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There’s quite a bit to it – I suggest you get in front of a qualified adviser before going ahead with this. In a nutshell, there might be better ways…..
I’ve estimated that expenses relating to the investment are roughly $15K annually (inc. loan interest payments). Does this mean that $15K is taken off my tax bill?
The short answer to your question above is NO – expenses are not deducted from your tax bill. But expenses can become deductions; they are then subtracted from Income and less Tax is paid because of that lower Income. Of course, rent is added and that increases your Income too. Tax will be paid at your Marginal Rate after Income and Expenses have been applied to arrive at your Taxable Income.
A simple example for your understanding:-
You have a rental house – you receive rent of $10,000 a year, but have expenses of $15,000. Thus a $5,000 loss. This loss is subtracted from your other Income (presuming house is in your personal name) – e.g. you earn $80,000 as a PAYG worker. So taxable Income is now $75,000 and you pay less Tax because of the lower Income. Marginal Tax Rate is 32.5% (not including Medicare of 2%) so you get a Tax Refund of 5000 x 32.5% = $1625
You might be better off to sell and keep the whole equity gain to yourself (assuming this is your own home, so no Capital Gains Tax would be liable on sale). Then all of the profits are yours to keep, to use elsewhere.
Note, I am not a qualified adviser, so seek advice from those who are. Who knows – maybe someone else replying will be qualified and can add more value here,
>>> “I will have tip in about $50k for the refinance to occur. I do have the cash to do this and it would bring it back to cashflow neutral on a P&I basis (Never again will I use an interest only loan) but will tie this cash up until I sell.”
One other option would be to put the $50k you have available in an Offset account against that mortgage. You’ve said that paying down that amount would bring the P&I cost back to “neutral” so the Offset would work similarly. (i.e. you would be paying Interest on $50k less than the amount actually owed).
The advantage of that (as against paying down the loan) is that any monies in the Offset are yours to use whenever needed. i.e. to take advantage of any screaming deals. Of course, as money in the Offset reduces, your interest payments rise again, but at least you haven’t given it back to a bank, so you remain in control of it.
In essence then, the Offset allows you to “pay down” the loan without actually paying it down. That could help you to hold on until better times come, or until you complete renos, or whatever else might work for you.
With Interest rates as low as they are today, the P part of P&I is a lot larger amount of the total repayment than it used to be – that can take you by surprise! Check this link to see what I mean –
…. and then, having read the post there to get context, follow on to the link within that post to get the full story.
BB, I hope these thoughts are of some use. :)
Hi I saw your post that you want someone to take over the course that you are currently learning, I would like to do that, but before I do I would like to know what is the price of this course, also when does it start. thank you I await you reply.
You seem to be referring to Jack19’s post. Let me help there – Jack had requested anyone who was interested to PM him – that means “Send him a Private Message”.
To do that, simply scroll up till you see “Jack19” then click on that name. On the new page that opens, select “Private Message” and follow the bouncing ball from there.
Hope that helps,
It is an interesting document and could be of use to some on here. For mine, I found some of the indicators straight out confusing. Maybe you are using “urban planner” words that mean little to Joe Public?
The Hazards group is where I found the most confusion – one example is “Attenuation” – just what does that mean? Then there seems to be 3 indicators that could/should be grouped as one (Coastal Erosion/Inundation/Stormtide). Other than these, all the other indicators do look quite useful.
Lets see what others have to say,
i cant seem to find your STEPS program. is it a course that i can purchase or is it just a forum? if you could please send me the link that would be great!
I am hoping this might help:-
Before going with this group (they may be OK or they may not be – I don’t know them) do use the checklist in the following link to appraise their operation.
The post linked above goes into depth re “How you can tell if the group looking to advise you re property should be believed”. Does this group tick the right boxes in your eyes? If not, run a mile.
Terryw had gone into quite some depth on this CGT subject previously – check out my post here:-
Read on down and follow each link – especially the last two (in the PS area) where Terryw expands on the whole subject and provides a huge chunk of not-well-known info re CGT. Once you have done that, it should clarify a lot of things in your mind – then come back to this post to ask more questions re YOUR situation (in case it is different in some aspects).
Another confusing issue I have is to buy my first home/apartment or an investment property first.
That is a good question. It is not one any of us can answer for you, however we can “point the way” for you to arrive at your own conclusions. Tom already mentioned that answers depend on where you are now, and where you want to end up (your goals). Your answers will vary from other folk, because of differing circumstances and goals. However we CAN point you to some thoughts – here’s one topic re “Which type of property do I buy first”:-
Just looking for some advice to get me started on the right track, I don’t think it is fair to come on here and expect step by step help but more in the direction of what to do and where to start. It can be confusing and scary and many of you would know.
True – any new thing we try can be quite scarey. First you need to learn what might work best for you. As Tom said, you appear to be well situated to start your journey as an investor. Some other thoughts (and subjects) are discussed in that same link – just scroll back to the first post and read through the Index of subjects – I’m sure you will find some of interest.
And then, the Training Centre (see the Home page) has a wealth of subjects written by Steve and others that will add to your knowledge. Meanwhile, Tom has provided you with a really good path to follow for now. Do come back to ask more as you strike problems,
Glad to hear you have found someone. Re approx cost, that is difficult to say for several reasons.
I imagine there is some kind of hourly rate, but I haven’t heard what today’s numbers might be. And then it would surely also depend on the complexity of your set-up. e.g. how many properties you have, are each in separate Trusts or all-in-one, or in personal name only, are any Companies involved, SMSF, etc, etc.
And one other major cost factor – do you hand him a well-completed summary/spreadsheet of your business, or a shoe-box full of receipts and invoices? His cost could change markedly, depending….
I hope your new find works out well for you, and one day you may be able to recommend them to someone new on here,
“But what now ? Time to buy or is there something bigger that’s getting cooked in the background which we don’t know about ?”
Sako, the RBA has only the one gun to fire – some actually say it is a “blunt instrument”, so maybe it’s Thor’s hammer, rather than a gun. As was said on the news yesterday – “It is up to a Govt to make other changes that might be needed to stimulate the economy” (read fixing Tax bracket creep – they are voting on this right now).
But let’s look at an overall picture of the recent economy in dot points:-
o Wages growth has been near stagnant for years
o Inflation is through the floor (the RBA tries to keep it in a band between 2% and 3% – we are currently around 1%)
o Power pricing is strangling many – businesses both large and small as well as the “Mums and Dads” in the family homes. So money is tight.
o Thus, employment is less buoyant, so less people with “money to spend”.
o Factions are actively demonstrating against burning coal – which could kill one of Australia’s most important exports (worth around $60b per year?) stone dead.
o Yes, house prices have dropped, but that follows years of gains in Syd and Mel, so they likely would have further to fall than other cities as the economy stumbles along.
o Not too long ago, APRA and Banks were instrumental in tightening lending which forced a drop in house prices (but also further encouraged folks to “keep their hands in their pockets rather than spending”)
o Recent moves from the Govt pushed away overseas investors too, further diminishing the pool of buyers of property.
o A recent election might have led to Capital Gains Tax increases, AND other Tax increases from a Labor Govt (remember franking credits being at risk too?) That certainly had many voters on edge. How UN-stimulating that would have been to the economy had Labor been elected?
o Housing and the associated ancillary trades and retail outlets used to lead Australia out of recessionary times. But if the housing market remains depressed, where does the stimulus come from?
o All of the above promote signs of “wait and see” rather than “spending up large”…. but where are we now since the election? Has it changed that much yet? We are breathing a sigh of relief now, and maybe that has led to a SMALL uplift in auction results. But for mine, we are still walking a tightrope.
Sure, good deals will be out there, especially where some can’t wait for the good times to come and they MUST sell. But then, can YOU get finance? That is the other side of the coin. Maybe check that part out so you may be ready to move. Maybe it is still harder than previous…. but then, that is one for the brokers out there. Check one or two out, Sako, to see what they can do.
In answer to your question about “something bigger”, I guess that remains in the lap of the gods – any major world event will always impact on Aussie. But for me, I think the home situation (above) is far more relevant right now.
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Trying again to make a more readable table for the first post:-
Broken Hill ______________39,000________________87,000_______170_____10%
Park Ridge (2 units)_______225,000_______________300,000_______440______7%
Wishart – Unit___________136,000_______________180,000_______255______na
Kangaroo Pt, NSW______380,000_______________480,000______1520_____16%
(4 x 2br Units)
Hmmm – that seemed to work……
OK, I understood enough from that question. You are wanting to know where this company operates. I got the answer from their website.
To find this answer yourself, go there, and click on “FAQ” (this stands for Frequently Asked Questions) and scroll down to where it says:-
>>> Question: WHAT AREAS DO YOU COVER?
>>> Answer: Certainty Property manages property across New South Wales. If you have an investment property in New South Wales, please reach out and a member of our team will be happy to assist.
Have anyone any answer to my question,
A wee suggestion – it appears English is not your first language, so why not put your question into a translator in your own language (there are lots online) and then type here whatever the English output says. I can’t answer a question that I do not understand. Make it understandable to us and we can try to answer your question,
Hmm, would I say this?
The most important advantage of real estate investing is LEVERAGE!
To be sure, leverage is a very useful tool – so long as we remember that leverage works in two directions (as well as leveraging our available dollars to purchase a more valuable property, it also magnifies any LOSSES should things turn bad). Leverage is useful, but it can be dangerous too.
To me, the most important advantage is the investor’s education, thus minimising risk while growing their investing options.
That’s a helluva good story to tell – well done you two, and congratulations !! :)
I also recall you posting about aged accommodation, and you made some very interesting points there.
In particular, I was gladdened by the good you did for others just by choosing that investing path, and the relief that older people felt when they knew their stay could be “many years” rather than “a year or so”. Great stuff!
Did you see the post before your own post above? It sounds like you might have a point that Helen is unaware of – maybe reach out to her directly to see what she thinks.
One further thought that struck me over this – and that is one could borrow the funds to complete the painting of the place – as with borrowing to purchase, you would be “borrowing for investment purposes” to cover what is actually a Capital Cost, so Interest could (should?) be deductible against your profits.
Like, it keeps $3000 in your pocket that might be going toward saving a deposit on your next property. Of course you would need to weigh up the benefits of doing so, versus not doing so. It could cost mere cents per week in Interest, and the interest would be Tax Deductible too (it isn’t currently). Meanwhile you keep the $3000 as an Offset against the main mortgage…. Food for thought ;)
Of course, check this out !! You know me,
Welcome aboard !! There are others on here who are able to quote you chapter and verse on all of those things (i.e. accountants) but, in case you are “hanging out” for an answer this weekend, let me share what I “think” is correct (but I am NOT an accountant, so beware…)
As I understand it, all you have said about not being able to claim it as a repair is correct. That leaves “how do you get to claim the cost?” And I think it would go as a Capital Cost (almost like it is part of the Purchase Price – you added value to the property, sort of like “buying it for a few thousand dollars more”). Like you, I don’t think it is any part of that 40 year “Capital Works deduction” either. Instead, it would become part of your Cost Base, so any Capital Gain on sale would be a few thousand $$ less to cover that cost.
Now, as I said, you CANNOT rely on my words there – but hopefully others will swing by to give you the “good oil” later on.
On a re-read, it was THIS final comment from that earliest linked article that holds the truth about negative gearing, and the likely result of its removal if implemented with little thought:-
Major changes to negative gearing will make housing investment less attractive. This will, in turn, impact housing supply – and we will return to the bad old days, when supply did not keep up with demand.
If we want to make housing more affordable in our country, we must tackle the blockages to supply and not impose new ones. Proposed changes to negative gearing and capital gains tax will make a bad situation even worse.
As always, supply vs demand holds the key to price. If something is scarce, its cost goes up. Force investors out of the market and even fewer homes will be built.
New couples or youngsters leaving home CAN’T always afford to buy a place – they must rent – so who provides the rentals? According to the article, tens of thousands of ordinary people – doctors, nurses, school-teachers, firemen, tow-truck drivers, sales staff, etc. Most landlords are NOT from the “big end of town” either.
By all means, look at the option of removing negative gearing if you must, but DO think it through first – don’t just implement it without a WHOLE LOT of discussion and consideration. Unintended consequences live in such hiding places, ready to pounce when due diligence ahead of a law change doesn’t take place !!