Investment property

[Beerfish]

I don't know the streets very well but the IGA block all bar one building is owned by one consortium but under a few names. The Monadelphous building is another foot holding.

Moreau Mews is apparently the street to be on as this is going to be the "mall"

I'm talking about the other end of that block towards Freo. Opposite Maccas.

 

[alexkidd16]

Stamp duty wrecks it, must be the biggest deal breaker for so many people.

 

[Sports Trader]

I don't mind the idea of building/buying a house to rent out and sell at a later date to make money.

The fact that our tax system encourages it is just ridiculous, though.

Nothing wrong with investment properties. The issue in Australia is that house prices have been heading skywards for 1/4 of a century. Hence, every man and his dog views property as an easy way to make money. Buy now and sell later for guaranteed profit.

However, many people aren't investing, they are speculating, which is just another word for gambling.

Not that I have a problem with gambling, I do my fair share of that.

Many investors are mums and dads that seem to think an investment property is a sure-fire way of making money. Greed can get in the way of common-sense. If you want to invest in property, at the moment you are doing nothing but gambling. I love gambling, so that isnt necessarily a bad thing, but as a gambler, I know that sooner or later I will lose. I also know that you only bet with what you can afford to lose. Many mum and dad investors forget the rules of the game and will get burnt in the next few years.

I cant see property prices rising at all, and even if they do, they wont stay there.

What is driving the rise in house prices? It isn't rising wages thats for sure. It's cheap credit and the fear of missing out.

In saying all this, perhaps what Australia needs is a house price crash and a recession. Only then could important reforms be passed? Thats another thread.

All in all, Id be avoiding buying any investment property at the moment in major cities. But if you want to gamble, enjoy the rush.

 

[Power Raid]

Nothing wrong with investment properties. The issue in Australia is that house prices have been heading skywards for 1/4 of a century. Hence, every man and his dog views property as an easy way to make money. Buy now and sell later for guaranteed profit.

However, many people aren't investing, they are speculating, which is just another word for gambling.

Not that I have a problem with gambling, I do my fair share of that.

Many investors are mums and dads that seem to think an investment property is a sure-fire way of making money. Greed can get in the way of common-sense. If you want to invest in property, at the moment you are doing nothing but gambling. I love gambling, so that isnt necessarily a bad thing, but as a gambler, I know that sooner or later I will lose. I also know that you only bet with what you can afford to lose. Many mum and dad investors forget the rules of the game and will get burnt in the next few years.

I cant see property prices rising at all, and even if they do, they wont stay there.

What is driving the rise in house prices? It isn't rising wages thats for sure. It's cheap credit and the fear of missing out.

In saying all this, perhaps what Australia needs is a house price crash and a recession. Only then could important reforms be passed? Thats another thread.

All in all, Id be avoiding buying any investment property at the moment in major cities. But if you want to gamble, enjoy the rush.

Agree

The only way properties can continue going up is the devaluing of our currency (meaning the price goes up but the real value does not). Sure we could go up or down in the short term but I don't see property being as rosey as it has been in the medium term.

In fact if we were to fix our budget and fix our affordability we should be looking at introducing a "real" property tax.

 

[Wickzki]

Hi all

I did not want to start my own thread to ask the convoluted question that I need to ask - with a bit of a story behind it - as it is somewhat related to this.

My partner, a chronic asthma sufferer, has been advised by her doctor that due to the air quality here she should move away from Melbourne. When we've gone to Queensland in the winter she does so much better - which the doctor said was expected. The combination of the winter weather and her own asthma issues cause her massive grief.

She has a mortgage on the property that we currently live in. As many young-ish couples do while having a mortgage we tend to live close to paycheck to paycheck. Not quite but close enough. As such we don't have enough combined savings to invest outright into another home in QLD. That would necessitate selling her property and then reinvesting it into property in QLD.

We had been considering renting this property out and renting property in QLD. If we rented this property out I'd expect her to get about $350 per week from doing so. If we rented up in QLD for a little bit less (looking at properties at the $300-320ish mark) how much would we be losing financially from doing a deal like that? Is a wiser choice selling and buying up there or what? It depends on the financial aspects of such a deal.

The reason why I ask is that her company is in discussions with her about transfering to Brisbane. I believe that it would be the same role at the same wage, etc. The move does not effect me one way or the other (I work online and can do that there as well as here). So we may have roughly a month to six weeks to decide upon the move and obviously even less to make it happen after we decide.

 

[Beerfish]

We had been considering renting this property out and renting property in QLD. If we rented this property out I'd expect her to get about $350 per week from doing so. If we rented up in QLD for a little bit less (looking at properties at the $300-320ish mark) how much would we be losing financially from doing a deal like that? Is a wiser choice selling and buying up there or what? It depends on the financial aspects of such a deal.

I would want to hold onto that property if I possibly could and rent in QLD. Some things you would need to consider are management fees for the Melbourne property (around 10% but it's worth shopping around) and council and water rates which you still need to pay.

 

[Wickzki]

I would want to hold onto that property if I possibly could and rent in QLD. Some things you would need to consider are management fees for the Melbourne property (around 10% but it's worth shopping around) and council and water rates which you still need to pay.

Thanks mate. That's pretty much what I was thinking. Thankfully she's (it's her mortgage) been putting inexcess of $100 over and beyond the minimum repayments (fortnightly). If that's the worst thing we need to rejig then we can do it quite comfortably.

 

[Beerfish]

Thanks mate. That's pretty much what I was thinking. Thankfully she's (it's her mortgage) been putting inexcess of $100 over and beyond the minimum repayments. If that's the worst thing we need to rejig then we can do it quite comfortably.

If you're ahead in your mortgage payments that gives you some breathing space for things like vacancy periods and the added costs associated with commencing your own tenancy in QLD such as bond/pet pond?/x amount of rent in advance etc. You can always put a halt on your mortgage payments for a certain period if you need to (depending how far ahead you are of course) until everything has settled down. You'd also want to look into landlord insurance for the Melbourne property.

 

[RandB]

Thanks mate. That's pretty much what I was thinking. Thankfully she's (it's her mortgage) been putting inexcess of $100 over and beyond the minimum repayments (fortnightly). If that's the worst thing we need to rejig then we can do it quite comfortably.

Tell her to go to the ATO website to get a comprehensive idea of what deductions she can claim for a rental property. If she makes a loss obviously she can offset it against her other income.

As she has previously lived in the Melbourne property and you are both renting in Brisbane it means that she can treat the Melbourne residence as "main residence for tax purposes" for up to 6 years ie if she sells it within 6 years it's exempt from capital gains tax. If she ends up buying a second property a choice will need to be made as you can only have 1 main residence for tax purposes.

It's important to claim all deductions possible during the rental phase if it's unlikely you will have a CGT event with the Melbourne property.

Edit: here's a link to the ATO rental properties guide, I'm sure an updated 2015 version will be out soon.

 

[Scotland]

As she has previously lived in the Melbourne property and you are both renting in Brisbane it means that she can treat the Melbourne residence as "main residence for tax purposes" for up to 6 years ie if she sells it within 6 years it's exempt from capital gain.

Would she still be able to claim the interest on the loan as a deduction?

 

[RandB]

Would she still be able to claim the interest on the loan as a deduction?

Yes, it's a rental property and depending on how long ago the finance was set up (if less than 5 yrs ago) some of the borrowing costs.

 

[Scotland]

Yes, it's a rental property and depending on how long ago the finance was set up (if less than 5 yrs ago) some of the borrowing costs.

That is absurd double dipping. Our tax system is a joke.

 

[Collingwoodity]

That is absurd double dipping. Our tax system is a joke.

Are you a property owner mate?

 

[Scotland]

Are you a property owner mate?

Yep.

 

[Collingwoodity]

Yep.

Do you have a home and an investment property?


Sent from my iPhone using Tapatalk

 

[Power Raid]

I find it interesting the debate seems to be dominated by tax laws. Although I agree negative gearing should be reviewed, the reality is any changes here are likely to be unfair and just a side show to the real problem.

we have to ask ourselves why land ownership is so important. why not move to a very "leftist" position like London where you lease property from the crown rather than own it? it is too late to do that due to the cost and other barriers but it could be created by a proper functioning annual property tax. A proper functioning annual tax would also promote redevelopment and better housing product.

we also have to ask ourselves why we have so many inefficiencies such as transaction property taxes.

we also have to ask ourselves why we have stopped nation building and focused on pork barrelling our capitals.

imagine having your cake and eating it too........cheaper housing, better housing, less disparity between "ownership" (of the master lease) and renters.

 

[Scotland]

Do you have a home and an investment property?

Sent from my iPhone using Tapatalk

Nope, just place of residence.

 

[suetonius]

Hi all,

Just a question about investment property.

My in laws are coming to Australia from overseas soon and looking for a place to stay. We are looking at getting a small flat for an investment and renting it to them at an affordable price. If my wife takes up a mortgage and rents the property out to them at a market rate that is lower than the costs of the property's upkeep/mortgage interest, can she claim on negative gearing while renting to family?

 

[Scotland]

As long as all the income and expenses are declared to the ATO there should be no issue.

 

[Tassieboy]

Agree

The only way properties can continue going up is the devaluing of our currency (meaning the price goes up but the real value does not). Sure we could go up or down in the short term but I don't see property being as rosey as it has been in the medium term.

In fact if we were to fix our budget and fix our affordability we should be looking at introducing a "real" property tax.

Piet Eichholtz did an interesting study on property prices. He found properties in the Netherlands actually grew at quite a high rate of 0.2% above inflation between 1628 and 1973. The is about consistent with the historical prices in Europe. During some 50 year periods there was no adjusted growth at all.

In the past 24 years in Australia, capital gain on property has increased an average of 3.6% each year above inflation. Some people incorrectly assume this is normal. To give an indication how unsustainable this is, in about 350 years, a house worth $500,000 today would be $100 billion inflation adjusted. Obviously insane considering that is beyond the net worth of all current people. There will be a regression towards the mean, and whilst dollar fluctuations will have some very minor influence, people will be shocked when the property bubble ends.

 

[radiojake]

It's patently stupid how expensive some properties are...

there was an auction around the corner from my house the other weekend - in Fitzroy. 72 square metre 'cottage' without a functioning kitchen went for $750,000 - That's over $10,000 a square metre..

stupid stupid stupid...

 

[Wickzki]

There's some really knowledgeable people in this thread and my partner is in need of advice - before we go and seek a professional - We just do not know what the best course of action is and neither of us knows what to expect in the way of professional advice. I know that she is not even close to foreclosing but that slowly we are dwindling more and more finances away and living very slightly above our budget (more and more onto credit cards, etc.).

As some of you may know my partner was given a month's notice earlier this year to move from Melbourne to Brisbane. The move was both health related - her allergies and asthma are much better here than in Melbourne - and job growth related (for her career rather than mine). Anyways, she held a mortgage in Melbourne on the property that we were living in. Simple 3 bedroom unit in the western suburbs. When we agreed to move she put it on the market with a realtor that she felt that she could trust and we took out a rental property in Brisbane.

The realtor she entrusted her house to did not do a good job of picking renters. Things have been broken, etc, etc. (I know the tax implications on those things). But then the lead renter moved out because the co-signee moved his partner (the lead renter's daughter) into the property without telling the realtors until they paid part of the rent. Now they're behind on rent (which up until this last time we did not know was a regular thing by days almost every month). We've given them the 120 days notice (or the realtor should have as that was the request that my partner made).

So with 120 days notice we're not sure what the best course of action would be.

1. To change realtors and entrust the property into the hands of someone perhaps better at finding more reliable renters
2. Selling the property and investing a deposit into a property here in Brisbane
3. Selling the property and continuing to rent here in Brisbane.

A sticking point is that it is an emotional investment. The only way that she got the money for the initial deposit is through the inheritance received from her grandmother's passing. As such she has already said that if she takes the third option that it will feel as though she has failed her.

What I do know is that paying that mortgage fortnightly and hoping for the best once a month isn't helping us at all. We're barely making ends meet.

What would you do?

 

[Lyyynnnchy]

There's some really knowledgeable people in this thread and my partner is in need of advice - before we go and seek a professional - We just do not know what the best course of action is and neither of us knows what to expect in the way of professional advice. I know that she is not even close to foreclosing but that slowly we are dwindling more and more finances away and living very slightly above our budget (more and more onto credit cards, etc.).

As some of you may know my partner was given a month's notice earlier this year to move from Melbourne to Brisbane. The move was both health related - her allergies and asthma are much better here than in Melbourne - and job growth related (for her career rather than mine). Anyways, she held a mortgage in Melbourne on the property that we were living in. Simple 3 bedroom unit in the western suburbs. When we agreed to move she put it on the market with a realtor that she felt that she could trust and we took out a rental property in Brisbane.

The realtor she entrusted her house to did not do a good job of picking renters. Things have been broken, etc, etc. (I know the tax implications on those things). But then the lead renter moved out because the co-signee moved his partner (the lead renter's daughter) into the property without telling the realtors until they paid part of the rent. Now they're behind on rent (which up until this last time we did not know was a regular thing by days almost every month). We've given them the 120 days notice (or the realtor should have as that was the request that my partner made).

So with 120 days notice we're not sure what the best course of action would be.

1. To change realtors and entrust the property into the hands of someone perhaps better at finding more reliable renters
2. Selling the property and investing a deposit into a property here in Brisbane
3. Selling the property and continuing to rent here in Brisbane.

A sticking point is that it is an emotional investment. The only way that she got the money for the initial deposit is through the inheritance received from her grandmother's passing. As such she has already said that if she takes the third option that it will feel as though she has failed her.

What I do know is that paying that mortgage fortnightly and hoping for the best once a month isn't helping us at all. We're barely making ends meet.

What would you do?

A few questions.

Where is the property located?
When did you buy?
What are your mortgage repayments?
What is the market rent?
Have you had a valuation done?
Did your partner live in the property?
Have either of you owned a property apart from this one?

One piece of advice is don't let emotion control your financial decisions. You have the potential to both set up your future as well as ruin it in a financial sense. To let your emotions decide what you do is setting yourself up for ruin.

Would her grandmother have wanted her to struggle through life financially?

 

[Lyyynnnchy]

There's some really knowledgeable people in this thread and my partner is in need of advice - before we go and seek a professional - We just do not know what the best course of action is and neither of us knows what to expect in the way of professional advice. I know that she is not even close to foreclosing but that slowly we are dwindling more and more finances away and living very slightly above our budget (more and more onto credit cards, etc.).

As some of you may know my partner was given a month's notice earlier this year to move from Melbourne to Brisbane. The move was both health related - her allergies and asthma are much better here than in Melbourne - and job growth related (for her career rather than mine). Anyways, she held a mortgage in Melbourne on the property that we were living in. Simple 3 bedroom unit in the western suburbs. When we agreed to move she put it on the market with a realtor that she felt that she could trust and we took out a rental property in Brisbane.

The realtor she entrusted her house to did not do a good job of picking renters. Things have been broken, etc, etc. (I know the tax implications on those things). But then the lead renter moved out because the co-signee moved his partner (the lead renter's daughter) into the property without telling the realtors until they paid part of the rent. Now they're behind on rent (which up until this last time we did not know was a regular thing by days almost every month). We've given them the 120 days notice (or the realtor should have as that was the request that my partner made).

So with 120 days notice we're not sure what the best course of action would be.

1. To change realtors and entrust the property into the hands of someone perhaps better at finding more reliable renters
2. Selling the property and investing a deposit into a property here in Brisbane
3. Selling the property and continuing to rent here in Brisbane.

A sticking point is that it is an emotional investment. The only way that she got the money for the initial deposit is through the inheritance received from her grandmother's passing. As such she has already said that if she takes the third option that it will feel as though she has failed her.

What I do know is that paying that mortgage fortnightly and hoping for the best once a month isn't helping us at all. We're barely making ends meet.

What would you do?

Sorry just saw you guys said you lived in the property.

So

You lived in the property so there shouldn't be any cgt, assuming your partner hasn't purchased another primary place of residence elsewhere.

The market is still doing ok with signs pointing to a slowdown next year. Assuming your partner purchased at least 12 months ago, she should at least break even and if longer than that, could make a healthy profit.

I would sell the Melbourne property and look to purchase something in Brisbane. Concentrating on inner south / south west near the university and/or train line and making sure you keep away from flood prone areas. Id look at purchasing a house that is in fairly poor condition however is comfortable enough for you to live in without feeling overly uncomfortable. Where you can, over the coming years put what you can in to cosmetic upgrades to boost the value of your new property and make it more comfortable to live in. Repainting, new flooring, new kitchen cabinets and bench tops etc.

Stay away from apartments in Brisbane. A huge amount finishing completion over the next few years.

If you can't afford a house in inner Brisbane, look further south between Brisbane and the Gold Coast or rent, pay off your credit cards and save.

 

[Wickzki]

A few questions.

Where is the property located? Deer Park, Victoria
When did you buy? I believe late 2009 or in 2010.
What are your mortgage repayments? She pays approx. $750 per fortnight
What is the market rent? She gets $310 per week (I believe)
Have you had a valuation done? Not Yet
Did your partner live in the property? Until June 5 this year when we moved to Brisbane
Have either of you owned a property apart from this one? No

I agree with the emotion thing - which I'm better at working through than what she is. It is entirely hers and not mine.