Hi,

This might be a tough ask!  International tax is a tricky area, and if you want UK expertise then perhaps your best bet is one of the larger accounting firms. You may pay a lot, but if it helps fill in the gaps then it will be worth it.

He's not in Perth, but my accountant Mark Unwin has knowledge of the tax law as it pertains to offshore investing (for Aussie tax residents). He has needed to become keenly aware of these issues from my own OS investing. His contact number is 03 9854 6317

Cheers,

Hi,

Hope it all goes well with Nick.

At the moment I don't get to make it up to the NT, only as far as Brisbane, which I know is still a long, long way away.

Cheers,

– Steve

Hi Ray83,

Welcome to the forum and thanks for making a post.

Before thinking about another property, I'd encourage you to get a better handle on how your apartment is travelling. That is, your ability to handle more property will depend on how well you management your money and investment, and it seems like that could be something you could sharpen a little.

For example, $260 p/w represents nearly 25% of your pre-tax salary. Could you afford another IP at the same negative return?

Specifically, I would:

1. Contact a r/e agent to get an appraisal of the value
2. Understand my loan repayment obligations. Perhaps you could refinance for a cheaper rate and save some money
3. Create a plan, and then relate your current property and also future purchases to it

In terms of a 2nd, 3rd etc IP, it seems you have a long-term growth asset, so now you may like to do a shorter term quick-cash deal or else look for an investment that delivers a cashflow return.

All the best,

Hi,

Welcome to the forum! You might be our youngest member… well done!

Some additional thoughts for you:

1. Play Kiyosaki's games: Cashflow & Cashflow For Kids

2. Read investment and money related books – become a regular at your local library. Kiyosaki's Rich Dad Poor Dad and Clason's Richest Man In Babylon are a great places to start.

3. Start understanding how money works, and the best way to do this is to get a part-time job and gain an appreciation of how hard it is to get ahead by working. That way you'll become hungry for what investing can do for you.

4. If you want to come to seminars, write to those running them explaining your age, enthusiasm and situation. You might be able to swing a free or cheap ticket. It's worth a try.

5. Keep asking questions! It's the best way to learn.

All the best,

Hi,

Remember that LMI is insurance for the bank against your repayment default. Even though you pay it, you don't get the benefit. My understanding is that even if you default and the bank claims on LMI, your credit rating will remain trashed.

There aren't too many mortgage insurers, and hence the market isn't very competitive. One of the ways the previous government looked at reducing loan costs was to contemplate opening up the LMI market to more players.  I haven't heard of any developments as to whether or not this ever progressed beyond being a draft policy.

Cheers,

Hi,

ROI is popular among accountants, but I feel it is less useful for property as it does not fully price in borrowing capacity.

For example, let's look at this example:

Purchase price $200k
Cash deposit: 20%
Closing costs: $5% of purchase price; paid in cash
Annual rent: $12,000
Annual cash costs: $15,200 (includes $2,000 of capital loan repayments)
Depreciation: $1,500

The ROI would be:

Rent: $12,000
– Cash costs: $15,200
+ Capital loan pmts: $2,000
– Depreciation: $1,500
= Loss: $2,700

Cost: $200,000
+ Closing costs: $10,000
=Total cost: $210,000

ROI= -2,700 / 210,000
ROI = -1.29%

However, a cash-on-cash return would be:

Rent: 12,000
– Cash costs: $15,200
= Cash loss: $3,200

Deposit Paid: $40,000
+ Closing costs: $10,000
= Cash Down: $50,000

CoCR= -3,200 / 50,000
CoCR= -6.4%

Do you see how ROI uses asset value (not taking into account % of cost borrowed), whereas CoCR does factor in the amount of cash contributed?

Having said that, if you contribute low cash then the CoCR can be skewed.

As I said, I prefer CoCR for property deals, particularly positive cashflow calcs.

If you have trouble crunching numbers then get along to the upcoming conference. There will be plenty of help on offer.

Cheers,

Hi,

The cash-on-cash return formula is as follows:

(cash received – cash paid) / cash down

where:

cash received: rental and other income
cash paid: all cash costs, including capital loan repayments and excluding depreciation
cash down: deposit paid + purchase costs + finance costs etc + initial repairs

A quick example for you to try:

$200,000 property bought with a 20% cash deposit.
Allow 5% for closing costs (paid cash)
Annual rent is $15,150.
Rental Management 7% of rent collected
Rates: $1,500
Interest: 8.5% interest only
Other cash costs: $2,500 per annum
Depreciation: $3,100 per annum

Based on the above, what would be the cash-on-cash return?

Also, if ROI is net profit / asset value, what would be the ROI based on above?

Cheers,

**Sigh**

What spend time answering posts where people show no respect and demand action?  Yeah, that's how I'll pick posts to reply to!

There's no point convincing people that things can and are done, when they already believe that it can't.

The simple fact of the matter is that I never borrowed more than 80% of the purchase price.
 
How? Well I didn't refinance equity. And I didn't use unethical methods to obtain finance.

However I did:

* Sell property to convert unrealised to realised profits, and reinvest the difference
* Use a standard accounting structure to protect my assets
* Fully disclose all details to financiers

Enough said.

Hi,

I don't think I'm talking complete crap, as the book is based on my real life examples.

However, as you are studying the latest info and world trends, I'd love to hear your thoughts on how you think "studying perfect equilibrium and arbritrage etc etc" relates to the property market.

And while I agree that the property boom of 2000 – 2003 caused the 11 Second Solution Formula to become more difficult to apply, I don't agree that Book 1 is totally out of date. I continue to buy positive cashflow properties and invest in the same way as described in the book. Having said that, perhaps it is time for an update.

Bear in mind though, I also released the sequel in 2006 which was designed to answer your questions. There is a chapter in that book on how to find positive cashflow properties.

Finally, positive cashflow after depreciation is not what I call positive cashflow; it is positive gearing. Perhaps this is a finer point, but the assumption is that you have other income to soak up the depreciation tax shield. If you don't then the property will be negative cashflow as the depreciation created loss must be carried forward.

Margaret's books are well written and a good source of info on the topic of positive gearing.

Regards,

Hi guys,

We are out of stock, and I am in the process of rewriting it as I type. There have been quite a few changes to tax laws of late, least of which are the new tax rates.

This has had an impact on investors, although many remain unaware.

For example, the changes to marginal tax thresholds have made negative gearing less tax effective.  For instance, if you made a $1,000 loss and could get a deduction at 48.5%, then your tax 'benefit' was $485. Assuming that you now are on a 30% average tax rate (due to the thresholds increasing), then your tax 'benefit' is now only $300.

This is just one of the many things I need to update Wealth Guardian for.

The product is due to be re-released, bigger and better, in late March.

Hope this has helped shed some light on the matter.

Happy New Year!

All the best,