[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

June 4, 2015 - 10:38 am

The interest rate last year was (majority of the time) 5.01%. Approximately $185k against the investment property (interest only for first 15 years), with the deposit, all purchase costs (including stamp duty), and ongoing costs above rent from a LOC against our PPoR which started around $45k drawn down and is now around $60k drawn down ($90k total). Interest rate is down to 4.51% currently.

Last year we had a vacancy for a few months, so rental income was only $9.9k, against costs of $16.7k (12.5k of which was interest), the rest being repairs, fees, taxes, rates and water.

Previous year we had $12.8k rental income, but costs of $18.9k (13.7k interest and higher repair costs (incl resurface bath and shower and replace toilet cistern).

I wouldn’t say we’ve let the place run down, we immediately take care of any issues that get reported (I don’t think I’ve ever said no to a request or suggestion from our rental agent), and try to keep the place looking neat and tidy. That said, some of the things that were issues we intended to address when we first bought the place haven’t been addressed (initially because we got a tenant who wanted to move in immediately very quickly, since then…to be honest they slipped our mind until seeing the new builders report).

I’ve spoken to the sales agent, and he thinks we can realistically get a sale if we drop the asking price by $15k and leave it as is, or fix everything (including the major items) and probably only recover those costs in terms of sales price. I’ve asked our rental agent to take care of the urgent issues immediately, and whether she has someone who can assess whether the house does need restumping (only a few years ago it was reported as “some bearers off stumps” which we’ve had addressed, but now according to a different builder its “whole house needs restumping” which seems like a big change in a small time). I sent her the whole report and asked for her thoughts on what we should address from a rental investment perspective.

At the suggested sale price we’d be left with around $45k left on the LOC I believe. The cost to repay that falls somewhere between best case return numbers if we keep it, and historical average cost. At the moment I’m thinking we’ll take it off the market, and look at addressing all of the issues in the report (very rough estimate of $20-30k) including sprucing the place up even more once it’s all done (paint, etc) and keep it as a long term investment, hoping things turn around. It’ll probably mean we’ll need to be putting money into it regularly to cover costs fairly quickly, as the LOC will be maxed out fairly shortly after that expense. It also means we’ll probably end up owing around $280k for a place worth around $230k once done, but selling it leaves us with even more debt by the time we factor in selling costs, and no asset that at least has some potential to grow and hopefully the rental market will improve over time.

• This reply was modified 8 years, 11 months ago by  bjsaust.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

August 5, 2014 - 9:53 am

Yeah, I’m getting a valuation done by the agency that handles the renting so I have a better idea of where I stand. My hope was that even taking those costs, and losses during ownership, to make a small profit, but I think we might be looking at a small loss instead, which could make for a more interesting decision.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

August 2, 2014 - 1:46 pm

Line of credit. Interest only for the first 15 years.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

July 11, 2012 - 12:01 pm

Thanks. I know they were popular back when I set it up, but I also noticed that banks have reduced LVR maxes for SMSF loans since then (did need 30% deposit, I gather now 20% is more common), so I'd hoped they'd also gotten more flexible with rates.

I don't have the offset account setup, but its not a bad idea. I'm only getting about 3.5% on my cash acct for SMSF.

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July 9, 2012 - 6:05 am

Ok. Thanks very much for the reply .

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

November 2, 2011 - 10:14 pm

My first lease I deliberately got a car with good resale value so I could pay it out, on-sell it for profit and get a new lease. Worked out I'd make around $5k profit. However by the time I renewed registration, needed new tires for roadworthy, and some competition on carsales.com meant I dropped my price by a couple $k I think I made about $1.5k profit. Better than nothing, but not what I was hoping for. I suspect this one we'll just give back at the end.

"need to get for it at trade in to finalise payment."

No, you just hand the keys back and walk away. Then the lease company will on-sell it. Check out any lease companies website and they'll have links to ex-lease cars for sale/auction.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

November 1, 2011 - 10:54 pm

The lease has nothing to do with the use of the car. Its just a salary perk. The only tax-effect I'm aware of is that you can't claim travel with a lease car when you could with your own. Because technically the car is owned by your company, not you.

Yes, a novated lease should cost you nothing. Petrol, insurance, servicing, road-side assistance, new tires, everything.

Basically at the end of the lease term, everything you've spent is added up. If you've spent more than was allowed, you'll be billed for it. If you've spent less,  you'll get a refund (well, technically your employer will, but it gets passed back to you).

http://www.fleetpartners.com.au/

I go through these guys. I notice they have some calculators on the front page and plenty of info links.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

November 1, 2011 - 9:54 am

Its not really that complicated. Most people will go with a Novated lease, which includes maintenance costs as well as the lease costs. The payments are deducted from your salary pre-tax, so you save money. On the other hand, its a loan, you're paying interest. That costs money.

So say your lease costs you $10k per annum. At 30% tax rate, thats only $7k out of your take home pay, but if say $4k of that was your lease payments, then you have to compare that to cost of just owning your own car and paying your own maintenance.

If you were on 40% tax rate, it would only cost you $6k in take home pay, which could make the difference between it being good or bad.

Leases will normally be between 1-5 years. I have a mate who leases a new car every year, haven't asked him why but I presume its because he wants a new car every year. I do a 3 year lease…I think I did some sums and comparisons when I did it the first time, but now I just do the same period each time.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

November 1, 2011 - 3:38 am

fWord wrote:

My money is in property and I have mortgages to pay, so I don't really see how I could potentially upgrade my car and NOT expect to have to lay out more money on a depreciating object and possibly affect my borrowing capacity for future property purchases. Plus, I'm only in the '30% tax bracket' but I do travel a fairly substantial 240-270km per week to and from work (excludes my house calls).

A lease is essentially a loan, it will count towards serviceability.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

November 1, 2011 - 12:12 am

Ignore growth, its about cashflow.

Cashflow is negative.

Ummm…

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 31, 2011 - 4:16 am

Talk to the council. They obviously won't give you a guarantee, but they should be able to indicate their willingness to let people sub-divide these properties.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 31, 2011 - 4:14 am

He clearly said he only had 300k to spend. Its not a matter of what he thinks its worth, its what he can afford to offer.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 30, 2011 - 4:43 am

Some good thoughts in here. I'm no expert, but here's what I would do.

Written offer.
$300k
A minimum settlement period but beyond that vendor to choose settlement date (i.e., you probably don't want less than 30 days but up to them if they want later than that)
Bare minimum of conditions
Final offer
Deadline of 24hrs to accept.

A bit of give and take, with some urgency to push them along.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 29, 2011 - 5:45 am

Yeah, I believe you can.

Even if things seem straightforward, everyone's situations are different. You're unlikely to lay your life out here for the world to see, but with an accountant you can let them know the exacts of the situation and plans for the future and you never know what they might come up with. Its the things you don't realise are important that they should help identify.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 29, 2011 - 4:41 am

I don't get why people become involved in hundreds of thousands of dollars worth of property deals, but wont invest a couple hundred dollars talking to an accountant. If you've owned this property for 5 years, and plan to buy more in the future, you should already have a relationship with an accountant, but given you don't now's the time to start.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 29, 2011 - 4:34 am

Qlds007 wrote:

No that is incorrect as the Title defines who claims the Tax deduction and not who borrowers the money.

I hate to say it doesnt sound like your Broker has any idea on loan structure as Jamie initially mentioned it is a bot of a mess.

I'd really think about seeing an accountant also…

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October 29, 2011 - 4:19 am

Paullie wrote:

I reduce my negative gearing capability in IP2 as it will only be in my name, and I am the sole bread winner paying 80k+ tax a year.

However you structure it, you should end up with the same amount of debt, paying the same amount of interest, set against the same amount of income.

[bjsaustParticipant@bjsaustJoin Date: 2009Post Count: 141]

October 29, 2011 - 12:00 am

My general feeling is there's no rush. Whatever's going to happen in the market, I find any kind of significant rise in the next two years to be very unlikely. That said, there's no reason not to buy the right property at the right price for the right reasons now. My main "advice" would be to not get too leveraged right now. I would have trouble sleeping right now if I wasn't comfortable with my levels of reserve in serviceability.

A lot of property spruikers make the claim (as fact usually) that now is the greatest time in ages to buy property. Whilst I don't really agree, what I really don't like is the implicit assumption with such a claim that its only a small window of opportunity and people need to act right now.

Point to note on the last few responses, its very hard to get any information from unbiased parties. Not surprising I guess, as if someone didn't have a vested interest in property then their opinions probably aren't worth much anyway. However I get a little tired of being bombarded with emails from from people/companies who clearly have a vested interest in promoting a positive outlook for property.  I don't know about you guys, but I'm yet to get an invitation to an event where I'll have the opportunity to spend 4 figures on finding out why now (now being any time I've gotten an email) is a bad time to buy property? Or "market research" from a property valuation service claiming that property prices are likely to drop, so I'd be wasting money buying their valuation reports just now?

At the end of the day, noone is going to tell you the right answer, and if they do its more likely to be just luck. You need to monitor the market, be aware of the larger global market forces and make some educated guesses.

For instance, that article linked above talks about how the emerging nations are driving global GDP and somehow (I didn't read the details just browsed) this is good for Australian property (presumably because we sell them commodities). However, I can't help but ask myself how much of the GDP of those emerging nations is driven by consumerism of the first world countries? If theres economic collapse in the first world countries, just how much demand for commodities will still exist in the emerging economies? I don't know the answer, but I know its not all as black and white as a lot of commentators would have us believe.

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October 22, 2011 - 10:55 am

I wouldn't even take it off the market. Just market it for the price you eventually want to lease for and leave it up.

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October 21, 2011 - 4:34 am

Are you sure they're decreasing public housing in that suburb, and not just focusing elsewhere for new public housing?