Hi,
I'm new to this and don't really know my options. I'm 28 years old and just have bought my first investment property, I have a mortgage on it for about $240, 000. I've lived in it for 6 months so i could get the first home owners grant and now i'm looking to rent it out. My minimum monthly repayments are $1500 but since i've been living there i've made extra repayments of $2500 so $4000 a month all up. Now that im moving out and renting the place for about $1000 a month can i still make extra repayments without affecting by tax benefits? last financial year i earned about $100, 000 and paid alot of tax, so i bought an investment property to off set it.
So you bought a property that will lose money so you don't have to pay so much tax? I know lots of people do it. It's called negative gearing but it's not for me. I like making money.
The more you pay off the less tax you claim as a tax offset, but the more you pay off the less interest you pay.
I'm hoping you are paying the extra money into an offset account and not directly off the loan. By having the offset account the extra money you pay is yours to withdraw as you see fit. Down the track you may want that money to buy another IP or even a home to live in. You can take the money from the offset without losing tax deductions. If you pull it out of the loan to by a home you lose the tax deductions.
Catalyst wrote:So you bought a property that will lose money so you don't have to pay so much tax? I know lots of people do it. It's called negative gearing but it's not for me. I like making money.The more you pay off the less tax you claim as a tax offset, but the more you pay off the less interest you pay.
I'm hoping you are paying the extra money into an offset account and not directly off the loan. By having the offset account the extra money you pay is yours to withdraw as you see fit. Down the track you may want that money to buy another IP or even a home to live in. You can take the money from the offset without losing tax deductions. If you pull it out of the loan to by a home you lose the tax deductions.
Agree totally,
also you will find that if you owe 240k and getting $250 a week in rent you will probably only get back 3-4k from that property as its not far off been positive geared. with that in mind your property then becomes pretty much neutral so you don't really saving anything as it initially costs you money to hold, and this is what you want, neutral or positve geared!!
always remember though the more cashflow you have, the better your serviceability…
coalstar wrote:Catalyst wrote:So you bought a property that will lose money so you don't have to pay so much tax? I know lots of people do it. It's called negative gearing but it's not for me. I like making money.The more you pay off the less tax you claim as a tax offset, but the more you pay off the less interest you pay.
I'm hoping you are paying the extra money into an offset account and not directly off the loan. By having the offset account the extra money you pay is yours to withdraw as you see fit. Down the track you may want that money to buy another IP or even a home to live in. You can take the money from the offset without losing tax deductions. If you pull it out of the loan to by a home you lose the tax deductions.
Agree totally,
also you will find that if you owe 240k and getting $250 a week in rent you will probably only get back 3-4k from that property as its not far off been positive geared. with that in mind your property then becomes pretty much neutral so you don't really saving anything as it initially costs you money to hold, and this is what you want, neutral or positve geared!!
always remember though the more cashflow you have, the better your serviceability…
This is a good point. My property in Canberra has a loan of about $230,000 but my rent is $400 pw. Does that mean I’m close to positively geared? Is it likely that I’m still negative gearing now, but after tax and depreciation, I’ll be in a positive cash flow position? I’ve heard this is the most desirable, as you don’t pay tax on any profits, but still make a profit at tax time…
I’m also nearing 100k per annum which is why I want to purchase another investment property.
bobbifisha wrote:Hi,I'm new to this and don't really know my options. I'm 28 years old and just have bought my first investment property, I have a mortgage on it for about $240, 000. I've lived in it for 6 months so i could get the first home owners grant and now i'm looking to rent it out. My minimum monthly repayments are $1500 but since i've been living there i've made extra repayments of $2500 so $4000 a month all up. Now that im moving out and renting the place for about $1000 a month can i still make extra repayments without affecting by tax benefits? last financial year i earned about $100, 000 and paid alot of tax, so i bought an investment property to off set it.
You can still make extra repayments into the loan but best to make the extra repayments into an offset account with the loan set up as interest only as opposed to principle and interest. That way, if you buy another ppor in the future you can transfer these funds to your ppor loan which has the benefit of
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Sorry, using an iPhone and his done before I’d finished.
Added benefit of increasing deductble debt whilst lowering non deductible debt.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
thanks guys, been very helpful much appriciated
matthewp wrote:This is a good point. My property in Canberra has a loan of about $230,000 but my rent is $400 pw. Does that mean I'm close to positively geared? Is it likely that I'm still negative gearing now, but after tax and depreciation, I'll be in a positive cash flow position? I've heard this is the most desirable, as you don't pay tax on any profits, but still make a profit at tax time… I'm also nearing 100k per annum which is why I want to purchase another investment property.Hi Matthew,
Based on numbers provided.
Annual rent is 52 X $400 = $20,800
Loan Interest @ 6.8% (estimating) = $15,600
Property Managerment Fees @10% (estimation) = $2080
Rates (Estimation Water & Council) = $3000Gives you a surplus of $80/annum.
Maintenance, strata costs (if relevant) woould tip you into negative cashflow territory.
Depreciation, if relevant, would provide tax relief and create positive cashflow (after tax) situation)
In effect you have an asset costing you very little irresepctive of tax savings.
Another property should be affordable if that is your plan.
Hi Derek
Thanks a lot for your reply, makes sense. I can depreciate a lot of items, given it’s a 2 year old property. I also pay strata fees, but I don’t pay for property management fees as I look after it myself.
I’m actively looking for another investment property given the current one is almost paying for itself.
Cheers
MattHi Matt
Good for you on already looking for the next IP.
Just make sure you structure your lending correctly to avoid cross collateralising your securities as that will certainly slow your investment journey down.
Why dont you contact Jamie M who has already commented on your earlier post and get him to steer you in the right direction.
Cost you nothing and you get professional help and advice from someone who is doing it himself and assisting others at the same time.
Cheers
Yours in Financ
Richard Taylor | Australia's leading private lender
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