Forum Replies Created
- thecrest wrote:Hi John.
That’s a very clever strategy.
It converts personal living expenses the tenant can’t claim on tax,
into expenses the landlord can claim.Can someone familiar with Australian Tax Laws tell us if
there are any FBT implications in supplying “free” utilities to a tenant ?What else can the landlord supply for the same effect – groceries, full room n board, gardening services, ironing or housemaid services, ???
It’s good of you to post this info for everyone on the forum, we all benefit.
Hopefully our Australian tax man doesn’t move to plug that hole.Cheers
thecrestHuh? Nothing special tax wise about this.
The expense is just offset against the increased rent [income].
I think its inevitable that a substantial number of projects will be scaled back with some being cancelled/postponed until the fundamentals correct themselves.
We have seen softening commodity prices, with blowouts in capital expenditure from when projects were first planned.
People talk about a lot of the projects as certainties, when most haven’t even reached final sign-off. (speaking about the whole of Australia). It’s never to late for a company too back out of a project.
Given the level of risk, I don’t believe investment groups have any place in mining towns.
Too add to this I also believe by the time investment groups get around to focusing on these kind of hot spots its already too late. The first round of investors are usually just selling into the new pent up demand. They just create the demand that allows the smart money to sell into at high prices.
Based on the level of risk I don’t believe anyone should be advised to invest in mining towns, rather it needs to be a decision they arrive at on their own.
I believe these groups and recent pent up demand is also overshadowing how great the risks are.
I think when you add up the time and travel costs of multiple family members, living further out can be a false economy anyway (especially as they are always increasing), your also generally further away from services too.
I think with the high uptake of foreigners and younger generations, many are used to/have resolved to living in higher density closer to the cbd's (not necessarily in the CBD). Maybe considering moving into a house come starting a family.
They prefer the convenience and cost advantages provided. A student/young professional just starting out, will find it hard to justify paying for a large yard/house when they will never be there or don't have the time to benefit from it anyway. Units/Apartments also require less of their attention too.
Even with kids some complexes actually would provide more room for your kids to play, and you could also prioritise being closer to parks/ovals too, even better if there are other kids in the complex too.
For me personally, its location first, accomodation second with cost ruling out some locations.
I think affordability will be a big determing factor going forward, most conventional houses will be priced out of the next generations hands, they will have to opt for smaller houses on smaller blocks, or apartment living unless they are willing to move further out.
I think this will see unit/apartment prices at least trend house prices.
Gen Y.
fWord wrote:simple wrote:Let's see if trend continue: http://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/6416.0Main+Features1Dec%202011?OpenDocument-6.1% for Melbourne from Dec 2010 – Dec 2011. That's not so bad. I lost more money in shares!
Depends really.
There is a lot leverage in property.
So if you looked at say $100,000 invested in Property Vs Shares.
It might look like:
Property (80% LVR)
$500K – 6% = $470K, $30K loss.
Loss on $100K Principal = 30%Since the person investing in shares probably had little to no leverage, their portfolio would have to have lost 30% to have the same effect.
Which on average it probably did, so they are sitting about even.
It's not really just a question of cost, but the stigma which will now be attached to the building.
This will likely mean future buyers being turned off.
It could also affect future valuation's which could affect future purchases getting finance to buy your property.
If there was a purchase for $650K last October, why are you offering $670K now? Is there evidence to show units have gone up in the area over that time? Are the units comparable?
Insurance and depreciation.
http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm
6 Year rule maybe?
So if you lived in the property to start with yourself, you can then declare it a ppor which makes it Capital Gains tax exempt for upto 6 years from moving out, while still allowing you to claim all the normal deductions for a rental property for the period in which you are renting it out.
All the other details seemed fine.
mickm007 wrote:. On paper their plan looks great they own the propery and at 200-220k per unit to build and sell at 500k plus per unit how can this go wrong!! lol!!!Can't help you with the finance questions, but this is the wrong way of looking at it. Regardless of whether they own the land or not the land value must be added to the build cost to work out their margin and whether it is worthwhile going ahead with the project or not.
Terryw wrote:Kong, this is an offset linked to an IP. So any reduction in the interest payable on the IP loan would lead to more income. This means the negative gearing effect will be less, or the positive income more. This in turn equals more tax.However, it still may work out better to put into the offset account.
His calculation for putting the money into the savings account is wrong because he forgot to add back the benefit from negative gearing.
$100,000 savings@6% interest p.a., and are at the marginal tax rate of 30%, then you would earn $6,000 per year, but then be taxed on $1,800 and be left with $4,200
Adding Negative Gearing Benefit, $6700 * 30% = $2010.
So Savings account option = $4,200 + $2,010 = $6,210.
So its $6,700 (Money in offset) vs $6,210 (Money in Savings).
The difference is however all to do with the difference in interest rates.
For an IP the answer will always be your offset account because of the fact that your loan has a higher interest rate.
For PPOR definitely the offset account for obvious reasons.
Michael_Cao wrote:Thanks for that information guys!I can either:
1) use the 30k on my personal loan paying 14% and buy real estate in the US that offers 18% return and risk 30k only.
Or,
2)
Don’t do that. No way would you invest with a loan of 14%.
Paying down your personal loan would be the best advice, it’s effectively a return of 14% risk free.
$384,000 + ~$13,000 Stamp Duty + $44,000 Reno + ~$50,000 Interest + ~$15,000 Sales costs + $Rates + $Insurance + $your time= $506,000+
How much rent did you get over the period? Does seem to be a close shave.
engelo10 wrote:Hi all,I have just lent some money to a business that buys property in the US. Its a 5 year contract with an interest rate of 10% per annum. After 5 years there is a possibility to extend or get a balloon payment of the funds lent. If repayments are late by 60 days I can repossess the properties. What are your thoughts on this strategy? Has anyone done anything similar? I have been in correspondance with these people for some time now and am confident there will be no issues. Thanks for your time.
Regards,
EngeloWhat if the property values went down or failed to keep up with the rate of interest, so the borrower went into negative equity?
Even if you got possesion of the properties, they wouldn’t cover what your owed? Better than nothing though I spose.
My concern is they are risking your money, so how motivated are they going to be to do due-dilligence/make sure its a sound deal.
Mosqui wrote:Can I claim the stamp duty back when I sell the IP? Or the Stamp Duty gets lost?Yes, It's added to the cost base along with all other acquisition costs for determing capital gain when you sell the property.
e.g. You bought the property for $500K, Stamp Duty was $20K, Other Capital Costs were $10K, you got $600K for selling after sales costs.
So the cost base for capital gain is $500K + $20K + $10K = $530K.
Capital Gain is $600K-$530K = $70K.keiko wrote:Lets say you bought a house for $200,000 and after stamp duty and reno costs it owes you $220,000 and then you sell it after a couple of years for say $300,000 and make a $80,000 profit on that property less 50% = $40,000 taxable CGT
Now lets say you made a loss on the books in the previous year for say $100,000, would the accountant then carry the loss into the new year and right off that $40,000 so that you pay no tax on that capital gain?
Or do you still pay tax on the $40,000 as its own standalone CGT profit?As an individual a capital loss can only be offset by a capital gain, therefor when a capital loss is declared for a particular income year on your tax return. It must be carried forward to future year's where it can offset future Capital Gains.
E.G.
Say I bought an investment property in 2005-2006 (Financial Year) for $600,000. I then sold it in 2007-2008 (Financial Year) but only recieved $500,000. Therefore for the 2007-2008 (Financial Year) I would declare a Capital Loss of $100,000, which I would have to carry forward.
Now in the 2007-2008 (Financial Year) I bought another property for $400,000. And sold it in 2010-2011 (Financial Year) for $450,000. That is $50,000 in Capital Gains for which a 50% discount is applied (due to holding >12montsh), so $25,000.
Now when I sit down and do the tax that year I would declare a Capital Gain of $25,000. This would however be offset by the capital loss ($100,000) carried forward from previous years. So +$25,000 – $100,000 = -$75,000.
Therefor I pay no tax on the capital gain that year and continue to carry forward the new capital loss figure of $75,000.engelo10 wrote:Hi guys,
I would like to get an idea from other investors as to what strategies they've used to achieve a passive income of a minimum $100k p.a. So far, my strategy has been purchasing below market value, renovating, refinancing, pulling out equity and repeating the same process. Similar to what Nathan Birch has done. I appreciate any positive or negative response, just don't be provocative hahaha
Thanks for your time.
Regards,
EngeloThats not really “Passive” income.
Definition: Passive income is an income received on a regular basis, with little effort required to maintain it.
Examples of Pasive Income are:
* Bank interest.
* Rent.
* Dividends.There must be little to no involvement by you to earn the income.
In your case there is work invovled with acquiring, renovating and refinancing the properties (Active). The only passive income in this circumstance is the rent.
Tax has already been paid on the gift, by the person giving the gift. They paid income tax on the income they have gifted to you.
Agree with Luke.
Don't try and circumvent the policies in place to straddle him with even more debt. That is why he is in the situation in the first place.
A lot of people on this site are strictly "Property Investors", this is counter intuitive to good Financial Planning advice. Therefor it is no wonder that many would not seek the services of a Financial Planner (even a good one) as it doesn't gel with their mantra.
A financial planner should be looking at and giving weight to all investment classes.
The biggest problem for Financial Planners in my point of view, is the strength of Australian Property over the last 10+ years, a lot of people have done really well out of it and it's meant that a lot of people have forgotten all other asset classes and just choose to invest in property. A financial planner just can't add enough value in this area to make it worthwhile, any advice they did add is likely to be ignored by the majority anyway.
While there has been some skill involved in investing in property over the last 10+ years, there also has been a lot of luck. We all know what happens when someone gets lucky to often over a long period of time, they begin to define it as the norm and look at it as a normal market characteristic or even begin to believe that they somehow greatly outskill the market. (Much like the way the GFC started).
If there is a slow down in property, or a lot of people get burnt. And property doesn't become such an obvious or the only choice in the future. Financial Planner's will be able to add a lot more value. At this time, I believe people will be much more satisfied to make payment for financial planning services. Obviously the industry has some cleaning up of its own to do first.
