Forum Replies Created
There’s an article in this week’s Business Review Weekly on the type of issues the ATO is looking at in relation to property investors. If you leave one vacant, the ATO might regard you as a developer and say all the profit is taxable as income rather than as capital gains.
crj
One of the issues is that a lot of credit card debt is not at 16%. I’ve just been offered by one of my credit cards 6.99% fixed on up to $12000 unsecured. Maybe the RBA needs to tackle credit card debt another way.
There are 2 very interesting books I’ve read in the last 2 years:
debtand delusion by peter warburton
and an Amercican book called something like the Credit card bubble
The first book suggests high debt is a major problem in the industrial countries. The second looks at some of the methods that are used to make being in debt on credit cards attractive and also at a number of consequences that have happened to people in the US because of that
It would seem that what Anastasia is proposing is not for the primary purpose of tax minimisation, but probably for some other valid reason eg to protect assets as the 1% owner might be at risk of being sued, or to make it easier and cheaper for the 99% owner to borrow as both parties are in the finance application rather than having personal guarantees involved.
Basically as an Australian resident you are taxed under Australian tax laws on all income including capital gains irrespective of whether it is gained in Australia or elsewhere.
Suggest you seek very competent professional advice before you start.
Why don’t you just speak to the banks or credit unions with branches in Canowindra or Gooloogong
Good points Rugbyfan. I’d also suggest follow the town for a while if it’s a mining town. Go and read the back copies of the papers in the library if you can for a couple of years. Mining towns seem to go in boom/bust cycles. Even if the ore is there and can be extracted cheaply they’re at the mercy of overseas prices and foreign exchange rates.
Talk to a few of the older miners, they’ll have a pretty good idea whether there is more ore around. Try and find an area where there are smaller mining operations around, they’ll be leaner than the multinationals and also more committed to the local area.
Don’t put all your eggs in one basket. There’s an old gold mining town in NSW, Stuart Town (which used to be called Ironbark as in the poem). In the boom there were 10,000 plus miners now the population is very small. The old silverton museum near Broken Hill has stories about people shifting to Broken Hill who wweere told by the people in Silverton that they were fools, that Broken Hill was a flash in the pan and that Silverton would last. a few years later most of the buildings in Silverton wwere demolished and shifted to Broken HillWhat are your objectives? Does purchasing one or both of these properties help you achieve these?
What is the likely future of the town? Is it stable or is a major employer such as a council, abattoir, likely to close or relocate? I find many country towns give good income returns but poor capital growth. However, I know many people who have done well by investing for income rather than the uncertainty of capital growth.
My gut feeling would be that you won’t make much, if anything, after mortgage payments, rates, insurance, repairs, property management fee. On the other hand if you put extra money in and pay the loan down quicker you’re building equity for future investments.
It’s natural to be apprehensive. Have you considered just purchasing one and seeing how that goes?
One method of pricing in a tender is something like “$50.00 above the highest tender to a maximum of $X”. This means that your price need not be thousands above the next highest, but that if someone has gone over your limit you are still protected.
crj
As a general rule Australia asserts jurisdiction to tax its residents on their foreign source income including CGT. Interposition of non-resident companies or trusts will raise a number of other complex issues which would need specific professional advice.
James
What you’re thinking was tried several years ago by a lot of farmers and businesses. The problem is that if you’re borrowing $US the lender wants $US back. This is OK if the $A keeps rising or only falls a couple of % during the term of the loan. But if the $A falls say to 64c (I think there was something in one of the financial pages suggesting 64c was the likely level of the $A in a couple of years) and it is 80c now if you borrowed $1m US you’d get $A1.25 m now but if had to repay when The $A was 64c you’d be repaying $1,562,500 which if you were borrowing over 3 yrs would be equivalent to about 8.3% per annum. To protect yourself you would need to do something like buy a forward foreign exchange contract and the cost of that will be based on where the market thinks the exchange rate will be at that time.
The link shows some of the issues that might arise:
users.tpg.com.au/adslflfl/1995/foreign4.htmcrj
Warialda is the headquarters of Yallaroi Shire. Not sure what the latest thinking is up there re local govt amalgamation, but they are talking about amalgamation with Bingara. It’s a service centre for the rural district around it.
http://www.warialda.communitytechnology.net.au/about_ctc/
will give you some information
There’s also a bit in an education dept report
http://www.pub-ed-inquiry.org/reports/ final_reports/03/Ch7_34.htmlrelevant bit:
The Warialda and Bingara Industry and Education Links Committee (WBIELC) is a unique organisation consisting of teacher, parent, student and community members from two towns 40 kilometres apart. The Committee oversees and facilitates the delivery of vocational education at Warialda High School. The high school has received state and national recognition for its vocational program during 2000 and 2001. Currently 40% of the senior school is involved in part-time traineeships. The school aims to have its graduates achieve the dual accreditation of an HSC and an industry-recognised qualification. Over the past three years the school has enjoyed a one hundred per cent success rate in having graduates gain university entrance, or TAFE continuance or full-time employment.Since achieving this goal, the school and the WBIELC have progressed to the view that Warialda High School needs to take an active role in the education and training of the total communities within its drawing area (Warialda, Bingara, Gravesend, Coolatai, and other centres). The school conducts meetings with Yallaroi and Bingara Shire Councils and adult learning groups. There has been a shift of ownership of the curriculum towards a community service or demand orientation. This has result in strengthening links with TAFE. Currently, courses have broadened and are being delivered from Ballina, Armidale, Inverell, Tamworth, Moree, Coffs Harbour and South Australia TAFE. Classes can be formed largely with student members and supplemented with community members or vice versa.
Associated with these initiatives, morale has lifted in the communities of Warialda and Bingara. The state and national awards received by the school and individual students have underlined the fact that quality education is available and that people from the local area can achieve high levels of success and fulfilment. Further, a positive mentality is forming within the vocational education ranks that obstacles do not block enthusiasm but rather, they invite creative solutions.Warialda High School is now expected to assume a greater role in community renewal and building a sustainable community. Warialda and Bingara school sites are being seen as campuses for training as well as education to meet broad community needs. Currently meetings are being conducted between the school and Bingara Shire Council to facilitate the introduction of a theatre course, which is the catalyst for exploring the formation of a regional theatre company and the restoration of an art deco theatre. These initiatives are attracting the commendation of regional arts authorities and also have the potential to generate other courses and skills development, tourism and employment, and thereby help the local economy.
Meetings between the school, two shire councils, TAFE and health service representatives have identified the need for mature age and student training in aged care. The appropriate course, deliverer, modes of delivery and work placements are being negotiated. Other negotiations are taking place with education authorities and community agencies outside of the immediate district with a view to forming other productive partnerships, the extension of education and training options and enhanced opportunities that will retain youth within their communities. The school’s involvement in vocational education has increased the relevance of the curriculum for many students and contributed to their retention in the senior school. Their self-esteem has been raised and they leave school with employable skills and a sense of gratitude for the assistance they have been given. The expectation is that some will leave the area to gain further knowledge and skills and at a later date return to the environment that supported them in their youth.
The communities of Warialda and Bingara have been revitalised as individuals see opportunities for their educational needs being met, as they gain satisfaction in investing their time and energy in their youth and their future, and as momentum gathers for other projects and innovations to be considered.
The principal believes that the keys to success to this point have been:
– the concept of the school as a learning community,
– demand driven curriculum,
– local solutions for local problems,
– flexible delivery , and
– effective partnerships.Is there a bank or credit union where you are looking at buying? If so, that financial institution would probably lend for that location
Elysium-M
We had a clause in the contract on how it would be calculated and what would happen if there was disagreement, but just relied on a real estate opinion. No major change in prices had occurred
crj
Start by talking with the planning department in the council the land is situated on what their requirements and what they permit and what their costs are.
Where are the services to the property eg wateer, sewerage, electricity. If the property is subdivided will this be a problem eg does the sewer connection run across the middle of the land to the existing house? Will services need to be extended to service the new block? Will driveways etc need to be relocated?
Toby,
The secret in partnerships is not the words on the paper but the people involved. I’ve been in partnerships and advised people on partnerships over the years.
Partnerships have a better chance of working if partners respect each other, have common value systems. Complementary skills are often valuable. Look at some scenarios:
eg what if you bring what you think is a great deal along and your partner has doubts, if you don’t proceed will you resent that.
eg if you work hard and your partner doesn’t or vice versa there will be friction.
I’ve been in some great partnerships and I’ve seen some lousy ones.
I’ve read Steve’s book and it’s clear that the chemistry between Steve and Dave works.Toby,
The secret in partnerships is not the words on the paper but the people involved. I’ve been in partnerships and advised people on partnerships over the years.
Partnerships have a better chance of working if partners respect each other, have common value systems. Complementary skills are often valuable. Look at some scenarios:
eg what if you bring what you think is a great deal along and your partner has doubts, if you don’t proceed will you resent that.
eg if you work hard and your partner doesn’t or vice versa there will be friction.
I’ve been in some great partnerships and I’ve seen some lousy ones.
I’ve read Steve’s book and it’s clear that the chemistry between Steve and Dave works.I’ve done this twice. first with a PPOR in a country town where rental accommodation was scarce. Two other single people and i purchased a house. We had an agreement about getting out. We did not use the house as security and each did our own borrowings. After one year one person, a teacher, was transferred and the other person and I bought her out. Then some months later the other guy got engaged and bought me out.
Then a few years later I and two other friends bought a block of land together initially with the view to paying it off and building some flats. A few years later our plans had changed and we sold the land.
In both cases we were structured so that the finances weren’t a strain on anyone so that even when we decided to sell the land wwe did not need to sell quickly.
Renovating for a profit might cause some additrional issues. Are you going to do the work yourselves? If so, how are you valuing time? There have been one or two articles in Australian Property Magazine on the pitfalls and benefits of working in a group (in 2002 I think)
My worst tenant came with the property. I changed managing agents when I settled because the agent when I purchased had let the tenant instal Pay TV despite being behind in rent. The original managing agent had told me what a good tenant this person was. Tenant almost straightened out arrears as we put them on Centrelink then his de facto left. Tenant bashed up another tenant, broke the windows in another flat and when he was evicted stole the airconditioning system. My managing agent handled everything and did a great job. Having a good managing agent removed a lot of stress. I was 200 km away from the property travelling to a meeting several hundred k’s away when I got the news. Agents organised window replacement, locks etc, principal went and spoke to the other tenants.
I figure it works both ways with agents. good ones take the stress away, but they’re in a pretty thankless position being the meat in the sandwich between the tenant and us. If the agent rings me and the tenant wants a repair or something minor even if they are not strictly entitled to it, it gets authorised straight away. This is partly selfish on my part. My agent handles a lot of property. My property is at the cheaper end of the market so it’s not a great moneyspinner for them. If i help them keep a tenant happy I’m making their job easier and I’m also making it more likely the tenant will stay longer so ultimately more money ends up in my pocket. I also send my agent flowers once a yearRancid,
It seems to me that what you’re asking about is risk management which is understandable when you’ve had an expensive unexpected repair and vacancies. There are some risk management strategies referred to but probably not specifically what you’re seeking. On the other hand if your property is positive cashflow what you make each week from it after expenses will provide a buffer if you put it away for that.
For what it’s worth my risk management strategies are:
a. at the beginning borrow or put aside some extra money to cover vacancy or repair
b. get a property with multiple tenancies. I have a amall block of flats (4). There’s an occasional vacancy and at times 2 flats have been vacant but even when two are vacant there’s still been cash coming in to cover most expenses. Might have needed a topup of $100-$200 a month which is not much if you
c. invest with a partner (although this also has risks)crj
