rushed decision based on your recent experiences or information.
As they say in the building game – measure twice and cut once.
Real estate has realtively high entry and exit costs and as such sellign an asset in a ‘good area’ is a questionnable step to take for most investors.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi Derek,
I do see where your coming from, and believe me the masterclass seminar is very different from the one we both attended on the gold coast earlier in the year.
The point made was that the capital growth that is stagnant in Sydney is still growing in other areas, if sydney prices slump or stay constant for 5 years, I could sell (no CGT to be paid after my accountant meeting) invest the money elsewhere (NZ) to get capital gains that I can re-invest in sydney in 5 years time. Thats the basic understanding of the concept that I got. I’m not saying I will re-invest in sydney in 5 years, by that time I will probably have moved back to NZ and be focussed on that market only.
derek, I was a “buy and hold” finatic. Now I can see another way of looking at it. My parents are still buy and hold finatics adn even said it sounded like a good idea for me to sell (maybe cause they will get their $15K back?)[blush2]
Either way I am still investing in NZ and hope to find something this weekend by using my existing equity. Thanks for your input, I value your contributuion as I know how much you have already gained in your investing.
I am from the school of thought that everything is for sale at a price. The fact that you don’t have to pay any tax on realising this asset and that you have no expectations of cap growth in the medium term makes it a no brainer
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
You must be logged in to reply to this topic. If you don't have an account, you can register here.
