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February 7, 2004 - 6:12 am

Sorry James. I don’t know the answer to that question. I expect that if you’re selling the property, you’d pass it on to the buyer (ie the buyer pays you the extra 10% for GST, which you then pay to the ATO); and if you’re buying the property, the GST component simply forms part of your cost base.

There is a way for developers to make some type of election which turns the sale of the new properties into a GST-free (or maybe just input-taxed) supply. It’s on the tip of my tongue, but I can’t remember what it’s called.

Cheers
Elysium-M

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February 7, 2004 - 5:31 am

GST is payable on commercial properties, but if you structure the deal so that the property is sold as a going concern, you won’t have to pay GST.

In order to qualify the property as a going concern, it needs to be sold with everything necessary to conduct the enterprise. You also need specific wording in your contract. Go to the ATO website and look for the GST Ruling on going concerns.

Cheers
Elysium-M

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February 4, 2004 - 12:40 pm

I once heard a self-styled millionaire saying that you’re not a real millionaire unless you have at least $1 million in cash and other highly liquid assets, in addition to any other investments you might have.

Cheers
Eylsium-M

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February 2, 2004 - 12:58 pm

As Simon says, and last time I checked, interest rates are the same for owner occupied and investment properties.

Stamp duty on loan docs and land transfers is the same regardless of whether the property is owner occupied.

Insurance may be different. But why would the bank care as long as you’ve got a valid policy?

The only thing I can think of which is different is land tax. You don’t pay land tax on your owner occupied IP (as long as it’s in your name). However, declaring a place as your PPOR and not living in it to avoid paying land tax is fraudulent.

Cheers
Elysium-M

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February 2, 2004 - 5:35 am

Hi Billfromoz,

I know that this is more an opinionated post than something that fits into the “Help Needed” category, but I just wanted to ask some questions.

The impression I get from your post is that it’s aimed at particular forumites. Why is it a problem not to like what somebody else is saying?

Isn’t the notion of a free society meant to give you the freedom to hold or reject a certain view as you see fit?

For example, Bec absolutely hates wrapping, and while I hold such a more moderate (I admit some would say sitting on the fence) view on the issue (which has been previously aired in the Wraps forum) and don’t agree with her, I respect her right to hold those views.

My approach in these cases is simply to accept that others may have drastically different views from me. I don’t have to like or accept those views, and in certain cases don’t like people who hold certain views, but I respect their right to hold those views, as long as those views are not likely to harm my personal interests (such as promoting defamatory statements about me).

Like kay, I’m going to keep on living my life the way I want to. My friends accept this. If anyone who doesn’t like it, too bad (If I print the two-word phrase which is what I really mean for those last two words, it’ll get edited).

Of course, you don’t have to accept my view. But why can’t we have mutual respect for one another?

Cheers
Elysium-M

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February 1, 2004 - 5:53 am

To expand on pelican’s post – as a general rule, overseas borrowing commitments should be met out of income in the same currency. So if your mortgage payments are in Japanese yen, and your rental income is in Aussie dollars, then you’ve got a mismatch which exposes you to exchange rate risk.

The big companies mitigate this risk by entering into some form of hedging arrangement (usually with or through a bank) to “swap” their income stream into Japanese yen, or their mortgage obligations into Aussie dollars. It’s a sophisticated form of insurance, and there’ll obviously be a premium. But at least you’ve capped your risk. Unfortunately, this product is unlikely to be available to you unless you’re working off a few million dollars in cashflow.

Think this is silly? You only have to dig up stories of all those poor sods back in the eighties who borrowed low interest money from Lichtenstein and other fashionably exotic places, and literally lost their homes (or came close to it) when the exchange rates turned against them in a big way.

Cheers
Elysium-M

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February 1, 2004 - 3:34 am

Hi Chan

Sorry to hear about your lost money.

I personally feel that what happened to you is wrong. Firstly, how in the blue heck can you assess a property without knowing its location and physically inspecting it? Even Steve McK says you need to inspect before you sign.

Secondly, I don’t like this contract by ambush routine. Carparks used to try this on years ago, by having the terms and conditions on a board located near the exit. The courts have said that these terms and conditions are unenforceable, because when you entered the carpark and took your parking ticket, you weren’t given the choice to decide whether or not to accept those terms and drive away to look for another carpark. Why do you think there are so many boards with fine print nowadays when you drive up to the carpark entrance?

Sounds like DD are running a real estate business and collecting a fee from doing so. When I last checked, you needed a licence for that, regardless of where in Australia you’re doing it…

Cheers
Elysium-M

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February 1, 2004 - 3:19 am

Hi kay,

There’re never enough girls who deserve champagne!

richmond made a very good point earlier in this thread. To build on that point, you also never know when you might no longer be able to afford enjoying yourself. So you gotta enjoy life (in a financially responsible manner, of course).

Cheers
Elysium-M

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February 1, 2004 - 2:58 am

Also, check the rental pages in the newspaper. If you read it often enough, that should give you a rough idea of the range of acceptable rent prices for the relevant area.

Cheers
Elysium-M

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January 31, 2004 - 1:10 pm

Thanks crj

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January 31, 2004 - 1:07 pm

Rancid,

It doesn’t sound like you’ve got the mindset that would allow you to be comfortable with property investing on the scale advocated by Steve (or even on a smaller scale, say a handful of rental properties in addition to your home). Don’t take this the wrong way – I don’t intend my comment to be derogatory or condescending.

Reading your post reminds me of myself before I read my first Kiyosaki book years ago.

I’m guessing you probably also invest in shares, because the liquidity (issues of price aside) doesn’t lock you into a significant long term financial commitment (not that there’s anything wrong with that – I invest quite a bit in shares too).

I’m sure you know quite well that the potential for financial gain comes with risks. There’s no such thing as a risk-free technique that will make you rich (although if you’re rich, some extremely low-risk high-gain techniques will become available).

When you spend money on lunches with clients, aren’t you still taking the risk that even after spending that money and time on them, they’ll go elsewhere, in which event your money would have been wasted?

And whether or not you want to go full-bottle into frugal living with every cent going into your investment properties, or keep it more moderate and still enjoy a good lifestyle, is entirely your choice. If I stopped smoking my cuban cigars, drinking 25 year old single malts and buying champagne for the girls, I’m sure I could easily afford to pay the mortgage on another investment property (not even taking into account the rent income), but that’s no fun for me.

I don’t think anyone can convince you, just in a short (or, for that matter, long) post on a forum board, to buy the book. You have to decide for yourself to take the risk and buy the book.

I encourage you to take the risk and spend the money to buy Steve’s book (or another book for that matter – I’d recommend any of Kiyosaki’s earlier books). You’re taking the risk that it’s a dud, and your money is wasted. Maybe you’re also taking the risk that you don’t like what the book you’re reading is telling you, in which case you decide it’s a dud anyway. Maybe it’ll be because you are not prepared to take the risk of stepping outside your comfort zone and implementing the strategies and techniques. Is that really a big deal if any of that happens? You simply lose the $30 of risk money (or you could sell it on ebay for maybe $10 to mitigate your loss), swear at me for wasting your time and money, and move on with life.

Cheers
Elysium-M

P.S. – many forumites actually know how it feels to have rent stop flowing in from more than one property, and having to cop the mortgage payments entirely out of your own pocket. But that’s a risk you take too.

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January 31, 2004 - 12:40 pm

Sorry wrappack – I disagree with you on the caveat suggestion.

DO NOT slap caveats on their properties unless you get court judgment entered in your favour (in which case it’ll be a writ of fi fa or something similar that your solicitor can arrange to be slapped on the properties).

You don’t have any direct interest in those properties, and are therefore not entitled to put any caveats on at this time.

If you do so, I can guarantee that they’ll be entitled to sue you for any loss or damage caused to them due to the caveats. Don’t think it sounds fair? That’s how it works, otherwise everyone will be threatening to slap caveats around left right and centre to recover debts.

If your solicitor says that you can slap on a caveat up front, try to get an unqualified written opinion confirming this, so that you’ve got someone to help you pay the damages bill when you get sued. I wouldn’t hold my breath, though – you’re not going to get it.

I agree with markpatrick – it’s not blackmail at all, simply a debt recovery exercise. What’s wrong with telling them to honour their contractual obligations, or else you’ll sue them?

Cheers
Elysium-M

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January 31, 2004 - 2:22 am

Hi crj,

How did you work out the price at which each party was bought out? Did you get a formal valuation done (or just an appraisal by an R/E agent)? Or did you just do your own research to come up with a back of the envelope figure? Or was there a formula?

Also, was there some argy bargy about the dollar amount before you agreed on the price?

I’m always interested to find out the different ways in which people deal with the most sensitive of things – price.

Cheers
Elysium-M

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January 28, 2004 - 7:32 pm

Well, you know the old saying about doing unto others…

If I was selling a house, I personally would have no problems with potential purchasers asking why I wanted to sell. That’s only fair, since I ask the question myself. Obviously, if the reason would put me at a bargaining disadvantage, I’d specifically instruct the agent not to tell.

But aren’t people entitled to ask anyway? Whether or not they’re entitled to receive an answer is a different issue (and I believe that the answer to that question is “no”). I’m not offended if I get told that it’s none of my business, although I might get a bit put out if I was being talked down to.

That said, why is it bad to ask the question? Does it offend your sensibilities of what is ethical? If so, how can you say it’s not ethical? And (forgive me for being blunt with this one) who are you to say that it’s wrong?

Please note – I’m not trying to be argumentative here. I’m just trying to understand whether:

1. other forumites do ask this question on a regular basis; and

2. if not, why (and how can you justify to yourself, since it’s your personal financial interests that are at stake) do you accept the risk that the seller’s reason for selling the property could be prejudicial to the value of the property?

Cheers
Elysium-M

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January 27, 2004 - 6:13 pm

Actually, the identity of the trustee of the trust is irrelevant. If the tenant sues the trustee, in its capacity as trustee of the trust, and you change the trustee, the tenant simply goes after the new trustee (sorry melbear – it’s not that easy to defeat a lawsuit []).

mooda – there’re 3 different kinds of “asset protection” you seem to be talking about.

One is where things don’t work out between you and your mate or your girlfriend. That’s not so much asset protection, but simply structuring the arrangement so that you can cleanly and easily walk away from it if you needed to do so (ie by separating the jointly owned asset from your own personal asset, and by making it easy for either party to buy the other one out).

The second is where some liability arises in relation to the property, such as where the tenant sues to owner of the property (which will be the trustee in its capacity as trustee of the trust). That protects you from having any personal liability to the tenant (unless by your own personal actions, you caused the problem). In this case, your personal assets are safe, but the property isn’t, since it’s owned by the trust.

The third is where you get into serious financial strife (eg you max out your credit cards and can’t pay it off), independently of the property. The unit trust structure doesn’t protect you or your property. Your personal assets are exposed to your personal creditors. However, one of your personal assets is your units in the unit trust. If the creditors seize the units, they will control the unit trust! A discretionary trust will provide better protection in this event, because you don’t own any interest in the trust – you’re merely one of a number of potential beneficiaries.

Unfortunately, it’s not easy to get all the benefits. There are pros and cons to every structure. Maybe investigate setting up a discretionary family trust, which owns the units in the unit trust. Make sure you are the trustee of the family trust, and that you control who gets to be the trustee. Of course, this is more complicated, and will cost more money to set up. It may also make it more expensive (in bank fees) to borrow money. There’s always a price to pay or a trade-off for extra bells and whistles.

You should talk to your accountant and a lawyer to make sure that the things you want to achieve are achievable in the structure that you ultimately set up. All we can do on this forum is to give you tips on what to look into.

Cheers
Elysium-M

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January 27, 2004 - 5:56 pm

On the other hand, though, the right (and it is a right) to claim interest and compensation equal to 10% of the purchase price is clearly set out in the contract. This is not a new thing, but something that’s been in standard sale contracts for years.

When the purchasers signed the contract, they agreed to the deal on that basis. And a deal is a deal, isn’t it?

Another way to look at it is that it’s the agreed contractual price for getting out of the sale.

So why should they not be made to honour their contractual obligation?

And if it’s a clear breach of the contract, how can they defend it? Ask your solicitor to seek summary judgment.

If they own a few houses, they’re not going to be foolish enough to get involved in an expensive court battle, which will not only cost a lot of money, but will also hurt their credit rating.

Cheers
Elysium-M

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January 27, 2004 - 5:52 pm

Phew – there’s some divergence of views here.

I totally respect the vendor’s right of privacy. I think it’s legitimate for a vendor to take the view that the reason he or she is selling is none of my business.

However, the flip-side is that as a purchaser, I’m not doing myself any favours if I fail to ask that question.

For example, if I find out that the vendor is doing a buy-renovate-sell strategy with the property, then I’d pay a lot more attention to the quality of the renovations, to make sure that it hasn’t been slapped together in a hurry by a DIY amateur (of course, there are people who renovate their own property and do a top quality job, but I’d rather be safe than reckless)

There is the example that mini gave, which might give you the upper hand in negotiating a price. Then it really comes down to your own character, I think. Do I still offer a fair (maybe slightly below market value) price, so that everyone gets a win? Or do I try to screw down the price to the bare minimum (eg $5,000 more than what the vendor owes to the bank)?

And I think that in other cases, knowing the vendor’s reason for selling may give me more flexibility in formulating my offer, or help me avoid making unworkable offers. On one occasion, the real estate agent told me that the vendor was a really old lady who wanted to cash out her assets so that she could give the money to her grandkids before she moved on. Because there was no mortgage on the property, I was going to ask for 5 year vendor finance terms. But once I knew that, there was no point in wasting my time with that idea.

Anyway, I think it depends on which side of the fence you’re sitting on at that point in time. If I was a vendor, and I thought that my reason for selling would help me get the price I wanted, I’d definitely instruct my agent to tell prospective buyers. When I first inspected one house (that I know own), I felt that I might be paying a small premium if I offered the asking price. Then the real estate agent told me that the husband wanted to sell so that they could buy a bigger home, but the wife had a sentimental attachment and was opposed to the sale. I knew that if I tried to bargain down the price, the wife was probably going to use that as a reason to fight the sale. In any event, it was still a decent cashflow deal even at the asking price, so I didn’t waste time with haggling over the price and offered them what they wanted. By the way, I don’t know if they told the agent to tell me about the domestic drama, but it certainly worked in getting them their asking price!

Cheers
Elysium-M

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January 22, 2004 - 4:38 am

It sounds like a very clever arrangement.

However, I worry that if the “lender” is able to have recourse to your super money, or if the money lent to you actually comes out of your super fund, the arrangement would seem to be illegal.

So I’m interested in learning how you can get around the fairly strict restrictions on use of super fund money to make this work.

Cheers
Elysium-M

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January 21, 2004 - 5:44 am

picjal,

What if you default and aren’t able to repay the loan? Does the super company have the right to take the money out of your super?

Also, where are the loan funds coming from? Is it the super company’s own funds, or is it actually coming out of your super fund?

Cheers
Elysium-M

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January 20, 2004 - 6:42 am

Microsoft Money is only about $50. Cheaper than many investment seminars…

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