[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 15, 2003 - 4:04 am

hmm in that case it makes sense to pay as little rent as possible, don’t it ? i.e. at the lowest end of the market price. This way your maximise your loss and thus tax benefit.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 15, 2003 - 4:01 am

319 yes please that would be good to get the details.

thanks
007

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 15, 2003 - 3:59 am

surely you would raise capital through eachs members own equity ? otherwise webecome more fund managers than partners

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 14, 2003 - 4:31 pm

Tas re; converting your PPOR to IP through a trust and renting it yourself.

More intriguing with each post indeed.

What if you fail to pay the rent ? could you get kicked out ? hehe ! would you loose your bond if you trashed the place ?

More seriously, what about insurance claims on accidental damage ? I guess that would be the same as a normal claim.

On another note, so effectively how I see it is that you are simply converting your PPOR into an IP and renting it back from yourself, which as you indicated you would be renting out anyway, so its a legitimate IP

I can see a potential draw back here in some situations. Say I can get $180 a week if I rent out my PPOR as an Ip to a third party. But if I rent it myself as a trust, I only pay $130 per week which is my weekly repayments on my loan.

One would clearly have to do the numbers on both scenarios. i.e. live in as a trust or rent out to third party and rent yourself.

In this situation could it be argued that the trust is not as cost effective as me renting it out. Clearly I guess that depends on then what it costs me to rent out another property to live in.

On the other hand operating as a trust could mean I can delay certain repairs that I would otherwise make if I wanted to get the $180 a week if rented to a third party.

So clearly to me it seems a trust may not always be the most cost effective solution. I would hesitate to say that a brand new IP may not always perform as well if you rented it out to yourself, as opposed to renting it out to a third party.

For one as its brand new, there are no savings to be made by delaying repairs as there is nothing to repair.

Also, as mentioned, on a brand new IP your repayments may not reflect the rent you may otherwise get from a third party. i.e. it may be much less than the rent you could get. Thus you may be getting a lower ROI unless of course you made a point of paying market price rent into your trust arrangement. But as it’s your own money, this seems hard to conceive.

Also with a trust, aren’t you being double taxed on your income with a trust? I mean I pay PAYG income tax and then use some of that income to pay rent into the trust and being trustee the rent paid by my income is also taxable ?

Much to learn.
cheers

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 14, 2003 - 3:40 pm

Gav I expect a buyers advocate could no more insulate your property selection from risk, than you studying the property sites and forums for 3 months before you dive in.

Just be sure to get an independant property professional valuation once you have done your homework and have your mind set on a property.

I used Bristow & Associates in Brisbane, about $450 but there are cheaper ones around. They do a full appraisal including rental appriasal range. I’m sure valuers exist in other states.

http://www.bristowvaluations.com/

cheers
007

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 14, 2003 - 2:12 pm

Wayne thanks. I don’t get the publication. I may talk further with about this at some stage. I am a newbie and have my hands full at present. Just settled on my secondd IP today. I may do one more unit buy before I start looking at land.

I am considering finding a partnering project with someone through acquisition of a block on land. Perferably with someone who has more experience than me. Basically a 50/50 busines arrangement on the financing and ownership side. I need to find a solution that will be closer to cash positive that is brand new on full borrowings. I’m looking to be creative.

cheers

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 14, 2003 - 1:45 pm

Steve Thanks ! That was on my mind !

Now another question. Do you or does anyone know of a good developer of Units or Town Houses on a very small scale. Say two at a time ? I had a look on the net but only found one or two possibles.

thanx

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 14, 2003 - 7:32 am

I just spoke to a real estate agent who valued my PPOR and he also suggested I rent it to myself. When I said through a trust you mean ? he said yes thats right.

So now I’m getting curious and have some questions as follows;

1. Is this just a tax dodge or something ?

2. How expensive is it to set up your PPOR as a trust and rent it from yourself.

3. What are the bennefits of this ?

thanx

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 13, 2003 - 11:31 am

How far out of brisbane does one have to go to get a positive cashflow property ? and where would you suggest looking ?

thanx

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 12, 2003 - 1:04 pm

Hmm property value / 10 to get rent ? hope this is not the only measure of cash + but granted you did mention I think for properties under $100K

Imagine a $300K property / 10 = $30,000 in rent, yipeeeeeeeeee !!

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 12, 2003 - 12:52 pm

I thought you only paid CG tax on the period in which your property was an investment property. i.e. if it was previously PPOR then that period of growth is exempt.

hey love that story about the two mates !

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 4:50 pm

Sounds like an interesting concept that could be developed further, this “Renters Equity Share” thing. Hey this could be the next big wave in property investment, enabling cash positive brand new investments. hehe ! [8D]

Say at the end of the tenants lease, the property is revalued based on average property growth rates for that area. The tenant is paid back the sum of their extra payments, plus a capital growth component consisting of their yearly extra contribution. Hmm starting to sound like some kind of property renters mini super. hehe

formula

End Lease Rebate = total yearly extra contributions plus ( total yearly extra contributions divided by the property value times property value capital growth amount. )

For Example;

Say CG = 10% on a $200K property = $20K

ELR = TYEC + ( TYEC / PV * PVCG )

say the tenant paid and extra $20 per week

END LEASE REBATE = $1040 / $200,000 * 20,000

Thus in this case End Lease Rebate = $1144

Hmmmmm Rather long winded I guess so simply add 10% to the TYEC and you get the same result

i.e. $1040 * 1.10 = $1144 doesn’t seem much but this is 10% flat rate return for simplicity.

Not much of an incentive though

[]

seriously, I doubt it would take off though.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 4:10 pm

Capital Growth, cost of owership, return on investment, tax benefits and more

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 3:28 pm

where is the best area to invest in NZ ?

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 3:21 pm

Tasman

“Last but not least, in order to move your assets into a new family trust it will trigger a capital gains tax event (as the trust is the new owner, you effectively sell your property to the trust). This can cost you in terms of stamp duty, and if you have owned the asset you want to add in to the trust for a while and there is a large capital gain – it could mean a lot of tax!”

Can you sell your property to your trust at under market value ? or even so you make a capital loss ? what capital gains tax implications could that have ?

I ‘m told stamp duty is based on fair market price.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 2:46 pm

” I believe you should use outstanding debt rather than property value, as that gives a more accurate result. Others may disagree. “

What if the outstanding debt is $10,000 ?

I mean anyone can pull simple formulas out of thin air. I just thought of one with 10 seconds.
Try dividing the property value by 1000 then multiplying by 2 that give you your rent. Hmm that gives you your 0.2% Damn I just realised thats the Eleven Second Rule reversed. hehe

More seriously, mother I suggest you utilise a decent negative gearing calculator, with forward projection capability. Also ask to view the body corporate meeting minutes for the last few years.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 2:35 pm

if you live with your defacto in a defacto relationship, then I suspect she would loose her tenant status and you would loose your landlord status. But seek tax departments opinion and I suspect they would say its a tax dodge.

Now on this trust issue what is the point of this type of trust ? Seems to me its just a way to aviod tax.

What is the moral argument for setting up a trust of this type ? if indeed there is one at all.

I would just like to know. Nothing more.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 2:10 pm

Hmm I think we should try to focus on property and related matters and not political or social commentary here. I probably should have confined the subject heading to property and stocks, but one cant aviod matters of global stability and its influence on such markets. That said, please try to stay on topic, to aviod branching down a new discussion path, possibly not for this forum.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 11, 2003 - 5:35 am

Hi David,

“Put all your eggs in one basket… and watch that basket carefully” Warren Buffet

” Hmm, I couldn’t bear to watch myself sinking in quicksand. I would prefer it be a small pot hole, on my way to the oasis.” HWD007 []

Regina that’s a great idea checking body corp minutes.

[hwd007Member@hwd007Join Date: 2002Post Count: 247]

July 10, 2003 - 4:15 pm

max sounds like its costing you money. I would sell it if I can’t get $270 min, if you can cover your holding costs for the life of the asset, with capital growth after CG tax. I would then reinvest in more conventional residential units, flats, townhouses, small developments etc.. that I expect may offer better capital growth. The high rise market is gonna be flooded and they can always build another.

Your call, in the final analysis