Rob,

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SOME QUESTIONS: the satellite town – how can I find out if this is a good place or not?

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Look at the population to begin with. If it is more than 15,000 then it is likely to be a good possibility. Is it contracting or expanding?

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– most properties that can be +ve are older – what are the maintance on such places? I was assuming 20% of rent – good idea or not???

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You need to determine this on a case by case basis. Ask the builder when you get an inspection.

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doubts!!! How to get rid of them? Coffee/drugs/stress pills?

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It comes with confidence… but there will always be fear because you are moving out of a comfort zone. Growing pains is not just a phrase… it’s a reality.

Have you seen the movie Galaxy Quest? “Never Give Up, Never Surrender!” []

Congrats on beginning your search, you are among the 1% of people doing something!

Have an absolutely outstanding day.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Hello Chris,

Thanks for your post and welcome to the PropertyInvesting.com forum.

To answer your questions:

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1) How do banks view wrapping?

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My experience is that if you walk in off the street then banks are not fond of wraps. If you have a contact though who is keen to write business and is further up the internal tree, then the outcome is much more favourable.

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2) Is there a standard contract for wrapping?

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No. There is no standard contract as such since the details on every property differ in price and as such terms. However there is standard (or at least similar) wording that is used for wraps. This is the detail that I include in the special conditions of my wrap contracts.

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3)If you wrap a house who has ownership of the property for purposes of building depreciation during the mortgage?

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This is an interesting question and not one I have thought about before… my first thought is your wrap client as you essentially transfer risks and benefits of ownership to them. But if the deal fell over, then working through this issue could be complicated. Let me think about it some more and I’ll get back to you.

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4) Is there someone who is expert at wrapping in Sydney that we can contact?

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Yes. Rick Otton is a considered a wrap expert based out of New South Wales. For more info, visit his website .

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

I think your lender has it wrong. There is no rent. It is just like if Wizard had a loan on the property and then the client went to the NAB to be refinanced.

The NAB would look at “equity” in house, together with the normal loan approval checklist before saying yes or no.

Usually the loan will more than pay you out provided there has been sufficient growth in equity.

Let’s take an example:

You buy $60,000
You Sell $80,000 (less $10k deposit)
Loan $70,000

After five years let’s say the loan is now $64,000.

During the same period the property has risen to $100,000. The client (at worst) goes to a no doc loan who will lend 70%.

Under this model, the client pays you out ($64k) and pockets some cash after closing costs ($4 to 5k).

This, from my experience is what has happened to date.

The problem though… is what happens in a falling property market????

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Matt,

Was I was outlining was that someone who is classed as trading in property does not pay capital gains tax.

This would be disadvantageous as no 50% CGT discount would apply to traders. Instead all of the gain is treated as assessable income.

The ‘trade up’ provisions of US law re: property do not apply in Australia.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Greetings!

A BIG Friday hello and welcome to the community []

Let’s see if I can help…

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My questions are, are there any loopholes on avoiding capital gains?

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Well, first up, let me point out that you only pay CGT if you sell. I’d imagine that given the equity you have in your home and investment property you’d find securing finance a bit easier – especially on a no-doc or other non-conforming loan. Give Andrew Burgan (mortgage broker – Wizard) a call on 03 9870 4451.

If you feel you need to sell then I think that there’s a great chance you’ll pay less tax than you think.

Here’s why…

I imagine that you own the property in joint names or at least in one name as an individual (as opposed to a company).

This being the case you will qualify for a 50% exemption.

Ideally the would have the following effect:

Capital Gain: $100,000

Split 50:50 means you have a taxable capital gain of $50,000.

Then you both qualify for a 50% capital gains discount meaning that you will be paying tax on only $25,000 (each) of it.

I’m not sure how much other income you have, but, assuming you have none, tax on $25,000 is $3,880.

So, on a gain of $100,000 you might be able to knock it down to $3,880 * 2 (people) = $7,760.

If you own it in one name then you might be able to gift half of it to the other person… this is a bit tricky though and you should seek accounting advice.

Another option is to move into your investment property as your home, live in it for six months or so, and then sell it under the principal place of residence CHT exemption and pay no tax! Once again, seek proper accounting advice before doing anything.

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Someone told me that if you are a property developer ie renovator you can roll over the capital gains on to the next property when you sell, have you heard of this?

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No. In fact if you trade in property then there is no CGT, instead you pay income on your profits as if it were say a salary or wage.

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I have phoned the ato to ask them how long one has to live in a house in order to avoid paying cgt, but they gave me no clear answer.

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Because there is no clear answer to give. But you must be able to prove that it was your home and that you lived there.

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How is one suppose to get anywhere in life if the ato sucks all your profits like a vacuum cleaner?

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Here Here!

Bye

Steve McKnight

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Remember that success comes from doing things differently.
**********

Hi,

Thanks for your feedback.

This site was created in the hope that messages such as this one would be written.

Investing is not an outcome, it’s a journey.

When you feel like you are beginning to be re-educated and having your boundaries challenged then you are on the verge of a significant breakthrough.

It’s just an issue of when you find this site. For instance, I received a call today from someone who has just purchased a property for $237k that rents for $270 per week.

The caller wanted some advice about how to build wealth through property.

It’s a pity they didn’t call before buying.

Karen, work through your finance issue by talking it over with them directly. It doesn’t matter really what I think… I’m not the finance company.

One word of advice though… you are in control, always!

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

You should get legal opinion on this, but I’d imagine the offer is no unless you have a prospectus.

There are laws that regulate how public offers are made and I’d imagine that putting an offer in a paper certainly be classified as a public offer.

This raises a very interetsing issue. I have noticed that John Burley and Dolf De Roos have been looking for investing partners lately. They are doing this via their websites.

It seems to me that as self-proclaimed sophisticated investors they are on very dangerous ground. After the High Court ruling re: Joe Gutnick saying that it is where the online information is read (as opposed to published) that counts, making offers to Australian investors from overseas locations will still need to conform with Australian Law.

I haven’t seen anyone talking about a prospectus confirming to Corporations Law requirements in the offers.

Only please send money to be part of a massive jackpot of property profits.

Hmmmmm – steady as she goes is my advice.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

We are currently looking at upgrading the forum to a newer version and I’ll investigate the possibility of your recommendation being implemented.

Thanks,

Steve McKnight

P.S. Anyone else with a wish-list for the forum, please post it here!

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Remember that success comes from doing things differently.
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Hi Karen,

Thanks for your post and welcome to the PropertyInvesting.com community.

Sometimes there is no need to sell, since that will trigger sale costs (such as real estate agents fees) and also capital gains tax will be payable.

An alternative idea may be to renovate (spend the $4k) and then seek to have the property revalued and refinaced.

You can then access your equity to go and do the next deal and so on. Be sure not to spend your redrawn equity on lifestyle expenses though as you will lose the interest deductibility on the portion you spend.

As for your sons in the property… sounds like you might have confused a lifestyle (family) decision for an investing decision. You’ll probably only make that mistake once []

Thanks again for your post and don’t be shy about making more in the future.

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Sooshie,

Love the story… a free wealth assessment in the comfort of your own home.

Did you ask how many properties he owned?

Thanks for the contribution! Great post.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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