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March 28, 2009 - 11:56 am

I'd be very wary of using a hybrid trust as the ATO has recently clamped down on these.

   Surprised your accountant still recommends it with all the limitations the ATO are putting on  them,

   If it is cashflow neutral, I'd say you dont need a hybrid structure. Just set up an ordinary discretionary trust and have a corporate trustee if you want extra protection..
  

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March 25, 2009 - 6:09 am

If you check out the property area reports on domain .com, they will tell you what the average discounting amount is that houses actually sell for. This can be a helpful guide. Days on market also helps to find "conditioned" buyers.

   Personally, I'd offer less than what I was actually prepared to pay, so that you can eventually negotiate to meet in the middle.

      It bruises their ego a little less, and can look like you have really stretched yourself to come to a middle ground.

  At the end of the day as Shales suggests, an investment needs to be bought at a value based on your sums, NOT their asking price.  

   Only pay more than this  if you are emotionally attached to a place you actually want to live in. like a lifestyle home for you and your family.

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March 9, 2009 - 2:05 am

S.N.M.

   They used to say asbestos was totally safe in the day too, until people started dying.

  Ever watched the good asbestos teams remove the stuff, they don't stuff around.

 My point was not about Minimum government requirements, which mean jack squat. 

it was the  control measures you need to take to safely work with asbestos. 

For instance if you need a dust mask to work with the stuff, why wouldn't anyone who comes into the area after you not need the same level of protection. My opinion is that you are creating a hazard, and you should capture and remove the hazard. 
If you don't enclose the area, then how do you stop disturbed fibres contaminating that area and nearby areas??

    If anyone insists on exposing themselves and other innocent people to asbestos, I can't stop you. 

 

    

 

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March 8, 2009 - 5:04 am

Miike, You will know if you contract an asbestos disease in 15 years when it becomes terminal.

I.P.F. , you should know better than to tell someone that it "probably isn't asbestos", c'mon mate?

 The fact is that all it takes is a couple of fibres in your lungs to contract the disease.

   Similar diseases will probably soon appear for fibreglass insulation products.

   If it is tested and is asbestos, then you have two "safe" options.

1. Don't disturb it in any way.

2. Contract a professional to remove it.

   Although there is a lot of people who have had high exposure and are never affected, there are many stories of people with one off exposures that have died.

Asbestos is serious,

Minimum P.P.E. includes full body suits with asbestos rated respirators(not dust masks kids). Sealed Plastic Work Areas and exit showers in an air lock.

Anything else is a risk that you have decided to take.

[lifeXMember@lifexJoin Date: 2004Post Count: 651]

March 5, 2009 - 10:19 am

look up the PMT function in Excell. It will save a lot of effort when setting up a spreadsheet.

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February 24, 2009 - 12:08 pm

dcn,
    tax minimisation is absolutely the goal. No-one should be paying more tax then they have to, that is crazy.

   You are clever to continually question to get to the bottom of the matter. 

  CGT is a massive cost to investors and is worth investigating.

   The best approach i have come across is to amass a huge debt, incur a huge tax liability and live like a king. Just make sure you die before the banks or the ATO ask for their money back.

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February 24, 2009 - 11:59 am

I am not qualified to answer this … however.

    I understand that the CGT exemption can be applied for the period you owned the house.

  So , if you have owned it for 8 years and then rented it out for 2 years.

  You would have an exemption for approx. 80% of the capital gain you made, depending on the CPI for this period.

 

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February 22, 2009 - 12:18 am

dcn,
   Capital Gains Tax is twice as bad for company owned assets.

  If you make a Cap. Gain with your own property investmentsyou get a 50% discount if you owned them for over a year.

   If they were owned in a company you would get no discount. Paying twice as much.

  The only way to not pay any cap. gains on a   property is if it has been your principal place of residence since purchase. But if this is the case, you would never had any of the benefits of negative gearing while you acquired it.

  C.G.T liabilities are not often taken into account by the average investor while building their portfolio, often only attended to when they sell.

      It is easy to keep using equity to borrow for multiple properties, just keep an eye on your cap. gains liability as each property increases. Because you could find that if you did sell the whole lot, you may have no money left + a huge cap gains debt to gov't. 

   

    If it is owned by a Discretionary Trust you will hopefully distribute the gains amongst the beneficiaries with the lowest tax bracket to MINIMISE the tax you are required to pay. New rules make this harder with a Hybrid Trust.

   Tax AVOIDANCE, where you illegally avoid taxes that you have to pay is viewed very unfavourably by the ATO (including jail time in some cases)… it also tends to annoy investors who are paying their share of tax.

   Personally I think we pay too much tax here in Australia, it is well above the western world average. The problem with Aussies as a collective is that we just take whatever crap the gov't dishes out.

  "what can we do, it's the government. They can do whatever they want" they'll say.

     –well in France or Greece for instance, if there is unjustified tax hikes there is riots in the streets and massive action.

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February 20, 2009 - 11:12 am

I.P.

     Isn't it funny how the ATO demands money immediately when you make a profit, yet are happy to let you off for a few years when you lose.    

   And as a Victorian I also know the roughly shoved pineapple that is Land Tax. Those poor yanks…..

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February 19, 2009 - 3:10 pm

There are many ways to use equity to buy income producing products or other. You don't need to rely on the big four banks for everything.

Don't forget  you can use rental monies to pay down the debt that is created to spend on living expenses.  And then borrow deductible money to pay down the deductible interest.

   Living on equity works for as long as the capital gains exceed the money drawn down and the interest costs.

It is worth checking out just to get a good appreciation of the many tools available to an invester.

Not sure I would personally do it.

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February 19, 2009 - 2:55 pm

or the other way is to never ever sell. and then you never pay CGT in your lifetime.

Simply draw money out of the houses with more and more loans (search "living on equity")

This is a very cool theory if done with caution.

….. ideally leave the properties with huge debt and huge capital gains to your least favourite relative. HA.

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February 19, 2009 - 2:52 pm

The other way to lurk your way to capital gains joy is to rent your house out during periods when house prices are flat or falling(negative gear), and then live in your house while prices are booming.

This could be covered with a valuation each time you move in or out.

– The theory here is that the property only appreciates while it is your PPOR and therefore attracts no CGT.

– Probably check on this one though with your accountant.

…..oooooh, i hope I haven't started anything with this idea.

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February 19, 2009 - 2:45 pm

The ATO base Capital Gains/Losses on an event.

Ie: the financial year you sell an investment property triggers the Capital Gain event and must be paid that year.

  The only hope you have is that in the same financial year you make an equivalent capital loss by selling an investment that lost money.

   For instance if you lost a heap of money in the stockmarkets this year, it would be a good year to bring forward the sale of an investment property. This would result in a tax year where they may cancel each other out.

 I heard the americans pay no capital gains on the sale of their own PPORs but can still claim any house repayments as a deduction against their income… and they still crashed the system.  Go figure.

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February 19, 2009 - 2:35 pm

You only have to have the property as your place of residence (ppor) for 6 months to satisfy for FHOG..(make sure the electricity bills and gas bills are in your name – keep these.

You could buy the first property in your name now, live in it for 6 months and have your other two friends rent a room (or pay board) to you. You wouldn't have any deductions against your income for this time.

6 months later you could all move out and then turn this house into a normal rental with all the associated deductions and negative gearing benefits.

At this point , your next friend could buy a house and make it his ppor, then you return the favour by renting from him for 6 months.

6 months later again you could all move out and then turn his property into an investment property.

Your third friend could then buy a house and make it his PPOR, and once again you return the favour by renting from him for 6 months,

I believe the FHOG is payable from the time the contract of sale is signed(check this one!!). So in theory you could all sign contracts in the next few months and..

 simply have the first house settle soon,

the second house could settle on 6 month terms

the third house could settle in 12 months terms (you would probably need to offer a large deposit to do this)

-I think this is perfectly legal and is a great way for young people to get into the housing market, and satisfies the governments need to stimulate the economy, especially if you build new houses or buy from a developer..

– May hinge on a bit of a gentlemans agreement from all three to stick it out til the end.

*************************
plan B – buy three separate houses now and each of you live in each one separately. Then move in other mates to each spare bedroom.
****************************

Trust me, you are much better off having one complete house with only your name on it, rather than three houses with two partners.

– try and get three people to agree on every tiny little thing- oh my head hurts thinking about this.

– It is much easier to get bank finance, as you are responsible for the complete total of all three loans and probably wouldn't get serviceability approval unless all three of you have very high incomes.

– you personally only have to go through the pain of taking out one mortgage. this process drains the life out of you.

– if you get pissed off in a few months because one mate roots your girlfriend, you can simply move on with your life by moving out….. and find someone else for the room.

********************

The only time I would recommend bringing partners into a deal is if you absolutely have no other option and they bring something that you don't …. ie: they have equity and you don't.

   Even so, it needs very definate partnership agreements drawn up and you want to have a serious look at the personality of the other person. Pretty much assume they will get spiteful and take you to court to rip you off.  Then think again if you want to do a deal with this person.

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February 18, 2009 - 1:09 pm

   In Melbourne,  you have a greater appreciation for these sorts of "period originals". Especially in a lot of inner subburban areas.

  You would be crazy to knock it down.

  If it can be incorporated into the theme of the property – I'd make it a feature.

If you can't, cover it up carefully… you don't want to damage it.
    This kind of thing is the stuff that lights the hearts of melbournians and will one day be worth more than it's weight in gold..

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January 20, 2009 - 4:26 pm

i have been with ingdirect for years – I found them good.

I think they are a bigger organisation than any of the big four banks in oz (correct me if i'm wrong)

They don't overcharge their existing customers who are already in loans  in order to fund "glitzy" introductory rates on new customers (unlike other lenders)

They are conservative in who they will lend to and how much, which reduces the risk of you paying more when the number of defaults on loans on their books increase.

Very good to deal with during the loan. 

   Cheap and easy to make changes to your loan (fixing, portable etc.)

   However I do vaguely remember some early costs (approx $1.5k from memory) I was not expecting when initially taking out the loan for ING's solicitors costs (nothing to do with stamp duty or other taxes)
  which were not included in their list of fees – double check on every charge you will incur when taking out the loan , not just ING's fee list!

Stu
 

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January 9, 2009 - 11:53 am

I'd say usually a bidding war will be won by over-emotional home buyers who have fallen in love with the home and will pay well over market value to get their hearts desire.

   Investors should not ordinarily be involved in this sort of money wasting.

   The only exception is if you honestly believe the property has much more value than the bidding price  (ie: multi-unit development potential) , in which case you will have done the sums and know exactly how much profit you are going to make and set your highest bid accordingly.

  Never pay well above market price just because other suckers are…. TCB.

   …oh. and there is no law that prevents you asking…

 

  

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January 5, 2009 - 2:51 pm

Rule of thumb,

  Unless you are sworn at and chased off the property with a broom – you offered too much.

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December 4, 2008 - 11:17 am

Basically , yes.

However the kind of properties that offer rental guarantees and extra arrangements are usually in obscure locations and have other bad karma.

   Good capital gains appreciating property rarely has this type of "extra" frill thrown in.

  Property investing involves taking some risk in order to crack higher rewards.

  There are areas of Australia where the rental demand is so high tenants outbid each other to get the house…… now thats a real rental guarantee.

   Rather than overpaying on the price of a house in the middle of nowhere built on a swamp with no future 5 years + …just because of frills such as a rental guarantee.

  It is common practice for developers to throw in rental guarantees to investors for crap property … property which drops in rental return by up to 30% in 3 years or so. And guess what the value of a dirtied up house is when the rent drops by so much ……. yep a lot less.

   You would be better off evaluating an investment property on basic fundamentals.

supply and demand – now and in the future.

  Good houses in good locations with  growth prospects and fair rental returns win every time.

   If you are focusing on rent guarantees as the main issue, I think you should probably research your base strategy further.

 ….of course take my opinion with a grain of salt …. as everyone claims to be an expert and not everyone can be.

   Good luck with investing , it is exciting times.

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December 4, 2008 - 10:32 am

watch for tax implications.

if you renovate before renting, and even if you renovate during tenancies, the tax dept. consider this to be a capital expense.

which means you can't claim it as a deduction against your income or against your rent.

30 grand on a reno could probably be instead spent as deposits on 2 – 3 more properties.

or a better property.

having said that, … i have  found bargain properties with a neat 5 – 10 grand spruce up that rent very well.

good luck – regional areas have great rental yields,,,, easy to own…