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- Originally posted by trajik:
No problem Andrew, just draw up an agreement with your wife to lend her 50% of the loan from her, so that way you practically have the complete loan. Your wife has an interest expense to the bank but and equal amount of interest income from you. The ATO have accepted that a husband and wife may enter into a joint loan agreement even though only one party has the investment income.
trajik
Just to clarify, you would be only referring to tax savings in claiming interest here? This would not help with Capital Gains Tax, asset protection or estate planning issues would it? (I am not an accountant). Thanks
Terryw
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sounds like a structural problem. Have a reread of the contracts regarding the guarantees and contact the company.
Terryw
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What about a depreciation schedule?
Terryw
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I think it may be too late. If you have exchanged contracts and the trust does not exist, then you may have a problem – better check with a solicitor.
If ok, you may need to get the loan to be redone. The title to the property will be in the name of the Trustee, but the loan needs to be in the name of the unit holder. The bank will also require a copy of the trust deed so they can have it reveiwed too. The loan shouldn’t be too much of a problem to change, but they may want to charge you a reword fee if documents have to be prepared again.
Who will the trustee be and who is your lender?
Terryw
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Sorry, that was a joke.
Are there many other blocks for sale int he same area? Maybe you could offer the agents an incentive, eg. double their commission if they sell it for a certain price.
You could also Put the price up a bit and then offer to pay the purchaser’s stamp duty or offer to lend the deposit etc.
Terryw
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Dom
You seem to want to not go through a broker for some reason.
There are a few banks that do not require valuations on properties under a certain value and a certain LVR – sometimes 80%.
Other lenders just require a kerbside valuation.
But it all depends on the location/postcode, the amount, the LVR, the lender, whether it is a purchase or refinance and if a purchase whether there is a real estate agent involved (they are wary of people rorting things).
Terryw
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Try giving it a fresh coat of paint.
Terryw
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Do you have a loan on the land? If so, holding the land till next April will result in you having to pay 5 months of interest – have you factored this into your Calcs?
And do you think you will be able to sell for more in April?
I suppose you also have to factor in the interest saved by plonking the money off the loan on your unit in Sydney.
Terryw
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I am no accountant, but believe this is possible. You have to be careful though. The ATO has been looking at these sorts of arrangements and can disallow them if they think you have entered the scheme with the dominant reason to save tax. Ways to make it stronger include:
– Doing it for asset protection reasons
– The trust holding other assets
– Renting it to another family member (someone unrelated to the trust)But if you do this thing to watch out for include:
– Losing the CGT free status of your home
– Land tax on your home
– Paying extra tax on the rent you pay your trust when the property becomes +ve geared
– Extra accounting expenses
– Trusts cannot distribute losses (so you may need a hybrid trust).Better talk to a very good accountant.
Terryw
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I have all my loans as variable – except one which I did 4 years ago. With fixed rates, you lose flexibility. Exit fees can be high, making it harder to increase loans or move banks. Also the rates are slightly higher than what you would be paying under variable.
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well, if those properties are worth $1,700,000 and say they are growing at 5%, that works out to be $85,000 pa. If they take a small portion of this each year and factor in the added interest they will have to repay, they should be able to keep their properties. They may even be able to retire now.
Steve Mcknight doesn’t like this idea and argues against it in the sample chapter of his new book being sent around.
At least with this idea, they can keep the properties longer, and may be able to supplement the equity with additional income from other areas, hobbies maybe. But you do have to be careful, only borrow a small percentage of the growth, and after it happens.
Terryw
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Originally posted by vyaw2003:Hello,
This website is all about houses. which return 6-8%, after rates and body corporates. Just covering repayments.
What about these investment bonds i see in the Sydney morning herald. $5,000 minimim 1 year minimum returning 9-12%. Anyone used any of these? Which are the best? Are they no risk (eg. it is just a bank account and at the end i get my money back no matter what). Not associated to the high risk that the invester will use with my money on shares.
Any feedback on this would be good. And i am sorry that this may not be the correct spot for this post….[biggrin]These are not the same thing as bank accounts. The rates are higher than banks because of the risks involved.
I think it was last year that one of these sorts of companies went belly up – many lost their life savings.
Another downside is that you cannot borrow to fund these like you can with property, so this will limit your return as well.
Terryw
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Hi Graham
Which state do you operate in?
Terryw
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You would have to calculate what you could get in rent for your place and the tax savings. If you are not going to be saving much, then it is probably not worth disrupting your family.
You can still live in the place and use the equity to invest further.
Terryw
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I have the exact same problem, and having done anything about it because of the hassle involved. Court order for $1600 in my case.
You need to do all the checks you can think of, including:
– ring references listed on their application for tenancy
– ring last known employer, relatives
– whitepages
– electoral roll
– internet searchSometimes physically turning up at their work/relatives homes can lead somewhere – as they often lie about them not being there anymore.
Terryw
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But how many are leaving per week?
Terryw
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Originally posted by Mortgage Hunter:Originally posted by JohnSmith:Good advice there from Simon
just add the preferred way is to say the money within a mortgage, as it is more tax effective.
Regards
JohnInspired Finance
(02) 9944 7776John,
My preferred way is to save it within an offset account. Should the funds be used for personal expenditure – and lets face it, sometimes good intentions fail when something needs to be paid for, or even used in an emergency for travel, medical expenses or the like.
Should funds be drawn from a mortgage for personal expenses then this % of the mortgage will never be deductible.
this is easily avoided by using an offset account and the tax effect is identical.
Simon Macks
Residential and Commercial Finance Broker
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0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
The only problem with paying deposit for the IP with funds from the offset account is that the interest on the PPOR goes up (as the balance of the offset reduces), and this is not claimable.
What some people do is get IO loans with offsets, then save as much as they can in the offset. When they buy something, they take the money from the offset and pay it into the loan, then make a withdrawal, thus reducing non deductible debt and increasing the amount of interest they can claim.
Terryw
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Originally posted by foundation:In 20 years the debt will be negligible.A pretty big assumption there. On what do you base this claim?
18 years ago I bought a property for $52K.I see you’ve answered my question. You’re expecting the past to mirror the future…
Fair enough, so we can expect interest rates over the coming 30 years to mirror interest rates over the past 30 years then? An average of around 10.4%?Imagine if I still owed that much against a property worth $300K+ .If you still owed that much, you would have paid out ~$100,000 in interest on the loan. Subtract 30% from the $300,000 because we are still floating near the top of a 30% overvaluation bubble, leaves $200,000 worth of house with $152k in debt and interest, maybe $8 grand in rates & insurance. Now subtract sales costs…
The picture isn’t as rosy as often painted.
$35k in profit for $160k invested over 18 years is exceedingly poor. Term deposits would yield a far higher return.
Remember, over the long term, interest costs EXCEED capital gains.
Of the two options, choose investment. An average IP only needs to appreciate by ~2%pa to pull a profit, a PPOR needs ~5%.
Cheers, F. [cowboy2]
Foundation, you forgot to include rent in your calculations.
I tend to agree with what your saying however. There is no guarantee that things will be the same as before, especially with rates low. But we can only make calculated guesses – we have to put our money somewhere.
Terryw
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Many loans are able to do this, or better – capitalise all the interest up to the limit.
Terryw
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Estate Agents (General, Accounts and Audit) Regulations 1997
http://www.austlii.edu.au/au/legis/vic/consol_act/eaa1980145/
See Part IV, s 58 onwards
Terryw
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