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From: Mike .


Help with PI
From: binh25@yahoo.com
Date: 6/14/00
Time: 11:39:44 PM

I'm thinking of getting an investment property to maximize my tax advantage as I'm paying a huge amount of tax ever since I took on contracting work and doesn't seem to know how to get some of them back.

Can someone answer me with these simple questions before I make an appointment to see the bank.

* Will the bank lend the money to contractors with high income. I been doing it for a year and half and pretty sure I can get contract works for many years to come in my area of work. Worse case scenario for me is I end up with a permanent job with a lot less pay around $50K-$60K

* What percentage are they willing to lend?

* I own 25% of my current house that I bought it last June

* I'm still young (27) and has many more year left on me to pay the bank off :) would that help??

* My wife has a permanent job as well and has steady incoming.

Any tips/advices/pointers will be appreciated
 
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Les

Reply: 1
From: Mike .


Re: Help with PI
From: Les
Date: 6/15/00
Time: 6:41:13 PM

G'day Binh,

Check out http://www.ewizard.com.au and http://www.freeol.com.au - I believe (?) both have a calculator that allows you to put in your details, and they spit out an answer re how much you can borrow. You may be QUITE surprised at just how indebted they will let you become. But it's all GOOD debt, so don't get concerned.

Your questions:-

>>> I'm thinking of getting an investment property to maximize my tax advantage as I'm paying a huge amount of tax ever since I took on contracting work and doesn't seem to know how to get some of them back.

Les: How about 2 or 3?

>>> * Will the bank lend the money to contractors with high income.

Les: Yes. The same scenario applies to me.

>>> * I been doing it for a year and half and pretty sure I can get contract works for many years to come in my area of work. Worse case scenario for me is I end up with a permanent job with a lot less pay around $50K-$60K

Les: Even at $50 - 60k you will be surprised at how much they will lend (and your wife's wage will add to that, of course).

>>> * What percentage are they willing to lend?

Les: Normal lenders will go 90% on IP's (some are less) and most will allow 75% to 80% of rental income to be used as "income" when calculating how much can be borrowed. And the norm for DSR is 30 - 35% (some go as high as 40%).

>>> * I own 25% of my current house that I bought it last June

Les: That's good, but if you re-borrow above 80% you could be up for Mortgage Insurance (on the difference?). For a deposit, though, you won't need too much (maybe a Credit Card? - shudder...) so you will need to "run the numbers" to see what's the best way to go. (You know the value of your home, and the cost of the desired IP - I don't, so can't help further).

>>> * I'm still young (27) and has many more year left on me to pay the bank off :) would that help??

Les: No problem there, I'm sure. And great to see you considering IP's at an early age.

* My wife has a permanent job as well and has steady incoming.

Les: How many IP's would you like????? A lot of your answers will come from your own attitude to debt, IP's, risk, work, etc. It sounds like you are wanting to buy a negatively geared property for the Tax benefits - but keep in mind the Tax side is the LAST side you should look from. (I can find a highly geared property for you that would likely NOT give you Capital Growth into the future - and you'd be throwing money away to save 48.5% now - NOT good darts...) So ensure the DEAL is good before even considering the Tax issue. You can always prepay 1 year's Interest (before 30 Jun?????? - you'd be racing!!) to get immediate Tax advantages - but in the end, you don't want to LOSE money so that the ATO can halve your losses - you're still losing!!!!!

And watch out for lenders who want to cross-collateralise your home with the IP. It DOESN'T have to be done that way - for your protection, resist any attempt by the Bank to do this.

Good luck - come back with more if we can help more. Have a good read of previous entries that appear to suit you circumstances - you'll learn heaps!!!

Regards, Les

PS. I'm just a bloke with an opinion, so check everything I say with your accountant, etc.
 
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binh

Reply: 1.1
From: Mike .


Re: Help with PI
From:
Date: 6/16/00
Time: 10:22:19 AM

Thankyou Les...I shall check those web page out.. Do you have any recommendation for buying property in Canberra??
 
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