Hey Guys,
I hope everyone had a great Christmas and New Year.
I’ve been reading this forum for a few months now and thought I would tell you a bit about my situation and would be very grateful for any advice.
My husband and I are both 25. We both work full-time and between us we earn roughly $120,000 per annum. I am working as an administrator and my husband is a builder/Welder.
We have just purchased a block of land in Pacific Pines on the Gold coast and are building through a company who will start building in the next few weeks. I am English and we plan to go back to the UK at the end of this year. Were not certain on whether to keep the house and rent it out when we go or just sell and take the profit. We have been advised by a friend that the land was sold for $50,000 less than it should have been so apparently we got a good deal there. What I was going to ask you guys was – has anyone had any experience with having an IP in a different country to where they reside? We are wary about being thousands of miles away and not being able to keep an eye on it.
In the long term we would like to get into property investing but at the moment feel we lack the expertise and experience and don’t want to jump in feet first and make expensive errors. I am going to purchase some of the books advertised on this website. Can anyone recommend a good book for beginners? Also does anyone know if there are any networking events in the Brisbane/Gold Coast areas?
Thanks guys,
Ems [biggrin]Hello Ems
Although I am an Aussie I have lived here in Belgium for many years. All my investment properties are in Australia and I’ve had no problems. The secret is a good PM. With a good PM, email and internet banking you are set. You will also need a good IP savvy accountant to do your tax returns for you.
Since your house will be new you should have little to no maintenace problems for years. Any small things will be taken care of by your PM. Even painting or recarpeting is no problem long distance. Your PM should do regulate inspections and if you have a friend who could drive past every so often to check that it’s still there I think you will be alright.
Are you planning to live in it until you go to England? Normally you are able to rent your PPOR for up to 6 years without attracting CGT if you sell. I don’t know how that works if you are immigrating back or if in fact you have to declare that you are leaving for good. I mean who knows what can happen. A good accountant can help you there too.
Hope this helps [smiling]
ElkaHi Ems,
good to see Warnie and the boys give your sorry arsed lot a good hiding!! Now that he and Glen McGrath are retiring you may have half a hope!Down to business; we are living in L.A and have been here for 16 months so far – 14 to go!
We have I.P’s in various states of Aus, all are managed. We are renting our PPoR as well and it is also managed.All the rent income is deposited electronically into our check account each month, any repairs/maintenance/fees are paid out of the rent and we get our statements and invoices emailed to us by each manager. I print them out for my records and tranfer the emails to a separate folder on the computer. I do back-ups to disc and memory stick as well every month just in case.
Our investment loan repayments are deducted each month from that same account electronically and our Bank statements are mailed to us here in L.A.
Everything is automatic, I don’t worry about a thing.Our situation is a little different to what you will have as we don’t get any of the rent money sent to us here. It stays in Aus.
You will have to arrange for the rent to be sent to you (probably by electronic transfer) in the U.K if you keep the property after you move back. I would be arranging a meeting with an accountant soon to work out what the options are.
I don’t know how you will be affected by taxes if you send money back to the U.K – an accountant in the U.K can sort that out when you return.You will have to do a tax return in Aus each year as well, we do this from here and all I do is send my records (which are very thorough) to my accountant by mail, he subtracts his fee from our refund and deposits the refund electronically into our check account.
So, if you decide to invest in Aus and move back to the U.K you will need 2 accountants, but if you are worried that it is too hard to do; don’t worry! As long as you put all the paper-trail processes in place first, it is easy.
Go for it!Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Thanks for your replies Elka and Marc.
Marc – please don’t say anything about the cricket – I have enough taunts each day when I go home to my hubby [biggrin]
Yes we will be living in the property until we go back to the UK. It’s going to take around 6 months to build and then we plan to live in it for 6 months in order to get the FHOG and then were off. It is a big house and there are 4 bedrooms with only two of us so we are thinking of letting 1 or 2 rooms out just to help us pay the mortgage and save a bit more. Not sure how we will cope as we are used to sharing just one room back in London so it will be different. If we do rent the rooms out can we claim anything like carpet, paint through tax deductions or as it will be our PPOR will that not be allowed?
Elka – so if we rent the house out for 6 years and then decide to sell we won’t have to pay any GST? We plan to go back to the UK for about 5 years and then come back here to OZ. My husband already has a job waiting for him back there which is good to know.
Marc – I don’t think we will be getting the rent money sent back to the UK, I think the rent will go into the same account as the mortgage will come out. The only money that will be transferred will be UK pounds which we will send over to pay more off the mortgage and to cover the mortgage when we have breaks in rental and all other fees.
We saw an investment guy from Bendigo bank a few months back to ask what our options will be when we go back to the Uk and was told if the property has equity in it then instead of selling why not take some equity and buy another place instead of selling and paying alot of tax. He also mentioned the GST problem with selling.
Cheers
EmsIf you live in the house for six months, claim the FHOG and then go to the UK for five years, my understanding from reading this forum if that you can live in it again when you return and up to that point, you would not incur any gains tax. I assume you will not be buying in the UK.
Once you are back and have established it as your home once again you can decide what to do. If you decide to rent it out and buy elsewhere, the cgt would only start from then, not from much earlier if you claim interest and costs from before you go.
That is my understanding from reading things on this and the SS forum.
If this is the plan, I would not claim any interest, even if you rent out a room for a couple of months because you don’t want to jeopardise your cgt status.
I only know what I have picked up in the forums so a good accountant would be the next port of call.
Wylie
Hi Ems
As a fellow Pom who has been here for 13 years I share your husbands pain when it comes to the cricket.
Having gone to the Melbourne and Brisbane Tests i find it easier to saying nothing and act dumb. Our time will come don’t worry.
I have several properties back in the UK and adhere to what has been posted before and that is ensure you have a good Managing Agent who can keep you informed and also organise for small tasks to be done in regards to general maintainance.
One other thing is to ensure that your loan is structured correctly as many clients who purchase investment properties appear to have their loans totally incorrectly structured and it is extremely difficult to change things from so far away.
i have many clients in the UK and know that a little forethough and careful planning now will save you in the long run.
Feel free to come back to us with any questions in this respect.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Hi EMS
Congratulations on securing a good deal eg the land at such a good price. Before moving to Brisbane I had an investment property here and was in Adelaide really I may as well have been O/S as had nothing to do with it. Have a good property manager in place whom takes care of everything.Even when they ring me occassionally with a little hick up I can trust them to get it repaired. Even though now live in Brisbane I am happy to just leave it with them. It keeps the emotion out of the picture anyway.
Ask locals that you know if they know someone they can refer as a good P.M. Visit a few and ask them all the questions and if they have any references to show you.
Yes make sure that you have a good loan structure I will be down the Gold Coast over the weekend by the looks feel free to contact me. Our service is free anyway, if you decide to sell congratulations on your makings and wish you all the best on your travel back
Wayne
Mortgage Adviser
Email [email protected]
http://www.alphamortgagesolutions.com.au
Refinace, Loan Consolidation, Owner Occupied or Investment Finance. Free Service we come to you!Originally posted by Ems:Yes we will be living in the property until we go back to the UK. It’s going to take around 6 months to build and then we plan to live in it for 6 months in order to get the FHOG and then were off. It is a big house and there are 4 bedrooms with only two of us so we are thinking of letting 1 or 2 rooms out just to help us pay the mortgage and save a bit more. Not sure how we will cope as we are used to sharing just one room back in London so it will be different. If we do rent the rooms out can we claim anything like carpet, paint through tax deductions or as it will be our PPOR will that not be allowed?
I suggest that you do not rent out any rooms and do not claim any tax deductions. For the few hundred or even couple of thousand you will make/save you will seriously jeopardise your capital gains tax status (CGT) which may end up costing you much much more later.
Of cause once you go to England and rent it out all costs will be tax deductible. You should get a depreciation schedule made as with a new house you will have lots of deductions.
Elka – so if we rent the house out for 6 years and then decide to sell we won’t have to pay any GST? We plan to go back to the UK for about 5 years and then come back here to OZ. My husband already has a job waiting for him back there which is good to know.
No, you wont need to pay any CGT if you sell at that point.
When you come back you could live in your house again for awhile and then rent it out again. That way the 6 year rule starts again. i.e you get up to another 6 years CGT free … but as long as you don’t declare any other place as your PPOR. Anyway, that’s a decision you don’t need to make now.
Marc – I don’t think we will be getting the rent money sent back to the UK, I think the rent will go into the same account as the mortgage will come out. The only money that will be transferred will be UK pounds which we will send over to pay more off the mortgage and to cover the mortgage when we have breaks in rental and all other fees.
I think it would be good if you set up an offset account against your mortgage. You could have all rent deposited into this and also any money you transfer from England. This is better then paying off the mortgage directly. It achieves the same result in reducing the interest on the mortgage but gives you full flexibility.
Hope this helps [smiling]
ElkaHappy New Year Folks![biggrin] Here we go again.
While we are on this topic , thought that I could pick you’all brains re problem/question.
I am both citizen of Aus & UK. Living in Aus for 30+ years continuously (apart from UK holiday breaks). My old father lives in UK. Has his own purchased home. However, its way too much for him now, and needs to downsize.
Problem is, it looks like it will cost him money to downsize… as ground level, better socio economic area, quality dwellings in higher demand etc. (We need to come up with a soln, as he has been mugged twice in the last 12 mths where he lives. )He has NO savings left, and a better dwelling area is likely to cost him twice as much as he’d get for his old place. What I thought is that if I could buy flat for him… let him live in it, and he pay us a token rent, just to say we get an income for it. We would buy in our name… so that the house wouldnt be ceased by the system for his nursing home costs/accommodation down the track. Then the money that he has from the sale of his 1 st home would be some spending/living costs money for him(even though he’d then have to pay full council tax, no free bus pass, and no free prescriptions). It would give him a better life quality etc.
SO my question is, does anyone know how the tax would work on that one…. both if we can claim losses while dads living in, and later on if we keep the place to rent to a tenant & it eventually goes positive cash flow. Can we do that if we arent currently UK resident? I have asked my accountant & tax office… they all say that they have no idea. Help please would be appreciated. (PS Dad wants to stay in UK rather than come to Aus to live with us. )[worried]
Hi,
I was in the same situation a few years ago but I was not on this forum then. Even my accountant didn’t know about the 7 year rule until I got the info through an accidental free tax seminar. It cost me thousands of dollars wasted through unnecessary tax.You have to establish that the property is indeed your PPOR. I used my driver’s licence with my home address on it prior to it being rented when I went overseas. Obviously, when I was supposed to be living in it here, it was not rented.
I never subsequently lived in it before I sold it 6.5 years later. I got to keep all the capital gains but I missed out on a lot of depreciation claims because I passed the 4 year back claim time frame.
Please speak to your accountant to verify what you can do but I share my experience in the hope that you benefit from my mistakes.
Incidentally, that house that I sold would be worth another $150K now [easily] two years later. I won’t be able to build it for what I got for it even though the capital gains were significant!
Good luck,
Kum Yin
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