Forum Replies Created
hmm, do you have to stay in your property for one year, i thought it was 6 months, better check out i think the ato website for clarification(well in nsw its live in for constant 6 months in the first 12 months).
Jayro wrote:I'm still lost for words a little over Chris' sister. Geeze, $46k. PLEASE tell me that includes a honeymoon in there somewhere atleast??? Mate at least you and your Girlfriend are on the same level. Thats the important part.Umm, I don't know if there is a honeymoon in there, but they are going away to the gold coast for 3 weeks, with i think helicopter rides and everything.
Have a big honeymoon:The exciting way to get into debt.
Chris.
elkam wrote:
You need to calculate about 20% of the yearly rental for expenses (repairs, insurances, rates, water, agents fees, vacancies etc.). This does not include the interest on your loan. However, don't forget that all this is tax deductible, including the interest on the loan.
[/quote]I keep on reading this 20% expenses alot. Does that include a property manager, as that would eat up like 8-10% of rent. Therefore if this is included(in the 20%) and I am going to manage myself, then i would only have about 10% rent for expenses.
Does this sound right.
Chris.
I agree totally with what everyone is saying, my sister is going to get married janurary 2008(shes been engaged for 2 years), and well my parents said they would pay 15K, her fiances parents are paying 5K, so thats 20K that they dont have to fork out, but they still are forking out an extra 26K aswell. This is unreasonable 46K for a wedding, come on they bought their house with little deposit, cashflow would be tight and they do this.
I've already had a chat with my girlfriend, we're on the same page, decent wedding, not extravagant.Chris.
Thanks for your reply Terry,
What I said about the CGT 50% thingy was exactly what you meant but I didn't write it in very clear words.
i'll have a look to see if i can find some ruling or something with details, and the like.
Thanks,
Chris.devo76 wrote:I love crunching numbers. I have a calculator sitting next to me at home. The wife thinks ive lost it. Ill see a property and go through a bunch of WHAT IFS. Seing if its viable or what a reno will do. It helps hone your skills i think.We are very similar, I have my calculator sitting next to me too, I love crunching numbers.
Chris.
Thank you Marc, your perspective has given me something to think about.
If I can get early access to the property I could do minor reno, e.g. paint. Then move in a tenant.
This will make me a buy and hold investor, I don't like the sound of that, but if moving into a house and doing a 6 month reno and not really guaranteeing the returns i'm after its just to much work.
Also I just thought that if I buy the house and reno it then all the buying costs are non-tax deductable.
With an IP(Buy and tenant straightaway) are all the associated costs tax deductable so my 6% allowed for closing costs I get all(6%) of part(tax rate) of it back via tax deductions.So lower LMI, no added costs for reno(and risk of reno), no added costs for holding, tax deductability of loan.
I'm really swaying over to this side of things now, The reno is just not making financial sense. I will have to re-research the market rents, and crunch some further numbers to compare.
Thanks again,
Chris.Thanks for your help Marc, greatly appreciated,
Ok I have now crunched the those numbers, and re-crunched em. Here they are;
Purchase price: $200,000
Closing costs(6%): $12,000
Deposit: $32,000
Renovation costs added to loan: $20,000
Loan amount: $200,000
LVR 100
LMI(2.5%): $5,000
New Loan amount: $205,000
Holding costs for 6 months(including rates, insurance, interest): $10,000
Value after renovation: $240,000
New LVR 85
Interest(8%): 16460
Rent(6% renovated value): 275pw/14300pa
Property expenses(20% of rent): $2,860
Cashflow: -$4960pa(-$91pw)
Expected capital gains(5% renovated value): $12,000
Net Profit Percentage = 18.05With an expected rent rise of 3% with all others constant property will be cashflow neutral in 12.5 YEARS, now this is my big shock, what the hell, is it due to my high LVR, or something else.
I hope I have fixed any problems.
And again I haven't included deprecitaion at all, and am not worrying about selling in the near future that is just complicating everything.
Is the reno costs of $20,000 realistic for a $40,000 increase in value.
Regards,
Christopher.P.S. Would the 20K of reno costs be added at the start thus increasing my LVR and pushing my LMI up heaps??
I have been looking on realestate.com.au at lots of properties, and the properties that are about $220,000 havea tenant in them paying about 290-300 on average(and I'm pretty sure that they are not recently renovated ones, I don't know, I don't want to seem to absolute best case scenario like, I should be worst case scenario, Is that what I am??Hmm, thanks Marc for your reply I didn't see your message.
Ok Marc in my number crunching I have revised it a little but not yet to what you mentioned. I did not allow for holding costs during the 6 months, which turns out to be 7K(just like the FHOG). Now as it will be my PPOR(for the 6months) would the 6% on top of purchase price hold, I don't think I pay stamp duty as first home owner and its relatively cheap, can you please clarify the actual things that I have to pay, this area has always been so grey to me.
The LMI, I cannot believe I didn't think of that, hmm, i remember I had some sheet of paper which had like a matrix table that is averages of LMI for certain %'s and loan amounts, i'll find it.
Hmm, the reno costs added on to the loan, how would this work, a line of credit??
How inclined would they be to giving me this considering my high LVR?Thank you Marc and others for your help I do appreciate all the help from everyone, it is nice to think that people come on here and genuinely want to help out.
Chris.
I agree with v8Ghia and Cameron, forget about the FHOG, you have to pay stamp duty so just pay it. Get income insurance(if not already) and just accept that over the next few years you may have to go back to work. With that said enjoy your home and I wish you the best of luck with your purchase.
Chris.
This is a real tough one, I can see where your coming from Fiona, and also where some other people are coming from with the risk.
Well you've got insurance with your husbands job, so no need worrying to much about that.
You might have to take up a small part-time weekend job to get a little more income(note:you pay small tax on this as you'll have a low income), that may help to get the house.This one is really up to you, if your able to get the loan and make the sacrifices necessary then go for it, it looks like you'll be in the money big time over the next 5-10 years, excellent.
800K property, 500K deposit, 300K loan, the bank should lend you the money, the only reason they don't lend is because of risk. If they have a 300K secured against an 800K property that would look very good from their point of view.
Your main concern here is servicibility of this debt that you will acquire.
Chris.
Hmm, with the capital gains, I have tried to be conservative with 6%, is that conservative. I know the market has "averaged" i think 10% for tonnes of years, I've dropped this incase the market doesn't perform as expected.
Do you think its to high?I need to fix up some of the things, there are 2 possible cases, I buy and live in house ofr 6months and get FHOG and reno at the same time, this will incur the mortgage repayments, and so my holding costs will fly up nearly as high as the FHOG i will be getting, or i could get in there, get the reno and get out with not FHOG, i don't know, i think the safer bet is to stay the 6 months, as i will have no problems with time blow outs if i have to stay minimum 6 months(also maximum). Hmm, What are your thoughts on this?
This would mean that my reno costs would jump up, i would have to work out how much more and also i would have a larger deposit, but then stuff like(maybe) LMI, bank fees, all those costs initially won't be tax deductable, hmmm….What should I do…hmm…Chris.
Well I know certain numbers just by experience on this forum. As I am currently at uni and am not going to buy an IP until late 2009-early 2010, I have just been looking/posting on this forum and checking out sites like realestate.com, I've just been researching I guess.
Well when you buy an IP you have the purchase price, but then there are also associated costs such as stamp duty, bank fees(finance), solicitors, etc. When you get the IP you can take some sort of strategy, if you want to buy and hold, then you look for a tenant, you could get a property manager(which usually charges 6-8% of rent) to manage your tenants and search for new ones when desired. This of course eats into your cashflow.
You will have council rates, insurance(i'm not exactly sure about insurance, like the technicalities thats something else i'll have to find out), etc I have asked around and most people say 2-2.5K per annum for those kind of things.
Also initially you may have to pay a certain insurance called LMI(Lenders Mortgage Insurance), I don't know if you are familiar with it, but it is generally an insurance for the bank(no benefit to you) if you don't pay your repayments, You have to pay LMI if your LVR is quite high(80+), that can eat up alot of money if you let your LVR get really high(95+).You borrowed money off the bank, so you gotta pay it back, your loan repayments will be your dominant outgoing(by far).
Rent, your big income.The figures with selling are say for example;
You buy a house for 200K, then 5 yrs later it is worth 350K.
The value of the house has gone up 150K, so this gain is taxed(capital gains tax), there are certain rules, if you hold the IP for over 12 months(in this case yes, 5yrs) you only pay CG tax on 50% the gain, so you pay tax on 75K not 150K, which is pretty good. Then you work out form the 75K how much actual tax you pay, say your tax bracket was 50% then you would have to pay $37,500 in tax out of your 150K profit.
You have selling costs(this is also an area where I don't know the figures, there are agents fees, some other fees), ive been told about 5% of selling price.There is depreciation, this is where your belongings(the house, the fixtures, the carpet, paint, sinks, etc, etc) lose value, you can claim a tax deduction for these. You can also set up with the tax office to get paid this depreciation on a weekly basis(just like how your employer might withhold tax before you even get paid) this is good as it helps cashflow. The value of depreciation depends very much on the age of the property, the building state and recent renovations.
I hope this cleared something up, if you need anymore help with anything or if anything didn't make sense just post back, i'm more than happy to help out.
Chris.
I kinda hope that this happens. I'm kinda seeing that if rates are staying where they are or lower that the market will recover(in sydney) and when i am buying my first IP(end2009) I will have missed out. But if rates go up the prices wont go up, maybe i can then get into a position where prices plummet(maybe, not so dramatic but drop) and then buy a few and then when rates come back down the price will fly and i will be in the money.
I can only dream that that happens, i hope, I will have to get in and see.
On LVR I reckon a LVR of 70 is conservative, I will probably start with LVR of 85(maybe higher).
Chris.
Thanks Marc and Joel. I can't believe I didn't look at comparative sales, that should enable me to keep an eye on the value and keep those formulas in check.
Thanks again,
Chris.v8ghia wrote:( wonder how 'wrappers' would go that long eh?)What did you mean by this comment? I'm interested in wraps.
Thanks TheBish for the comment about the planning website. There we go more due diligence tools at my disposal.
Chris.
For further acquisition of Ips you can access the increased equity of your PPOR and IP. Thus not needing a cash deposit. You can use the equity from the PPOR and make the entire new IP(an your first one) interest deductable, the whole value. You will have some cash then lying around(40K) decreasing your non-deductable debt.
You keep on doing this, paying off your PPOR slowly, and continually sucking money out of your properties for more.
After 30 years, you sell a few IPs and your living on tonnes of secure cashflow for the rest of your life.
Sorry about the babble guys, I just felt like it.Chris.
Your credit card is maxed, maybe consolidate that into your loan. That credit debt may be the thing thats stopping you.
Why is your credit maxed?? Its bad debt, why have you let it max out.
Chris.I feel the strategy should be lay back. Pay down the loans for now. Relax, look for deals. Once the equity starts building(your deposit) then you can get in quick to get a good deal.
Don't just do a deal for the sake of it. Do it to make money, find a bargain. Having good finance is part of getting a good deal/bargain.
Chris.
