Forum Replies Created
It’s sometimes also about aggressive (but always courteous) negotiation. If you can’t get the property for a price that would give you the yield you need, then be prepared to walk away.
Cheers
Elysium-MDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
It seems to me that the question of whether to use a property manager is very emotive, and depends on your own personal experiences.
Being in the service industry, and charging clients for my time, I appreciate the amount of running around that property managers do. To me, it’s a bargain. Imagine having to hire a personal assistant to run your investments. How much would you have to pay? $20,000 a year? $30,000?
Having a full time job, my property managers are a godsend. I had to get some grilles on one of my rentals fixed recently. With tenants moving in the next week. There was no way I could even find the time to call a bunch of companies to give me quotes, meet each of them at the property when THEY could make it there to let them in, then pick the right one, and meet those guys again to let them in to do the job.
Sure they don’t always do everything you want them to do. But do YOU do that yourself in your own job? Don’t sweat the small stuff, I say. The most important things are – finding a good tenant, and making sure that they pay on time. Sure there’re other headaches, like tenants trashing the place, etc. That’s what insurance is for. I don’t even worry about tenants burning the house down. Hey my insurance company will buy me a new house. And pay the rent for 13 weeks. That’ll be fun.
Like I said, different strokes and all that…
cheers
elysium-mDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hey y’all! I’m back after many months!
I’ve got a few thoughts that I thought I’d share.
Unfortunately, there are lots of different potential structures you could use. And the best structure is…. (you’ll hate me for this) … it really depends on your particular situation.
A unit trust is great because it makes things neat – it’s easy to clearly set out each person’s share in the property.
The catch is, the tax is not “flow through”. So all the potential tax deductions (eg from depreciation, interest, capital losses, etc) won’t be available for you to set off against your personal tax liability. On the other hand, all of the trust’s profit must (if memory serves me well) distributed to the unit holders. If you don’t, the ATO will still tax you as if the distribution was made. Of course, if you’re positively geared, tax flow through for deductions is not as big an issue.
On the other hand, if you used a company, you’d only be taxed at 30% if you kept the profits in the company (and you’d be allowed to do so). The catch is that the tax deductions are also quarantined in the company.
An unincorporated joint venture, on the other hand, will, if you structure it correctly, be completely flow-through for tax purposes.
You really need to work out which is best for you.
It’s easy for me to say that you need to seek professional advice (accountant to advise you on the best tax structure for your needs, and a lawyer to draft up the docs for you). The problem is that firstly, it’s expensive to set up an uncommon structure from scratch. and it’s even harder to find professional advisers who have real experience in what you want to do, without having to pay quite a bit of moolah. You get what you pay for, after all, as the old adage goes.
I’ve tried them all. And as I said, every structure has its pros and cons, and it’ll take me all night to list them.
Do lots of reading – that’ll help you get up to speed and get an idea of what you want. although the legal and tax concepts can often be difficult to follow, it’s worth the effort.
Cheers,
Elysium-MDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi guys,
I’m a bit slow on the uptake when it comes to tax. But if you own the IPs in your personal name, and use the companies to collect rent, aren’t you still earning the rent in your personal name? Isn’t it a clear case of tax avoidance, which the anti-avoidance provisions of the tax legislation will catch?
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Probably defamatory and a breach of the Privacy Act if you add the boyfriend’s name to the database and he wasn’t a tenant under the lease agreement (ie he doesn’t legally owe you any money).
Cheers
Elysium-MDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Discretionary trusts are a great tool for asset protection. But it only works in one direction – if you go under financially, your creditors can’t touch the trust assets. However, if the trust itself is in financial strife, it’s not so easy to cut it loose and wash your hands.
If you’re using a corporate trustee, the directors of the trustee are exposed personally if they let the trust sink with debts. There’s been a recent court judgment which held that the directors of a corporate trustee were personally liable for the trust’s debts, where the trust was not able to pay those debts.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi guys,
Read section 12 of the First Home Owner Grant Act (WA).
If you owned any residential property before 1 July 2000, you’re automatically ineligible for the grant – s12(1).
If you never owned any residential property before 1 July 2000, but buy a residential property after this date, owning this property in itself will not disqualify you from receiving the grant, unless you live in that property – s12(3).
I’m pretty sure that there are similar provisions in the corresponding Act in the other States.
An easy way to try to understand how or why this works is the following principle: the grant is to help you get your first “HOME”. If you buy an IP, it’s not your home. Anyway, whether or not anyone agrees with me on this point is irrelevant for the purposes of s12: the law is clear.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Been using Money for years. It does the job, and
I think it’s much more affordable than Quicken (I paid around $50).Setting up stuff is a bit fiddly, but you get the hang of it after a while.
The calculations (eg mortgage amortisation) are not perfect, so probably not so good for keeping track of your wraps. Also, it’s not able to properly track loans with an initially interest-only period, reverting to P&I after.
However, I like it, and I’d recommend it to anyone.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Interesting idea.
Unfortunately, it doesn’t work in WA. There are anti-avoidance provisions in the Stamp Act. It’s quite illegal here.
Will be safer getting an option to buy the property, and selling it to someone else.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi kbh,
if you buy an investment property, you won’t be able to get the FHOG for that property. However, if you never live in that investment property, you should be eligible for the grant when you buy the next property to live in (assuming that you satisfy all the eligibility criteria).
that is, merely buying an investment property, as long as you never live in it, will not disqualify you from getting the grant when you go and buy your PPOR next.
cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Pisces, believe it or not, the eligibility criteria for “first home ownership” under stamp duty laws and under the First Home Owner Grant Act may be different.
I have read the heading of the thread. “FHOG” is an acronym for First Home Owner’s Grant, isn’t it?
Stamp duty and the FHOG are quite different things.
DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
As a first project, keep it simple I say.
Use a company, and sign a shareholders’ agreement setting out how things need to be run, how to exit your investment, and what happens if there’s a deadlock or a default.
But none of us on the forum are qualified financial advisers (otherwise there would have been a disclosure/disclaimer blurb after the post to satisfy the regulatory hoopla). Once everyone’s chucked in their 2 cents’ worth, go talk to an accountant to work out the best way forward. Sure, it may cost a bit of money up front, but if, as you say, it’s going to be a long term project which will make a lot of money, better some pain up front, than watching it all flushing down the toilet bowl in a messy way later.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
South Australia and Western Australia don’t seem to have changed the laws to introduce the 6 month minimum residency period. But I expect that they will follow suit with the other States shortly.
When you apply for the FHOG, you have to make a written statement that you intent to reside in the property as your PPOR within 12 months.
The States apparently conduct checks on most people who receive the grant.
It’s a $20,000 fine and a criminal conviction for misleading the Commonwealth. The Commissioner of State Revenue can also impose a discretionary $7,000 fine (no trial needed), on top of making you repay the FHOG. If you don’t pay up, they have the power to force the sale of your property to recover the money. Their right to the money overrides all mortgages and other encumbrances, which will tick off your bank and really hurt your credit rating.
If you don’t intend to live in the property as your PPOR, you’re better off saving up $7,000 instead. Much less risk, and builds good saving habits.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi spi, welcome to the forum.
Are you actually asking a question, or just introducing yourself?
Anyway, all the best.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi smartmoney, when you say “FHOG”, I presume you don’t actually mean the first home owner’s grant? That’s a completely different thing from stamp duty (sorry to anyone who gets annoyed at me pointing out the obvious).
On stamp duty, you’ll need to find out what the transitional provisions are. It’s likely to be either the date the contract was made, or the date of settlement. I suspect it’ll be the date the contract was made. Pisces has sound advice, though – call the Queensland office of state revenue, and get the story straight from them.
E
DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hey SIS – good on you! And thanks for sharing your inspirational life story.
Sometimes, getting set back in life actually gives you the opportunity to build your financial foundations, because then you won’t be distracted by trying to climb to corporate ladder or getting along in your mundane job.
All the best, and don’t forget the One Minute Millionaire principle!
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hi guys,
Like many things in life, if it’s good, nobody notices, and if it’s bad, everyone has a whack at you.
How you establish a “good” credit history is the same. For example, by having a credit card for 5 years, without any defaults recorded on your credit report, gives you a “good” credit history. It shows the bank that you’ve been using your credit for a while and appear to be paying off your liabilities in full.
The same goes for personal and other loans.
Someone correct me if I’m wrong, but that’s my understanding.
Cheers
EDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
I used to have a 15k limit on my card (if I remember correctly), but halved that because it was looking really bad on my investment property loan applications. That was a long time ago, but I don’t miss the higher limit at all.
I’m quite happy with a lower limit – keeps me away from impulse spending.
E
DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
Hey SIS,
What’s the minimum income level you need before you qualify for the CBA plat? That’s usually a good indicator of whether it’s a marketing thing or whether it’s a “true” plat. If it’s a marketing thing, the service levels, and maybe even the benefits, will probably drop off in a few years time, when lots of people switch from gold to plat.
E
DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
In WA, there’s a conessional rate of stamp duty rebate for home buyers (not just your first home). If you’re a first home buyer, you may also be eligible for a $500 rebate (not to be confused with the Federal Government’s $7,000 first home owner’s grant).
There’s also a concessional rate of stamp duty on mortgages for home buyers.
Given that stamp duty is one of the biggest (if not the biggest) revenue raisers for State governments, I wouldn’t hold my breath on any abolition of stamp duty, or significant reduction, unless it’s replaced by another revenue source.
Cheers
Elysium-MDIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…
