Forum Replies Created
Hi Carolyn.
May I suggest you contact one of our senior contributors to this forum which is Jamie at Pass Go Home Loans – he lives and works in Canberra and I can personally recommend him to look after you and your aspirations to help your son . I hope the moderator will allow this link to stay so you can contact Jamie. If not his username on this forum is Jamie M.
YES, you can invest in the USA and you can still invest in Australia as an overseas investor (with some restrictions). We specialise in helping international investors do both!
PS Empty V
There are no simple answers to trusts. Whether a trust, and the type of trust, is suitable to you depends on you, where you are, and what you want to achieve. Lots of things like tax minimisation and spreading of assets to consider as well as your current portfolio, are you PAYG/self employed, married, have children, SMSF…………suffice to say you probably won't get an accurate answer to what is or isn't suitable to yourself in a 'public forum'. My humble opinion is you should speak privately to a specialist professional. Feel free to drop me a line if you wish.
Thanks EmptyVessel!
I hope some of the following helps.
Structure
- If you are serious to be a long-term investor get a structure in place to protect yourself and your assets.
- If you are going to use any statistics for housing growth ensure you use 10 year growth figures. 1-year figures are deceptive and do not indicate possible future growth. During a boom even the poorer suburbs can experience growth that looks good. 10 year figures will most likely include a complete cycle boom through to slump. Shorter terms will miss part of the cycle and not be accurate.
- I heard an interesting stat that out of all the banks long term interest rate predictions they have had poor odds at getting it right. This would be similar to economist’s long term property value predictions I guess. Past history is no guarantee of future growth and long term factors are very hard to predict as something usually happens to alter the forecasts. (Wars, terrorism, floods, earthquakes, Asian crisis). However saying that we can usually see into the short term and be semi reliable. Using historical growth and buying in the right location at the right price can put us ahead of those blindly purchasing to follow a boom.
- A good way to protect yourself is to use the “What if’s” (See Philosophy above). Decide if you are going to protect yourself from anything that concerns you with regards investing. Most things that concern people and prevent them from investing can be covered by a well thought out plan. Do this from day one.
Finance
- Avoid using the 1 bank trap. This is simply where an investor gets comfortable with their current bank giving the bank complete control over their entire portfolio. Banks will like to cross-collaterise if given the chance. Using several banks spreads your loans around and reduces the risk of your portfolio being called up if the economy turns bad.
- Banks use Loan to value ratio (LVR/ Equity) and debt service ratio (DSR/ Cash flow) to determine your ability to acquire a loan. It is safer to drop back and keep your serviceability low at end of a boom. This will enable you to have a buffer if things get tough and let you ride out any pending downturn in the market (Slump). Historically rents and house prices usually drop back from their peak.
- Ramp up your serviceability leading into next boom. This is when you need to use your servicing to catch the wave and build some serious equity.
- Just as it is sometimes safer to diversify your property locations, you should do similar with your borrowings. Interest rate diversification. Spread any fixed rate terms over a range of dates so all your loans are not expiring at same time. Interest rates move around regularly and you do not want to be caught out needing to have your entire portfolio expire at a time when rates may be high.
- There is a large amount of opinion on Principle and interest (P&I) loans versus interest only (IO). The general consensus is if you have non-tax deductible debt e.g. personal house mortgage. Then use Interest only and pay down the non-tax deductible debt with the money you will be saving in lower loan payments. Otherwise if you have no bad debt the choice is up to you P&I or IO. IO can allow you to accumulate more property but P&I can be good during a slump too as the debt is being paid off slowly.
Only a Quantity Surveyor can complete a depreciation schedule that will be acceptable to the ATO. Companies like BMT provide calculators that will get you into the 'ballpark'. Further info on depreciation and its applications are as follows:
Depreciation can be applied at different stages in a building's life cycle. These include:
Marketing of a new development – Depreciation Estimate
Expert consultation at the initiation stage of a new project employed for the marketing of the property's available tax depreciation to potential investor purchasers. Also, tax depreciation consultation at the feasibility study phase provides an insight into the long-term depreciation projections of a project.
The completion of a new building
A comprehensive analysis of a completed building ensures the maximum number of depreciable items is identified and the deduction is maximised.
The purchase of an existing property
If a cost schedule is not included in the contract of sale documents, Tax Depreciation can revalue the items of plant and equipment based on the sale price. A comprehensive analysis of the building ensures all depreciable items are identified and claimed and that the Division 43 component is established.
Renovation of an existing building
The cost of any renovation or extension can be claimed as a deduction, even when a previous owner conducted the work. A Quantity Surveyor will conduct a search to identify any alterations or additions which may have taken place on your property. A Tax Depreciation schedule should also be effected before a renovation takes place so that existing items can be quantified prior to their removal, allowing you to write off these items as they are removed
Welcome to our forum dfish.
If you still require a great property manager in Gladstone drop me a line – ours is awesome (not one of the big branded real estate agents) and manage's the properties for all our clients' properties as well as our Santos client properties.Good advice from Jamie and I concur. Finish the reno and then assess your situation.
We seem to be in a right pickle! With the little information you have provided publicly in this forum it would appear there may be possible negligence and failure to disclose from more than one party/professional. You must have these matters addressed BEFORE settlement is effected (and you probably already knew this). If you hyave no luck having these matters resolved, please feel free to drop me an email and i'd be happy to have a closer look at your legal options 'pro bono'.
Welcome David.
Richard and Jamie have 'nailed it'. By utilising Depreciation on your property in conjunction with Tax Variation (221d) your out-of-pocket costs could be reduced so much that you could end up with a neutrally or even positively geared property. Doing your 'due diligence' is a critical factor as well and you should avail yourself to all the research you can on a particular area before investing. The provided link will help you with alot of the fundamentals.https://www.propertyinvesting.com/forums/property-investing/general-property/4336374
Have a read of Jan Somers book 'More Wealth from Residential Property'. At 21 with that level of savings you have the property investing world at your feet. Listen and learn from professionals and there are many good one's on this forum – Michael and Jamie above being just two of them. Knowledge will give you the courage to believe in yourself and to be confident when you commit to your investment strategies. Keep going and keep asking questions!
A Domestic Partnership and its legal paramenters are set out differently from state to state. For example, in South Australia it is the Domestic Partnership Agreement Act 1996. In some states a relationship is considered de facto sooner if you simply get a joint bank account or a utilities bill in joint names -i.e. Victoria. Due to the fact that you have had a 12 month split will also affect the legal definition of the present legal standing of your domestic partnership and I would suggest that you speak to either a lawyer or a tax accountant who specialises in property.
In the fifties we said the price of property could never go up because we’d lost half the
male population due to World War II and a recession, yet prices doubled. In the sixties
they said property prices would never rise again because of affordability and wages
couldn’t keep up, but prices doubled. In the seventies they said prices couldn’t increase
due to the oil crisis… yet prices doubled again. In the eighties they said prices couldn’t
increase due to the introduction of capital gains tax and high interest rates which
reached 22 per cent at one stage, but prices doubled. In the nineties they said prices
wouldn’t increase anymore due to low inflation and wages not keeping up, but prices
doubled. In the noughties they said prices couldn’t increase due to the introduction of
GST, but they doubled.
“In 2003 when the property boom was full-on and the stock market had bottomed and
was losing lots of money, I had clients coming to see me in a panic and wanting to sell
out. I told them the same thing I’m telling everyone now: just hang tight.
“All I can say when people make claims of gloom and doom is ‘yeah, yeah, yeah I’ve
heard it all before’. So why am I so calm when everyone panics? “One must understand
the fundamentals first before you can make a sensible analysis of what is happening.
“We’ve experienced world wars and depressions and recessions and high interest rates
and low inflation and high unemployment etc. but we’ve managed every time to move
through this and come out the other side stronger and wealthier.
“As long as the human race is wanting to ‘improve their lot’ then we’ll ride through the
economic ups and downs. A simple way of explaining this is if you’re uncomfortable in
your seat, you’ll move around until you’re comfortable again. This may happen straight
away or it may take some time but you will get comfortable again. This is the same as
economic conditions.
“As we bring more people into our country to maintain our standard of living we have to
provide more housing. In New South Wales alone there is a high building shortage and
the demand will continue to push the prices of properties upwards like it has done since
1901.
Asbestos only becomes dangerous when it has deteriorated or been damaged. A little sanding of the surface paint, provided the wall is fundamentally sound, shouldn't prove to be an issue.
PS You must have your FULL deposit returned as the contract for sale 'conditions' have not been met.
Hi Bedford.
Tell the Vendor to go and do something anatomically impossible – way too keen to offload his property onto you which is supporting the concerns you have projected in this forum. Anyway, the Vendor is not a qualified building inspector and your inspector has indicated a clear FAIL on the inspection. I believe in a simple credo: "If in doubt, leave it out". There'll be no shortage of other IP for you to purchase that will give you peace of mind and allow you to sleep at nights. Well done!
Hi PPR, and welcome to our Forum.
You can swap and you can reverse your current PPR with your IP. But, with regards to the tax implications however, if you are using a 221d variation then that shouldn't change if your leverage remains the same but your claimable depreciation allowances will change if your current PPR is older than your current IP.
In regards to your finances, the biggest hurdle I see you facing is that on a re-finance lenders won't lend above 90% so if you took out a 100% loan and haven't experienced enough capital growth it may be a costly exercise.
SUMMARY: you should talk with a mortgage broker as well as someone who is qualified to help you factor in the tax implications of making these changes.I believe Gladstone is going to be an incredible performer with Santos and the billions of resources money going into Liquid Natural Gas (LNG) and coal but never forget the basics provided to you below.
BASICS FOR THE BEGINNER PROPERTY INVESTOR
Take a look at a map of the region you are considering, identify the local CBD and draw a circle 15 kms around the central point. Start looking for your property within the circle.
Research, Research, Research! Review data showing median sale prices and rental yields on comparable properties.
For affordability, stay within the second and third quartile of prices in the suburb for both price and rent.
Check demographics, especially population numbers, growth and density.
Is the property within close proximity to schools, shopping centres, university or business hubs that are well established and likely to appeal to good quality tenants?
Does the area have an established public transport network and is it close to the main arterial road network?
Check the local government website for developments planned for the suburb/region, e.g. high density dwellings.
What is the land size? Is there potential for subdivision (or to increase the size of the existing dwelling) at a later stage to increase the marketability?
The newer the property the better the depreciation benefits for tax minimisation benefits.
Unit – best features: minimum two bedrooms, built in robes, bathroom + ensuite, internal laundry and lockup garage.
House – best features: minimum three bedrooms, built in robes, two bathrooms, lockup garage (parking for two), extra storage, low maintenance fully fenced yard.
Is there a current tenant and if so are they paying market rent?
Invest time to find a quality property manager.
I trust this is of some help to you and good hunting!
Hi TTony.
Big deal! It was always a small loophole in the trust legislation and the wealthy were the ones who usually took advantage of it. If you're in a position to even have a Family Unit Trust and pay your kids $3333 you're usually doing ok. Most ordinary Aussies have no idea about how to improve their own financial position let alone the setting up of Trusts and reducing/minimising their tax burden by paying a few of the kids and taking advantage of a very small amount of tax relief.
Hi Zenetti.
Hmmmmn…….very shrewd of the developer looking to buy the rights to the space above your place. There would be no shortage of solicitors on the Gold and Sunshine Coast who could probably help you with this. You see, if a developer can sell high rise apartments and guarantee their views can never be impeded, the developer can ask alot more $ for those apartments. However, he can't guarantee anything until he locks you into a deal that will make him alot more money than it will make you in selling some 'air'. There have been no shortage of law suits in QLD of people purchasing a high rise apartments with guaranteed sea views only to have another developer build something bigger or closer and they lose their highly paid for views. You really need to get some solid legal advice on this before signing away your rights.
Hi Bell.
Good advice from Paul with regards to the option and he's the person to speak to for more info.
