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Despite all the noise and the European dramas we seen some pretty solid economic numbers last week with GDP, inflation and employment all tracking well. The RBA say that recent rate cuts were not made to address any local problems and were solely to help us through the international concerns. The banks are still whining about funding costs but how serious is this is it that dire that funds will stop flowing, who knows. Affordability and yields have also improved so not quite sure if there are any areas of concern left, other than the offshore funding costs. Hopefully the PIGS all get baled out and they all get on with it and the next big game changer might be Mitt getting into the Whitehouse.
Personally speaking, unless any of that lot suddenly head south, particularly employment I cant see the trigger for a property bust occurring.
I always enjoy the various life theme on these Hitler reaction takes……..now that I have seen one on housing I wonder if there is any theme that hasn’t been covered?
ayjae wrote:Hi Bardon,Have not done much trawling on this topic, did catch a glimpse of thread about Alpha mining accommodation (trial mininig already started). What I can say is that this is BIG business. There are very few providers who do this well as far as I'm aware. Worth pursuing if you can arrange a substantial amount of capital as I believe it would be more likely viable only on a large scale. I have been lucky enough to be see the progress of a friend of mine who is looking at this on a large scale. Being such an attractive deal there wasn't even much outlay initially required.
Thanks for the info.
Ayjae, I don’t doubt that there is opportunity here and if it does prove to have these high returns then I cant see any massive downside either. Personally I am not getting into any new investments for the foreseeable and I don’t have any appetite for new schemes. I ma actually reducing my holdings and have a property on the market now. I had a massive stoush with the ATO which was only resolved last month the outcome was favourable. The one major lesson I learned through this process was not to sail too close to the wind, as if you do and a couple of things go wrong at the same time it could tip you over. I mean how much money do you really need in retirement and is it worth the pressure and risk now to make a gazillion that would be impossible to spend anyway.
So for me now is to reduce some debt by selling a house, keep the rest of them forever, maybe do a development on one of them down the track, super is growing and most importantly increase my cash reserves to provide a buffer should something go south. My cash flow comes from work and it is better that I focus my attention on that area while the rest of my investments grow.
jnb wrote:Hi BardonThank you of your response and suggestions. Yes we do intend to move back into our PPOR in 3 years time as we do not want to miss out on the CGT.
How do we borrow 105% finance? Is that by using equity in the PPOR?
Also, we have purchased our IP under a DT structure with company trustee and the share holders of the company is another trust. This means we cannot claim losses on my husband’s income and will have to wait till the property starts making income. Do you think next IP should be purchased under a unit trust to claim tax deductions. We went for a DT to maximise asset protection even though my husband and I both have professional indemnity in place along with income and life insurance.Cheers
JB
Reading your subsequent posts I can now see that you are not targeting negative gearing as part of your strategy. To answer your question, yes the PPR is the means of borrowing 105%. Again this is done in my case to maximise negative gearing benefit. My wife has no income and I am a relatively high earner and have set up my housing loans to maximise the negative gearing benefit. With respect to ownership I have properties in my own name and in a Unit Trust. I also have a DT that I periodically use for some consultancy work fees and bonuses and distribute the profits to my non earning family members.
The only way I can see you getting more deductibility as it stands now is for you to increase your borrowings on the PPR for investment purposes. The interest on this loan would then be deductible and I would suggest that the loan be in your husbands name as he is the highest earner.
Interesting view point indeed particularly with the prefabricated homes.
One of our business lawyers was telling me recently that they are getting involved in providing finance for this type of building in the mining regions. There is no capital gain proposed only depreciation but according to her the ROI is 30%
If you are going to invest in property and are relatively high income then you would be mad not to maximise your negative gearing. So irrespective of how much funds you have, always make sure that your investment properties have a 105% IO loan on each. I realise that this may be difficult for your PPR but a least it can be used as security to enable you to get 105% finance on the other IP’s.
You haven’t mentioned if you intend to move back into the PPR or not. If you don’t then another consideration would be to transfer it into a unit trust, pocket the gain tax free and maximise your deductibility, the funds released could also be used for investing.
With respect to malicious damage the police are not always willing to issue a report and say that it is a civil matter as I have found. They gave their ID over the phone and said that the insurance rep can contact them to verify the damage. The insurer that requested the report and were diligently trying to minimise the claim amount told me that this happens a lot and they accepted this and paid out.
With respect to turning your current PPR into an investment property there is a major consideration that you need to sort out before you do it. Assuming that you have paid down the loan a fair bit and have a decent chunk if equity as you bought in 02 then you need to work out the interest deductibility when it become an investment. If you don’t change anything with the existing loan and continue to own it, but it is now an investment property then you can only deduct the interest on the current loan amount.
Whereas if you transferred it into a trust at the current bank valuation figure then you would maximise the deductibility of the debt. This way you trouser the gain on transfer CGT free now and then the trust has a big fully deductible loan. You will have to cop stamp duty on the transfer value but depending on the tax benefit (ie the size of the loan and your income tax band) this could be recouped in a couple of years and after that its all cream.
JPCashflow, I have seen some serious wealth made in the gas equities area but it was in the noughties. I am sure there is still opportunity out there especially with the smaller players that are now being hunted down for acquisition by the bigger players.
bandwagon wrote:HSBC’s take on Australia’s future re LNG etc…..I wouldn’t argue with any of the facts and figures in that report. Loved the chart on energy consumption and where India and China sit relative to other developed countries. It’s very similar to their protein consumption which again bodes well for oz given that we are an exporter of food. Let’s not forget that in China we have seen 150m peasants move up the economic chain to now have a disposable income, over the last twenty years. There is at least another 350m more about to do this at a faster rate. What will happen in India is mindboggling as they have not had any development since the days of the Raj relatively speaking, they will make the China growth story look like a training course in comparison.
I would say though, that their statement that we may see too much LNG is something that I think is a will. For example the UK basin that has now had clearance from the scientist for extraction will keep the UK self-sufficient for x years, which will mean that their dependence on imported LNG will drop. From the earliest of times it has been demonstrated that hydrocarbon will always beget more hydrocarbon. We are seeing this now with the methane revolution and we will see much more of this going on around the world. Not that this is a problem as an ever more abundant and cheaper sources of energy is what continued economic growth and human development must have to continue. I would go as far as to say that the jury is out as to whether hydrocarbons are a finite resource. There are studies of a from of hydrocarbon upwelling at the deep sub-sea bases of continental shelfs that are showing traces of a hydrocarbon freely flowing out of the bases.
Freckle wrote:Both India and China are developing energy policies that reduce their dependence on coalThis is a worldwide phenomena that is occurring in many countries and is part of the quest for more efficient energy sources. Its called de-carbonisation and it has been taking place over time with the transition from wood to coal to oil and now to gas. Each new phase has fewer carbon elements which means a higher ratio of hydrogen. This gives you more bang for your buck and has a side benefit of being cleaner ie less carbon emitted from the combustion process. The logical conclusion of this series of transitions will be the Hydrogen Based Economy.
This does not result in a step change and the transitions happen over many years and is more of a gradual process whereby the new entrant takes up market share and then a point is reached where it overtakes the previous energy source in terms of usage.
Nuclear will also have a bigger slice of the energy market in the future. The steam by product from nuclear power generation can also provide a very efficient means to reform methane gas and produce pure hydrogen ie a methane gas line loops into a nuclear plant and the output is pure hydrogen.
In all of the future energy demand scenarios Australia looks like it will continue to be a major source of raw energy resource supply to the worldwide market.
NHG wrote:As more of the population tells themselves house prices are high and unaffordable, you will find more people entering the rental market making it tighter and driving rent prices up.I had a good experience recently where I put a house on the rental market for a 33% increase in weekly rent. I was fully prepared to negotiate and perhaps take a lower price. A prospective tenant then said they would sign up if we repainted the interior. I did the maths and this still worked plus I was getting to improve my house so we did it and they rented it for the asking price.
If the inspection report is not to your satisfaction then the condition has not been met. If it is not to your satisfaction then you can decide what reduction in price would bring it back in line with your satisfaction and you don’t need quotes either. Obviously if the vendor thinks that you are gouging too much then they will not agree and the house wont be sold to you.
Allowing say 230k for the build, landscaping, fencing and driveway. That leaves 300k for the block I had a quick look on realestate.com and there wasn’t much listed to do a comparison with coupled with the fact that I don’t know Gladstone and I don’t know how good your block is situated either . What I did see didn’t set off alarm bells though.
Suggest that you get an independent valuation done before you commit.
what is the house size ?
Solomon10 wrote:This one is in Healesville 3777 if that helps.A nice are indeed I don’t know what the growth projection it has. But as I said a great area good luck with it.
Nothing wrong with new stock but there are some problems with it. Normally it is better to invest in existing stock for price purposes, yield and market force reasons. New stock doesn’t tend to have forced sellers and the prices remain uniform for a long time. I have one of these .
I read an interesting article recently about Carlton and its very high walkability score, plus my son supports them.. I can understand this type of measurement. So I put my lot in and surprisingly the one that I thought to be the problem child came out with the highest score. Its a keeper then.
NHG wrote:Thoughts?Most investment house owners in Mandurah would be best selling up now . Once the Freckle arrives he will scare <moderator: delete language> luckless landlords with evil charts, charts that will single handedly drive down rents to pre 01 levels. You have been warned.
Freckle wrote:One minute your highlighting the fact the next you're claiming the opposite. Make up your mind.Hey Freckle once you get to know me you will fond me to be boringly consistent. That article that I quoted has stuff all to do with the mainstream rent story. Surely even you could see that?
