HELP 3 Properties Positivly Geared- Need Direction

L

lovelykym

Hi

Thanks in advance for all advice offered for out question..:)

Relatively new to property investment ( 5years ) . Pretty well just stumbled into it and continued to do so along the way. This is the first year that I have had to pay tax ($200) instead of receiving a return of usually around $5000 -5500.
We have 3 properties and just a little about them.

1- Is situated in East Maitland NSW-3 bed $320 wk
2-Is situated at the back of the previous property -2 bed $280 wk
3- Is situated in Southport QLD - 4 bed -$490 wk

The First 2 homes in East Maitland total loan was $320,000
Southport home loan was $360,000

All are interest only with one offset account linked .
The Southport home was purchased in June 2013 and renovated ($50,000) and was tenanted on the 7th September 2013 for $490

Our accountant of 2 years doesn't seem to helpful or able to give any advice . We are both working and combined income is approximately $200,000.
Can anybody suggest any good advisors on the gold coast area that may be able to help with direction as the homes are positively geared .
Thanks so much in advance as I said we pretty well stumbled though everything we have done , relatively without any problems with great tenants and few problems.

Thanks Kym
 
Kym, tips would depend on what your goals are, and timeframe.
If you want to generate income then I guess your on the right track, but if you want to minimise tax in the short term then a different strategy may be better.

If you post what your ideal goal/ outcome would be then you will gets lots of ideas come through.
 
What are your goals with this? If you don't have a goal then pretty much doing anything is the solution.

Do you own a home? Is that geared?
 
Issues

Hi Thanks for the reply.

The accountant that we have said that we made approximately $10,000 profit therefor we would need to pay . The new property at Southport was apparently not a tax deduction this financial year as it was not tenanted until September 7th and as the interest rate is so low at this time the accountant said there were not enough tax deductions . ?

We have had the 2 homes at east Maitland interest only for the last 4 .5 years . This new property is also interest only and all are positively geared now....what to do ?
 
It wasn't tenanted until September. Was it available for rent before this?

Paying tax isn't a bad thing. I'd love to have a $1,000,000 tax bill this year.

Is reducing tax your goal? Or building wealth? Mor just buying property?

Perhaps you need to be looking for another property?
 
Hi
Thanks for the reply.
Goals are to own our own home and be financially secure . We pretty much stumbled into this property thing and touch wood have been so lucky with amazing rents ,long term tenants and good growth .However we are not sure were to go from here to be able to purchase or build our own home and continue to invest and grow our portfolio.
The accountant as I mentioned pretty well was not very helpful in terms of direction. It seems to me that its a waste of time having the properties negatively geared with such low interest rates and the rentals all being positively geared... What to do
 
Hi
No it wasn't really available to rent as we had to do quiet major renovations to this home . It is tenanted now with tenants on a 12 months lease paying $490 wk. They paid up front 6 months in advance . In terms of goals yes less tax payable is better as my husband and I both work in F/I F/O positions and pay substantial tax hence buying an investment property in the beginning. Ultimately owning our own home , within a couple of years maximum and being financial is the goal.
 
Have you done depreciation schedules on all the properties.

The effectiveness of the depreciation reduces with the age of the property but the $50k reno should certainly be accounted for in depreciation. I suspect that your accountant has added it to the capital cost.

Look up Scot from depriciator on this site and he is more than willing to discuss the options and give some further indication as to how effective a depreciation schedule would be.

http://www.depreciator.com.au/

Cheers
 
Hi
Sorry I guess its my lack of understanding in regards to investment properties. Yes initially brought the first property because of negative gearing against income , however now they are positively geared and we are paying tax and the accountant has said that we will be continuing to pay tax , so I guess the situation is this... 3 properties , weekly income $1190 from properties , loan totals $660,000 ,interest only loan. Both work income is approximately $200,000 . Don't want to be in the same position in 5 years time where same amount is still owing and we have properties but bank really owns them on paper... and we are not getting a return tax wise ? Thoughts
 
So you are using the offset account to build a nest egg to buy your own home?

How far off are you?

Do you have a lot of equity in the IPs that needs to be freed up for the home purchase?

Do you both plan on continuing to earn this income indefinitely?

I just ask these questions to get you thinking about future goals so that you can form a strategy to move ahead.

Your accountant is probably great at doing your tax but maybe not the best at advising future direction. Maybe some folks on the forum can suggest a strategist to help you decide. I'm a bit out of touch these days :)

At the end of the day you have got yourselves into a great situation and an enviable problem.

Well done.
 
The other thing is to go out and buy some more properties.;)

If your incomes are very securer then maybe concentrate on properties which have the potential for higher capital gain. If your income are not secure then continue on the cashflow properties but just buy a couple of extra ones.

I started this way and we are up to 60+ properties so you can make it work for you.
 
Last edited:
lovelykym said:
In terms of goals yes less tax payable is better as my husband and I both work in F/I F/O positions and pay substantial tax hence buying an investment property in the beginning.
Click to expand...

In my opinion, buying any investment to primarily decrease your tax liability is a fool's game.
I could just suggest that you decrease your rents by 50% and you'll get a nice big cheque come tax time. But it's obvious that this is a stupid suggestion, but I think it's akin to buying a property for tax minimisation purposes in the first place.

Be happy that you're making money and pay the tax bill. Or if you want, fill out one of those tax variation forms and pay more tax ever pay, that way you'll get money back at the end of the year.

I'm assuming you're claiming all applicable deductions such as depreciation?
 
lovelykym said:
Hi
Sorry I guess its my lack of understanding in regards to investment properties. Yes initially brought the first property because of negative gearing against income , however now they are positively geared and we are paying tax and the accountant has said that we will be continuing to pay tax , so I guess the situation is this... 3 properties , weekly income $1190 from properties , loan totals $660,000 ,interest only loan. Both work income is approximately $200,000 . Don't want to be in the same position in 5 years time where same amount is still owing and we have properties but bank really owns them on paper... and we are not getting a return tax wise ? Thoughts
Click to expand...

Decrease the rents and find loans with higher interest rates. fixed.
 
I think you are in a good position . You have properties and as a result you have more income. Not to many people here would think that is a bad thing.

My experience is you make most money through capital gain .

One solution might to be buy more properties and when they have gone up , sell some to buy your house .

One member bought several properties at the start of the last cycle and was able to sell them and pay cash for a PPOR on Sydney's northern beaches before she was 30 .( that's my recollection ..)

Cliff
 
handyandy said:
I started this way and we are up to 60+ properties so you can make it work for you.
Click to expand...

When do the taxman start seeing it as a business? (How many properties). My accountant warned me about having to much properties because it could be seen as running a business.

Best

Barnie
 
Elbaan said:
When do the taxman start seeing it as a business? (How many properties). My accountant warned me about having to much properties because it could be seen as running a business.

Best

Barnie
Click to expand...

And the down side is .........?

We are running a business. We rent out properties. We repair and renovate properties. We make a bit of money. Enough for 3 families to live off comfortably.

I still don't see a down side.

I think there is some aspect of CGT and property as a business but really won't affect us as not intending to sell, rather buy more. If we were to sell we would retain earnings in a company and then distribute structured in such a way that we don't break above the 30% tax threshold.

Cheers
 
handyandy said:
And the down side is .........?

We are running a business. We rent out properties. We repair and renovate properties. We make a bit of money. Enough for 3 families to live off comfortably.

I still don't see a down side.

I think there is some aspect of CGT and property as a business but really won't affect us as not intending to sell, rather buy more. If we were to sell we would retain earnings in a company and then distribute structured in such a way that we don't break above the 30% tax threshold.

Cheers
Click to expand...

I wish I had your problem;)

With 60+ properties one down side I see is property management, this in itself will require effort on your part getting the PM to understand how it needs to work and you would only want 1 property manager if they are all in the same area??

MTR
 
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