Viewing 16 posts - 1 through 16 (of 16 total)
  • Profile photo of Anthony ZanattaAnthony Zanatta
    Participant
    @azanatta91
    Join Date: 2016
    Post Count: 25

    Hey guys,

    I’m in the process of putting together a business plan for my property investment strategy and I’m looking at rentvesting. Spanner in the works, I haven’t spoken to anybody who actually does it – is anybody on these forums rentvesting at the moment?

    Bit of background, I’ve taken a massive hit to the pride and moved back in with the parents in the middle of nowhere for a year or so to be able to save a deposit for my first property. I’ve got myself 3 jobs and it’s safe to say that saving’s going well. By the time I buy my first property I will have saved enough for the 20% deposit in addition to all of the associated costs involved in buying. Before moving out I will have 3 months worth of running costs saved up as a cash buffer (I don’t like risk). I plan on financing the house with an interest only loan to keep monthly payments down and intend on buying and holding.

    So the questions:

    1) I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

    2) When I’m back in Sydney renting I’ll only be saving around $120-$150 a week, which is nothing in property terms. Although I COULD save more I’ve got some serious travelling (and smashed av, thanks Bernard Salt) to get through which I’ve put off for way too long. Realistically speaking, will I be able to duplicate my portfolio based off capital growth of a single property alone?? Before anyone suggests it, I don’t want to invest at below 80% LVR as that’s one of my safeguards I’ve put in place to combat possible depreciation.

    Any advice/tips/links to reading material on rentvesting in general would also be greatly appreciated!

    Thank you

    Anthony

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    1) That is 100% NOT tax deductible! Where did you read that?
    2) I was in a similar position savings wise when I first started investing, I was a pizza delivery driver and managed to get 14 properties. The key is to save hard and invest harder, make sure the investment property is below value, create sweat equity and have strong cash flow.

    I’d look at taking advantage of LMI. Less money down and what you would have used as the deposit put into an offset account against the loan. Makes it easier to save for the 2nd, 3rd etc deposits.

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me | Phone Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of Anthony ZanattaAnthony Zanatta
    Participant
    @azanatta91
    Join Date: 2016
    Post Count: 25

    I was told that by some so-called “property investors” – it sounded suss to me and my research backed that up, I just wanted to be 100% sure before I ignored that advice and moved on, so thanks for clearing that one up :)

    That’s great to hear that it is doable Tony, I’m aiming to buy a positive cash flow property under market value and use capital growth to fund the next purchase. I’m a little up in the air about LMI at the moment, I can definitely see the many benefits, however having a 20% equity buffer if the property were to depreciate would help me sleep a little better at night. Happy to be convinced otherwise!!

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Hi Anthony,

    Hmm, this has the aroma of similarity about it :-

    1) I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

    This smacks a little bit of a plan where someone with their own home chooses to go and rent instead. Though the rent they pay is NOT Tax Deductible, the rent they then receive on their PPOR (now an investment Property) IS. It works out that the new IP is effectively “paying” their own rent (depending on any mortgage payments due on the PPOR – if there is cash left over after paying any mortgage….).

    Further, depending on available Equity in their PPOR, they might also be able to borrow to buy ANOTHER IP as well. Thus the beginnings of a portfolio. And, if the rent they pay is minimal (i.e. moving in with Mum and Dad for a bit) then this can only accelerate their way along the path.

    Now, I have never heard of the term “Rentvesting” – but the above sounds like it could be that.

    I did know one or two people who NEVER owned a home – instead they always rented, but had a portfolio of properties and shares. They believed it was WAY cheaper than owning their own home. Could THAT be rentvesting?

    One final thought – could it be that you were reading an American book when you found the term, and the strategy? Their laws are way different in many ways – could having one’s Personal rent being a Tax deduction be one of these differences?

    Benny

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    I’m a little up in the air about LMI at the moment, I can definitely see the many benefits, however having a 20% equity buffer if the property were to depreciate would help me sleep a little better at night. Happy to be convinced otherwise!!

    Did you catch this post, Anthony?
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4996934

    That goes into the whys and wherefores of LMI and should hold some positive reasons for using LMI. Consider that you can choose to hold any of the Deposit you DIDN’T have to pay in an Offset account as your SAN (Sleep At Night) security blanket.

    e.g. Don’t pay a 20% Deposit ($80k on a $400k purchase). Instead, pay $40k plus maybe $5k of LMI (a guess) – this leaves $35k that can sit in your Offset. The interest on it should more than cover the interest on the $5k of LMI, AND you have funds available if the bad times come (or another bargain……)

    Benny

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    I’m a little up in the air about LMI at the moment, I can definitely see the many benefits, however having a 20% equity buffer if the property were to depreciate would help me sleep a little better at night. Happy to be convinced otherwise!!

    Did you catch this post, Anthony?https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4996934
    That goes into the whys and wherefores of LMI and should hold some positive reasons for using LMI. Consider that you can choose to hold any of the Deposit you DIDN’T have to pay in an Offset account as your SAN (Sleep At Night) security blanket.
    e.g. Don’t pay a 20% Deposit ($80k on a $400k purchase). Instead, pay $40k plus maybe $5k of LMI (a guess) – this leaves $35k that can sit in your Offset. The interest on it should more than cover the interest on the $5k of LMI, AND you have funds available if the bad times come (or another bargain……)
    Benny

    Benny has nailed it! The money is still there for emergencies/next deposit in the offset reducing interest plus the LMI is deductible.

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me | Phone Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of Anthony ZanattaAnthony Zanatta
    Participant
    @azanatta91
    Join Date: 2016
    Post Count: 25

    Hey Benny, I thought I’d read every single post on these forums but looks like I’d missed one! I’m really liking that idea, having the extra money in the offset account if things do go pear shaped would be a great peace of mind for me.

    And scarily enough I was told that idea by a friend of a friend at a dinner – they were going to try and claim their own rent too – not sure what dodgy stuff they’re up to!

    Thank you to everyone for your contributions, I’ve definitely got the strategy starting to form up nicely now. Lots of research to go!

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    And scarily enough I was told that idea by a friend of a friend at a dinner – they were going to try and claim their own rent too – not sure what dodgy stuff they’re up to!

    Thinking more about this, when I worked in Sydney (my home in Brisbane) I had joined up with an employment agency who found that I could effectively claim LAHA (Living Away from Home Allowance) as my home was 1000Km away. In my case, I found their way of doing things had me paying less Tax, but also it meant my Taxable Income was greatly reduced – meaning I couldn’t borrow as easily for IP’s. Technically my living costs were being treated as an expense allowance rather than a deduction.

    I didn’t stay with them long – the negatives far outweighed the positives for me. Perhaps that IS a legal way to save on rent though?

    Benny

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Hi Tony,
    Hmm, your story sounds mighty like another bloke featured elsewhere in here :-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977

    Was your story similar? It sounds like it might have been. Where were you investing? I’d love to read your story…. Have you posted it somewhere?

    And Anthony,
    In case you didn’t find that one either, do follow through the rest of the thread called “The big picture for new readers especially” – there are LOTS of different subjects covered along with this bloke, and LMI. Check out the whole lot – I’m sure you will find it worthwhile.

    Benny

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    Hi Tony, Hmm, your story sounds mighty like another bloke featured elsewhere in here :-https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977
    Was your story similar? It sounds like it might have been. Where were you investing? I’d love to read your story…. Have you posted it somewhere?

    Hi Benny yeah similar story just had a strong savings plan and started buying under value properties, renovating and renting so strong cash flow and equity to just keeping pushing on. I’ve invested mainly in Sydney, Regional NSW and SA at the moment.

    My latest media was
    http://www.dailymail.co.uk/news/article-3832798/Sydney-investor-Tony-Fleming-owns-14-properties-working-Domino-s-Pizza-ten-years.html

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me | Phone Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Hi Tony,
    Thanks for sharing that. Wow, I couldn’t believe the number of jealous souls who took the time to comment. So many posts that made NO sense at all – but then, I can only guess they have never researched property investing to know better.

    e.g. one of them commented something like “Humph – I bet he is only paying off Principal and NOT paying any Interest !!” That gave me a good chuckle.

    Well done you !!! ;)

    Benny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    1) I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

    Its a Porky Pie!
    Or perhaps a half truth. Rent would only be deductible if it relates to the production of assessable income – such as operating a business from home (not a home office) and then it would need to be apportioned.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Anthony ZanattaAnthony Zanatta
    Participant
    @azanatta91
    Join Date: 2016
    Post Count: 25

    Hey Benny, I’ve taken a look over the link you provided, few more goodies in there, thanks for that. I’ve got the beginnings of a plan forming up nicely :)

    Just read your news article Tony, wow. Talk about great inspiration that it’s doable for someone like me who’s just starting out, good on you mate!

    Terry my 9-5 job as a consultant is actually a work from home job so I think I’ve just about maxed out as many deductions as possible on that front :P The way this bloke was talking, he seemed to think that he could claim his rental expenses based purely off the fact that he owned investment properties.

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    Thanks guys. Yeah the comments are an eye opener about how people perceive property investors or people trying to better their lives.

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me | Phone Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    I haven’t spoken to anybody who actually does it – is anybody on these forums rentvesting at the moment?

    Not at the moment, no, but that’s how we started. We couldn’t buy where we wanted to live so we invested elsewhere while we were renting.

    I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

    Not all of it, as far as I know but generally speaking I would take accounting advice from my accountant, not guests at dinner parties or even forums.

    2) Realistically speaking, will I be able to duplicate my portfolio based off capital growth of a single property alone??

    Doubt you could find positively geared property that will come with a big capital growth but you could create that.

    Before anyone suggests it, I don’t want to invest at below 80% LVR as that’s one of my safeguards I’ve put in place to combat possible depreciation.

    Why would anyone suggest that?

    If at all, investors may suggest to look at over 80%, not under.

    Are you worried that property price will go down in value and you’ll be in negative equity for a while? Say that happens. If you don’t sell, no sweat. unless you’ll miss your mortgage payments, you probably won’t hear anything from the lender 😇

    Hope this helps?

    Cheers,
    Ethan

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of Anthony ZanattaAnthony Zanatta
    Participant
    @azanatta91
    Join Date: 2016
    Post Count: 25

    Hey Ethan, thanks for your input mate. Definitely going to speak to an accountant, I’m just trying to figure out a game plan so I have a rough idea of what I’m after before speaking to accountants/brokers/solicitors etc.

    Yep I meant over 80%, shouldn’t have been writing questions late at night after reading a stack of books! That’s exactly the scenario that has me worried. In the few books I’ve read they’re all very vocal about the fact that banks will come knocking asking for more money, I’d like to be prepared for that eventuality.

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