Forum Replies Created
Thanks for your input Freckle – I never really looked at this from a business perspective.
If I were to setup a business it’d probably have to be a Property Management Business that focuses on maximizing landlord’s rent, and then getting a commission from that rather than renting it myself first, and then sub-leasing. However, before setting up a business I think it might be best for me to be able to prove that I can succeed with this idea on my own with a few properties.
Since I am looking to make baby steps first with one property at a time, is it best for me to just rent out a property under my name and then sub-lease it, or should I be setting up a separate entity right from the beginning (and if so, would that entity be allowed to rent out a residential property, and have utility bills under its name?)
Thanks for the input
So the best way to deal with this is to have a clause in the contract that states that the landlord will pay up to 137KL per year, and any excess is to be paid by the tenant?
Main issue with lowering rent is it will lower the value of the property
This is the formula provided in some of Steve's seminars:
Price = Annual Rent / Yield
Instead of offering a lower rent, it was suggested to offer a rent free period
Residential Tenancies Act 1997 – SECT 64
Tenant must not install fixtures etc. without consent
64. Tenant must not install fixtures etc. without consent
(1) A tenant must not, without the landlord's consent-
(a) install any fixtures on the rented premises; or
(b) make any alteration, renovation or addition to the rented premises.
(2) Before a tenancy agreement terminates, a tenant who has installed fixtures
on or renovated, altered or added to the rented premises (whether or not with
the landlord's written consent) must-
(a) restore the premises to the condition they were in immediately before
the installation, renovation or addition, fair wear and tear excepted;
(b) pay the landlord an amount equal to the reasonable cost of restoring
the premises to that condition.
(3) Subsection (2) does not apply if-
(a) the tenancy agreement otherwise provides; or
(b) the landlord and the tenant otherwise agree.
Click Here for more details!
Main issue I can see is how 'Capital Gains Tax' will be calculated when it comes time to selling
Usually with PPR you can claim 50% CGT if you have held the property for at least 1 year
However, renting out spare bedrooms, may mean that the property is no longer considered 100% PPR
And this could mean you may not be able to claim 50% CGT on the full value of the property
Best to speak to an accountant about this, and about other issues like whether you can claim certain costs and depreciation
I'm salary sacrificing into my super right now; 15% tax is much better than paying 37% tax
No lost opportunity cost either as SMSF provides the freedom for me to invest in Steve's USA Commercial Property Fund as well as in Silver
Probably just need to setup my account to allow purchase of global shares and I'll be very happy
When it comes to renting out a property it is essential to get it right from the start
Once a tenant moves into a property it can be quite difficult to evict them as the Residential Tenancy Act works more in the favor of tenantsbullet46 wrote:
Do I need to get a contract/agreement done up to cover myself?
Definitely! Without one it will be very difficult to establish or enforce your rights.bullet46 wrote:
Who pays for water/electricity?
The tenant, as they are the one using the water and electricity (But landlord has to pay council rates)bullet46 wrote:
What dangers haven't I considered?
As stated earlier, you need to ensure you get the right tenant from the start
You want a tenant that…
- Will pay the rent on time
- That will be considerate of neighbors
- And that that will look after a property
Hope that helps,
I recall Steve mentioning he was able to market blocks of land in Blackburn prior to subdivision being complete in the past
I think he had some sort of 'subject to' clause
Maybe you could discuss this with a real estate agent?
It depends on what property you are looking at buying.
Residential properties usually require you to be able to service the loan, and thus will place more emphasis on your income and expenses. Some things to note:
- If the entity you are purchasing it is not making sufficient income, you may be able to go as guarantor
- Some lenders will consider rent as income, but only to a certain extent E.g. 80%
- Buying a property outright and then refinancing it to buy other properties will incur financing costs and reduce cashflow, and will not necessarily increase your chances of having a loan approved in comparison to having cash as deposit
With commercial properties, more emphasis is placed on the the income and expenses of the property itself, rather than the individual purchasing it, but in general you need a much higher deposit i.e. 20-30% and interest rates can be higher
- If you had $300,000 in Cash, you could use this as a 20% deposit to buy a $1.5m apartment complex, provided it had good cashflow, and you had the supporting financial documents
Haha… this is hilarious…
I wonder what's coming up next…
Going to try to get my hands on a copy next week
Thanks for all your input and for clarifying the finance query
Are there any 'Subject to' clauses in the contract?
Agree with Perry there
The AUS$ is not increasing in value or purchasing power, but relative to the US$ appears to be strengthening due to the US$ weakening
I believe the concept many need to grasp is that all fiat currencies are designed to lose purchasing power over time, but the rate at which these currencies depreciate will vary
Have recently setup a SMSF, and received ATO document NAT 11032 'Running a Self-Managed Super Fund' and it clearly outlines what the role and responsibilities are as a trustee. Here are some of the warnings mentioned on Page 15, which I found funny
- If your SMS buys art, generally you cannot use it privately
- Don't Buy Wine as an SMSF investment and then drink it
- Don't buy jewellery as an SMSF investment and then wear it
From what I've read so far on these forums, you should be able to continue to claim the usual deductions associated with owning an Investment Property, provided you charge yourself market rent for use of the property and declare this as income.
What does the rental agreement state?
Have you issued a breach notice yet?
This is the email I received on 27/11/12
Thanks again for your interest in the Passive Income (USA Commercial Property) Fund.
I'm writing with a quick reminder about this Friday's (30th November) 5pm cut off. This is the deadline you need to meet to completed your Fund paperwork and / or payment and still receive the 50% contribution fee discount.
After this date you can still complete your pending application provided I receive the missing information and / or payment by 5pm on 31 December 2012. Please note though, the normal application fee of 3.96% (GST included) applies to applications completed after the 30th November.
Please contact me if you have any questions.
– Steve McKnight"
Cut off date for 50% contribution discount was yesterday.
At this stage you should still be able to invest in the USA Commercial Property Fund but probably won't get the contribution discount.