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Investment Advice


belfastish

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  • 4 weeks later...

Ive recently got into the mining industry in the past year earning more than i thought i ever would,mix that with living on camp with free room and food,2week on 1week off,no bills(just phone bill etc) ,no dept,i pay for rent just the week i return to perth in a house share.

Ive got a little saving but within a year im wanting to buy an investment,probably a house!!i would like to put down $60-80k deposit before i buy.

In oz i hear a lot of people who claim a lot of tax back on house investments but i dont know much about it,should i just keep saving?,buy a house and rent it out?,buy a new house to get 1st time buyers grant?,buy an old house and refurbish it on my time off?

im wanting to have my house paided off within 10-15 years to avoid massive interest.

Perth is now turning into a mining town and house prices are rising so im also thinking of buying in north brisbane and renting it out but traveling to brisbane to sort it all out may be a hassle.

Im also interested in trying something different shares etc but again clueless!!

any advice /experiences/things to be carefull off?

Or should i buy a 10million baht 1 bedroom condo on suk rd :rotl::surprised:

 

 

Gday Belfastish,

 

What you are talking about is negative gearing. It made me my fortune and helped me to retire at a relatively young age. If you are paying excessive tax in Aus, you need not be. There’s a very handy tax loophole downunder that enables you to offset all your expenses (including mortgage interest!) incurred against income gained.

 

So if you receive rent of say $15,000 pa

 

and expenses including interest, insurance, rates, depreciation on all sorts of thing...curtains, carpets, HWS,...a massive list (check) and repairs (don’t be greedy...ATO won’t allow repairs till 2nd year of rental usually..so don’t claim a new picket fence the moment you rent it out)... on a newly built house there’s a 2.5%?? write off too...get an accountant’s advice or read up on the subject..I’m rusty. Agents’ fees. You could maybe even claim your travel to inspect the property once a year!

 

Expenses, say come to $20,000

 

You have made a loss of -$5,000 which can be offset against your main salary. So if you’re in a high tax bracket between the tenant and the taxman your house is being paid for more or less. Not only that, if you know this is going to be a regular annual event you need not wait till the end of the year for a tax refund. You can roughly calculate it (don’t be greedy) and ask for a tax variation.

 

You can also do it with shares (especially ones with full dividend imputation credits) using margin lending but you’ve got to know what you’re doing there...using borrowed funds can be a double edged sword when a GFC comes along. Very volatile and banks can ask for immediate more funds (margin call)if values decline. Whereas, banks will leave you and your properties alone so long as you keep up mortgage payments even if values decline.

 

Stock market Technical Analysis is my passion...you have to use Stop Losses ruthlessly.

 

At one point I had 6 houses on the go and a large share portfolio.. and was paying zilch in tax on my regular job and my assets were all growing in value. Now, before the rest of you get all moralistic and tell me I’m worse than Mitt Romney. The government once tried to stop this loophole and suddenly found themselves with a massive shortfall in rental properties. They pretty soon reinstated it, because private investors were providing public rental housing...saved the government doing it themselves.

 

I’ve lived off them ever since, selling the properties gradually to avoid paying too much capital gains tax. NZ I believe doesn’t even have CGT...you lucky people. In a way the only mistake I made was not working a couple more years..the whole edifice would have been self funding and providing me with a wage. Instead I’ve lived off the gradual sale of houses. Read “The Richest Man in Babylonâ€... v short book...good advice. Some dear friends of mine in Fremantle who started property investing the same time as I did, are workaholics, have raised 4 children, put them all through top private schools, and they just kept on buying more houses and shares cautiously as their equity increased...they now own 81 properties and a huge share portfolio.. they could’ve retired years ago, but just live for their family.

 

It gets even better..there’s a little known tax rule the allows you to rent out your principle residence for up to 6 years, claim all the above deductions, and NOT pay CGT when you sell it. But wait there’s more...if you reoccupy the place for x months before the 6 year deadline, put all the utilities in your name again, and actually live in it, you can then rent it out again later and restart the 6 year clock!

 

But wait there’s more..buy an old house in an inner Perth suburb (location location location...the worst house in the best street in the best suburb you can afford)..plenty about on quarter acre blocks. Then build a brand new house at the bottom of the garden, flatten the old house. Then a few years later, sell or rent out the first new house and build another in the middle of the garden, gradually working your way to the front of the block. If you’re not too hasty/greedy you can get away with all 3 or 4 house CGT free.

 

Words of caution as Redbaron says above...keep an eye on house prices...avoid media hype, keep your own stats. Interest rates may fall a bit more yet in Oz too.

 

If you want to pay things off quickly, get a mortgage with DAILY interest, then pay as much of your wage as possible into paying it all off... even to the extent of paying for everything on credit cards using every single $ of your wages to pay off the mortgage BUT make sure you pay off the credit card by the due date each month. The bank is thus lending you money for 55 days interest free and you’re using it to pay off your mortgage.

 

You can get equity loans too which enable you to draw down money that you have built up in the stake in your house. BUT use any drawdown in a tax efficient way i.e for repairs etc NOT for a non tax deductible whoremongering holiday in LOS... I suppose you could claim it as a charitable foreign aid contribution to Isaan though. :-)

 

Try to wangle the first home owner's grant into the equation if you can..it's free money after all, that will never be repeated once you own a house. Research the conditions!

 

Relocating from mine to mine is not such a disadvantage..in fact it’s the perfect excuse for renting your house out. Get a good agent to handle the rental..saves stress, and their fees are tax deductible. Keep very detailed records. You will one day be audited by ATO...everyone is...and they’ll want to see every last receipt for every last tap washer...happened to me twice!

 

Good luck, mate.

 

:beer:

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