Forum Replies Created
“I hope the government is reasonable on this.”
Yep, me too – I’d recently heard the comment that commonsense is also in lockdown, and, though sarcastic, it did make sense to me at the time !! Was it to do with Govts? Not sure – I think it was more to do with the hoarding/blackmarketing of toilet paper.
From where I sit, I would have thought that the injection of dollars that is occurring would (should?) have been to minimise the pain that is being felt all over. Or, in other words, that we all should be tightening the belts a little, so that no one group is shouldering all of the burden. And if Govts are saying “Give renters a holiday”, then there should be something similar for landlords. Small businesses are getting some help – and isn’t landlording a “small business”? On the flip side, this whole drama is monstrous from a whole heap of angles, so if Govts are needing a bit of time to get their heads together on it, I understand that – so long as they keep on correcting any “unintended consequences” that may come about as they take frantic moves to keep Australia’s head above water.
I believe the person Steve was referring to back then was Derek Gehl. Derek was often a speaker at Steve’s Mega Conferences back then. If you do a Search for that name you will find lots of posts, some of which include links to Derek’s website.
Thanks for your VERY informative post. I do take your point re “be cautious about retaining a loss”, and I admit my thoughts at the time of posting didn’t cover “How do you get to finalise a loan where a sale doesn’t cover the full mortgage” – I was simply assuming Anton WAS able to settle things with the lender, and that losses recorded on the ATO side of things could later be beneficial for him in offsetting future gains. Of course, if we don’t fully pay out a mortgage, we CAN’T claim a Capital Loss with the ATO if we didn’t complete the mortgage payout in full.
Your points are well made, CMS, and could prove to be super-beneficial for others out there, so I thank you for taking the time to educate us all re that situation you were in. It seems the insolvency company has been a big help for you through this. Though it is not yet “over”, I wish you the best outcome possible and hope things get back to a less trouble-some “normal” some time soon.
Re “can you name the insolvency company on forum”, I will come back to you on that in the next day or two.
Welcome to you too. And Ouch!! Sorry to hear of your loss, but good to hear you are moving on – I’m sure that couldn’t have been an easy decision.
Hopefully some of the thoughts I shared with Anton will be useful to you too. But then, maybe you are already a full bottle on all of those anyway. Perhaps you can share with Anton how things panned out for you – and how you came to decide to sell when the outcome sounds so awful !! Making a loss is never good, but sometimes it is the only way out eh? How much do you want to share? I’m sure we can all learn from these things – even if it is a warning for our own futures.
I’m sure you are not alone in having taken advantage of “good times” during the mining boom, then having it all turn bad some time later. It is good that you are here though, and I hope to perhaps turn on a light or two for you. I see you have a few options. That can be a curse or a friend – a curse when trying to make a decision with too litle knowledge, or a friend when “only one option makes sense” so you automatically take it.
First off, please note – I don’t know Perth at all, or its markets. I am also not an approved adviser of any kind (e.g. not a lawyer, accountant, broker, etc – I am just an old bloke with an opinion or two :) So be sure to get other views from those more qualified as well.
You haven’t mentioned rents, only values, so I can’t suggest too much re “which one to sell” based on week-to-week losses. But from other factors, this is what I see and would ask you to consider:-
a. If/when you sell, you LOCK IN the loss. That can be good or bad. At the moment, you are continuing on hoping for things to turn around so you can sell one or both. That doesn’t sound good to me, as you are continuing to throw money away weekly rather than investing in something that ADDS value for you and your family. But then, since I don’t know the numbers, maybe you CAN’T sell the apartment as you won’t receive enough to pay back the mortgage? Is that so? Are you “stuck” in that way? Many who bought in the mining boom have found themselves in such a situation. Advice from a relevant adviser would help in THAT situation. Or maybe if you sell the townhouse first this WILL release enough cash to allow the selling of the apartment too, and clear all debt with the bank.
b. The good part in selling at a loss comes when you find that you are now able to SAVE each week, and can even afford to purchase something that WILL make you money weekly. Also, since you have sold at a loss, this means there is no CGT (Capital Gains Tax) to pay to the ATO. Any loss can be retained and used to OFFSET any capital gains you make in the future (e.g. your next investment property might nett you $200k in profit – subtract the losses from this earlier loss-making sale to lower the CGT you owe on this new sale).
c. To quote Benjamin Franklin, “empty the coins in your purse into your mind, and your mind will fill your purse with coins” – i.e. spend some money on education that steers you toward the HOWs of investing so that your future investments will more likely all be positive ones. Enthusiasm is great, but it can lead us astray where it isn’t tempered with knowledge. Or (one quote I often use on here) “If you think education is expensive, try ignorance!”
d. Anton, you are certainly not alone in “having a go” a wee bit too early, or unadvisedly. That’s OK – learn from it, and turn the current situation into a better one for you and yours. In my early years of investing, a quote I loved was “You can’t change direction in a parked car” – and I used that quote to gee myself into action in making that first purchase (the first one is hard, have you noticed?). You are already past that first hard one, but now it is time for you to move on. Spend bit more time finding out the BEST path for yourself by reading on, checking with advisers, educating yourself (if that’s in property, that’s great – but it might be shares or something else – up to you, but we need to be investing, yeah?)
Come back with more info, or questions – it’s all good, and welcome !! :)
Thank you for respecting our place by asking first – we are all about education and we welcome discussions re property – its foibles, its successes, its legalities, its hurdles, etc. But we don’t allow adverts for properties for sale at this time. Welcome aboard anyway, and do join in on the various discussions that occur.
Thanks so much for that – and thanks to Steve for asking you to step in. This sounds as horrible as I had first thought it was – but it is good to have clarification since it IS now Law. Wow!!
One to watch out for if you are an expat, or contemplating becoming one, eh?
Yeh but why are they rushing to sell? If they can move back in and then get the CGT exemption why are the articles suggesting everyone is rushing to sell? It is no different to before if they are truely expats looking to move back and become residents again.
The one thing we can all be sure of is that successive Govts will tend to “tinker” with things, and/or make changes to laws. So, in this case, if they can sell with certainty NOW, and not need to HOPE that things will still work for them in xx years time, then maybe that is a smart way for them to jump.
Could it be that these sellers are not planning on returning any time soon, or perhaps they are needing the equity to purchase something else where they live now?
Anyone else have other ideas re PB’s question?
Before the rule change if they lived in the house for 15 years then moved overseas, as long as they were non resident for < 6 years, they could have sold whilst overseas and paid no CGT? Is that the key change?
I think it is far worse than that. Note I am NOT an adviser in this – so my opinion only – as I recall, previously they could sell even after 6 years, and all the ATO would base the CGT on was for the time it was a rental. So, sell before 6 years is up, get full CGT exemption (with conditions perhaps? maybe they had to move back in – not sure) or sell after 6 years was up, and they’d be taxed on the total years it was rented, divided by the total years it was owned. As a quick example, if they lived in it for 16 years then rented it, and sold it 8 years after moving out, then CGT was on 8/24 of the gain (or 1/3rd of the gain in value).
This new legislation (according to the article) seems to be wanting to base CGT on the gain in value over the full 24 years of ownership (even though 16 of them were as their PPOR). THAT to me is the big change – and (to me) wrong !!
Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?
Some of the words seem to signify GREAT change (and, in my book, rather draconian change). This quote below from the article, if true, would amount to a huge miscarriage for those expats:-
Further, the Morrison government’s new tax bill will apply retrospectively to cover the capital gain accumulated for the entire time the property is owned.
So, that could mean that someone buys a property in their early working life, lives in it for 15 years, then they go overseas, and sell it while away. That would mean NO PPOR benefit for those 15 years when they DID live in Australia, with that as their home. Sounds quite unfair to me.
The Professor mentioned makes a similar statement – and he happens to be a “senior tax counsel at The Tax Institute” so one would think he’d have a pretty good idea of what is going on, eh? It just sounds so wrong – I hope someone in the Senate picks up on this huge injustice and forces a rewrite of the Bill for better effect. Or has it already been passed? I dunno !!! Anyone have a view?
PS For me, this is a huge reminder of the old saying “We just don’t know how much we don’t know” – and it is these “unknowings” that often bring us undone. This particular expat happened upon it by chance – what if he hadn’t?
I’ve had no experience with this kind of situation – but one thought that sticks out is the old chestnut of “When a student goes on holiday for 3 months, where does my income come from?” Now in your case, it is NEAR the Uni, but is also near a train station – so that means you might be able to rent to non-students. At this time I think it would be good to consider just which demographic is to be your favoured tenant.
See what others think…..
Hi Mr Elmo,
Did you check the “Buy, Swap, and Sell Forum”? If not, go here – https://www.propertyinvesting.com/forums/community/buy-swap-sell/
The Buy/Swap pages have a few mentions that could interest you. Or, you could Search for “Rick Otton” and see what links turn up.
I would think “returning it to its original condition” should be no problem in making a repair claim. Thus replacing tiles, etc, should all be claimable (but NOTE – I am not an adviser of this kind of thing, so treat my thoughts as opinion only and check it out with your fave adviser). Re the re-painting, is that the whole roof, or just where the repairs/replacements were made? If the latter, I’d think painting is a normal part of a repair.
But if you are painting the whole roof, that would lead to more questions – like, did other damage (e.g. hailstones) affect the original paint? In which case, returning it to its original look should also be fine. But if painting a whole roof just because you think it needs it, that could turn out differently. Like, tiles aren’t originally painted, are they? So is this something new? Thus it could be a capital cost. Or is it fair wear and tear after 10 years? I dunno.
Anyway, as I said – I can only give my thoughts as opinion. Perhaps my thoughts have helped somewhat….
Hi Typing Dog,
I don’t think you are missing much at all. I ran my own airbnb for a number of years, and its return was very good despite the high vacancy rate. Alongside that, it allowed for tradies to come by through the week if needed (saved expensive weekend callout rates) and it also allowed us to take our own holiday times when it was not in use (you don’t typically get these benefits with a standard rental). Our return was also around 8 – 9% – it varied year to year. Some months would be thru the roof, while others would be low.
What it does entail is a heap more management. It sounds like you are paying for cleaning costs so perhaps you don’t involve yourself?. The other big item is management. Are you paying another group (RE agent?) to do all of the work of arranging the rental days/weeks? Or are you doing it yourself. See, if you do it yourself, you can save heaps, but it bites into your own time. If you are paying someone else to manage it AND still getting 8%, then really well done. Of course, the location and the offering makes a difference (e.g. if your airbnb is on the Gold Coast by the beach, then you may well have a relatively low vacancy rate, so better income but also higher costs). But if it is available for inner-city rental, for short-stays for visitors, there may be less take-up, but also less cleaning and less management costs.
In a nutshell though, an airbnb-style operation would usually return a far better rental than a standard residential rental.
I wanted to start by saying “Good for you for using a spreadsheet to start tracking this”. For me, I found it helped me to learn Excel from scratch, while also allowing me to finetune my thinking re my early Real Estate days as I went along. Each time I met another investor, or went to a seminar, read a book, etc – it all helped me to revise my thinking and thus make adjustments to my spreadsheet(s). In all, it was the learnings from that time that gave me confidence to take the first step and buy my first IP. So, go for it.
To your spreadsheet, it appears basically good to me. One point I’d suggest is that whatever equity you draw from another property should be considered to be the “cash” you put into the new one. That is because you are taking something of value to give you your Deposit. So (example) if you took $150k to be Deposit and Costs for a new IP, I would put that amount as my “cash down”.
Of course, the very act of borrowing to get that deposit also adds some extra Loan Interest into the equation, and in that case, I would include that loan cost as part of your total borrowings too. So you’d be paying interest on an IO loan for the bulk of the purchase, and also Interest on the Deposit/Costs Loan too. i.e. in effect your mortgage will be for like a 100% loan (maybe even 105%). That will make a huge difference to your monthly bottom line – but it needs to be considered in my opinion.
Other thoughts – I saw no line item for Insurances. Can be substantial depending on what you buy. I also noted some of your examples had no Body Corp, so you are obviously looking at houses as well as apartments or plexes. Were these actual examples, or simply a bunch of made-up figures? The reason I ask the latter, is that there appears to be a HUGE range of diverse options – so I’m leaning to “made-up numbers”. Am I right? If not, no worries, as (like I said before) it was my PLAYING with my initial spreadsheet number that gave me a base to grow from. So, keep it up.
I’m not a full bottle on NOI, ROI, etc so I’ll leave that to others – but I can say that Steve’s STEPS program goes VERY deeply into these, as it takes you through the Due Diligence path from beginning to end of a purchase, including all of the expenses and the various acronyms that go with it all, and (most importantly) how they interact to show you the TRUTH about a property based on its numbers.
Come back if you have more questions,
- This reply was modified 2 months ago by Benny.
I do feel I’ve done my research and I’m ready to take any action possible.
All good then Ben – I wasn’t sure, so wanted to sound a warning just in case. Good luck with your search for more MB info (I can’t help you with that).
Terryw has provided you with a Mortgage Broker’s view of your situation, with a warning or two. Sounds like things will go better after June when you become full-time (but even that might need some minimum period of employment to qualify – I don’t know, as I am not a MB, but check it out ahead of time).
What I’d suggest though is that you use the time between now and then to grow your knowledge of property – educating yourself about the market you want to buy in (go to open homes, talk with RE agents, go to seminars, etc), learn how you might buy at a discount (so your $420 property might only cost you $380?), learn how to evaluate a house’s value – like its position, land value (desirability of location), its likely tenants, any improvements YOU might make after purchase to add value, etc, etc. And that is the tip of the iceberg – there really is so much more…..
In a word – don’t be in a rush to buy something – plan for it, and reduce any risk by educating yourself ahead of a purchase. Read around on here – check out the Training Centre and its numerous articles and other topics. Oh, and welcome aboard, :)
Now I understand !! Yes, for sure, I can see where some regional areas might be “no-go zones” for any kind of investment into the near future. And yes, various media entities do tend to drive particular sentiments. Personally, I don’t foresee too much downside in cities, though some regional towns may well face a downturn, so it would be wise to re-consider things if your existing involvement in property has been mainly regional.
Re the cities though – as long as we all need a place to lay our heads for the night, and immigration remains strong, I think there will continue to be strong demand in Australia. Some downsides I DO see would be with units – these have faced multiple shocks over the last few years. There were increases to the cost of ownership for any overseas investors a few years back, leading to a drop in their numbers. That then left local buyers to pick up the slack (overseas buyers had been purchasing around 50% of all new units) so that dropped demand even as more towers were completed, leading to softer prices. Then we had the double shock with claddings catching fire (overseas, but applicable to some towers here, I hear) and then we had some towers failing (cracks appearing in newly-built places, with occupants told to “get out” and they haven’t been able to move back yet – eek!!).
With all of those downside events, I could only think unit values HAD to drop – and one off-shoot of that means house prices might become more favourable as more people steer clear of units. But hey, that is just a quick “back-of-the-envelope” set of opinions – what do YOU think re those?
Thanks for your response, and welcome. :) Re your comment below:-
I was going to head off and buy something next week but some have suggested that I be a little more patient and wait until we know more.
If you are skilled in property purchases, I’m sure there are always opportunities “out there”. On the other hand, if you are new to it, I’d also be saying “Hang back until you have planned just what to buy that suits your situation. Steve often says “Don’t just buy anything – the better way is to identify just what to buy (so you are actually looking for SOMETHING rather than anything)”. Or words similar to that.
But then, you said “wait till we know more” – is that about the climate? Or the bushfires? Or the current economic climate? Or something else altogether? Where do you have concerns in that regard?
What a good problem to have. You sound like you are going fine. I’m sure someone in this community will have answers for you, but it isn’t me – sorry!
Let’s see who does pop up with some sound ideas. I do like the idea of finding new expert members for your team – sounds like the previous ones weren’t up to the task, as you have “moved on” past their skill levels. Good luck, and I hope someone stops by soon,