How many IP's would you like to have?

[Twitch]

Land Tax exposure can be managed through owning IP's in a variety of different entities. Individual names, trusts etc..

I dont know about other states, in SA you can even have 99% of an IP in one name and 1% in a trust name and that successfully removes that particular IP from the Land Tax calculation as its the combination of owners names that makes is used to generate the Land Tax bill..

Good point, forgot about that.

 

[geoffw]

I dont know about other states, in SA you can even have 99% of an IP in one name and 1% in a trust name and that successfully removes that particular IP from the Land Tax calculation as its the combination of owners names that makes is used to generate the Land Tax bill..

Not in NSW. When there was a threshold, a trust was not eligible for that threashold. I can't tell what happens now from reading the website, but it may be that a higher rate applies to trusts than individuals.

There was something in the paper over the weekend that there will be audits carried out, as there have been instances where it was felt that properties were vastly undervalued for land tax calculation purposes.

 

[Peter 14.7]

Re land tax

I think Govs will always move taxes here and there reflecting the reality of the economy of the day.

Whilst this may be personally a bad thing , overall it is a fact of life. Any investment is better than none and 5% return is better than 0%.

How else are we going to support the Country when the boomers retire and stop paying PAYG.

Peter 147

 

[Steve Navra]

How else are we going to support the Country when the boomers retire and stop paying PAYG.

We will move away from high income tax on income to higher GST levels . . . this way the (Retired) wealthy baby boomers will pay tax on what they spend!

Regards,

Steve

 

[qaz]

Won't that cause inflation?

 

[geoffw]

Hi Geoff,

It would take more active involvement than a standard ip on long term leases, but I feel that once the new owners are comfortable with their leasing system that it would chew up very little time and provide fantastic cash flow with the potential to grow the business incredibly.

Glenn

Getting away form the original topic again (sorry). I suspect that a boarding house with 37 rooms would involve a reasonable amount of work.

If I was after cashflow, I think there are better opportunities. Businesses often sell with a return around 30%- sometimes a bit more. A good franchise with a manager could provide something like that. I have recently seen Pizza Hut and Wendy's franchises with returns in that neighbourhood, and a Subway mentioned in another post.

 

[DD1]

Slowing down

Well starting with a humble one IP 4 years ago, sold it 12 month later and paid off the house. Borrowed 200k and got up to 22 IP's and house.

Took a holiday and fell in love with Coffs, moved there with huge mortgage on new house in June. Now down to 17IP's and mortgage will be a humble 280k by Jan 23rd(my birthday.

What was right for us before was cruising along and buying more. Now what is right is to harmonise with the portfolio and leave time to enjoy living close to the water. We look to stop selling at 15 and then schuffle around debt from time to time to live.

The odd reno, helping others get started, learning more. Most of all 'enough' is when you are there with the kids 4 days a week and only work 3.

The only critique from these pages is why have a $500k IP in the city with 350/wk rent when the same $500k is 5 x $180 rent in the suburbs with your risk of vacancy is hedged, your potential growth is covered by them all not being in the same suburb, and finally, all entry level IP's are always sought after by new investors so the downside risk is negligable while the growth potential(percentage wise) is always higher on the "cheap seats" as some call them.

Just a thought.

DD1

 

[likewow]

Hi All

In some way it is a very limiting question, which if answered and you believe that answer, will limit your growth.

I would hope that everybody anwered 50+ as this answer says 'the sky's the limit', not because everybody necessarily wants 50+ properties but whybuild a limit in your mind.

It was through a similar limiting believe that I closed my eyes to 2 deals which would have grossed me $2.7mil. (selling now). The deal would have been no problem to finance.

At that point in time I had successfully replaced income up to an arbitrary level and was sitting back. Two buildings were offered, prior to listing, from overseas vendors basically a one horse race. But because of my limiting believes at that time I passed on these 2 and as the market jumped right after that no further property oppurtunities have presented themselves.

Some of the limiting thoughts at that time were

met an arbitrary income level
did not like the buildings
was thinking cash flow rather than capital gain
the wife was anti them
level of debt

So the bottom line is you have enough limiting thoughts/ actions don't load yourself down with more.

the important one here and where the money is made is the 'thinking cashflow rather than capital gain'. I bet you didnt know at the time what the cap gain was going to be but you do now. It might not be only limiting beliefs but also benefit of hindsight.

 

[likewow]

Getting away form the original topic again (sorry). I suspect that a boarding house with 37 rooms would involve a reasonable amount of work.

If I was after cashflow, I think there are better opportunities. Businesses often sell with a return around 30%- sometimes a bit more. A good franchise with a manager could provide something like that. I have recently seen Pizza Hut and Wendy's franchises with returns in that neighbourhood, and a Subway mentioned in another post.

I hope youre talking 30% nett Geoff. I wouldnt look at a business returning 30% GP. Last week i was helping a friend analyse a semi passive vending business returning about 50% gross, it looks like a goer.

$56k revenue and $27.5k GP with lots of upside potential. Sale price $55k. I advised him to organise a LOC on his PPOR, he'll be paying 6.5% on $55K and receiving roughly 50%. Lovely!

Not bad for one day a week work.

 

[geoffw]

I hope youre talking 30% nett Geoff. I wouldnt look at a business returning 30% GP.

Yes, 30% net.

The Subway I mentioned is on post http://www.somersoft.com/forums/showpost.php?p=126572&postcount=37

$200Kpa profit for $600K investment would improve the lifestyle of many forumites.

 

[likewow]

Yes, 30% net.

The Subway I mentioned is on post http://www.somersoft.com/forums/showpost.php?p=126572&postcount=37

$200Kpa profit for $600K investment would improve the lifestyle of many forumites.

It sure would but the $600k loan still has to be serviced, and thats a fair chunk out of that $200k. Unless your paying cash.

 

[geoffw]

It sure would but the $600k loan still has to be serviced, and thats a fair chunk out of that $200k. Unless your paying cash.

You're getting returns of 33%, and paying debt at 8% ($40k pa). Then pay a manager to run the store- $45k. Net return on $600K is still $115k, passive income, on a well known and popular franchise store.

I have a property I bought for $480K, which returns $20K after interest and expenses- for a property, it's a fantastic return. But it's peanuts compared to some other opportunities.

 

[likewow]

You're getting returns of 33%, and paying debt at 8% ($40k pa). Then pay a manager to run the store- $45k. Net return on $600K is still $115k, passive income, on a well known and popular franchise store.

I have a property I bought for $480K, which returns $20K after interest and expenses- for a property, it's a fantastic return. But it's peanuts compared to some other opportunities.

8% x $600k = $48k and can you get a manager to run a store for $45k? My god thats cheap for a manager! You'll find its not exactly passive income as even managed businesses require input and time.

Thats a great return on a property (units?) but im sure you know theres true passive returns in the range of 10% and theres business returns which can range up to 100% for small self funded start ups. But you cant really make comparison between passive property returns and active business returns. Its truly apples and oranges. Yes, I agree, theres opportunities absolutely everywhere in business, look at that vending one for a simple eg. Actually theres opportunities absolutely everywhere period

 

[geoffw]

8% x $600k = $48k

Sorry, the back of the envelope wan't too good today

and can you get a manager to run a store for $45k?

Yes- it's not a complex business, and it is quite possible.

You'll find its not exactly passive income as even managed businesses require input and time.

I agree. But the person selling this Subway store owns quite a number- so it's not exactly full time. He's only selling it because it's way out of the area of all his other stores.

Thats a great return on a property (units?) but im sure you know theres true passive returns in the range of 10% and theres business returns which can range up to 100% for small self funded start ups.

Startups are not what I'm looking for, as I don't have experience in business. I know that you do, so they would be something you would do quite well. I'm after an established business with a good proven cashflow, a simple business model, and the backup of a good franchise. For a first time, these are things which reduce the risk of failure- although the risk is still there.

But you cant really make comparison between passive property returns and active business returns.

Agreed. My point is mainly that property is not primarily a cashflow thing. Its strength is in capital growth. There's other ways to get much better cashflow.

 

[likewow]

Sorry, the back of the envelope wan't too good todayYes- it's not a complex business, and it is quite possible.

I agree. But the person selling this Subway store owns quite a number- so it's not exactly full time. He's only selling it because it's way out of the area of all his other stores.

Startups are not what I'm looking for, as I don't have experience in business. I know that you do, so they would be something you would do quite well. I'm after an established business with a good proven cashflow, a simple business model, and the backup of a good franchise. For a first time, these are things which reduce the risk of failure- although the risk is still there.


Agreed. My point is mainly that property is not primarily a cashflow thing. Its strength is in capital growth. There's other ways to get much better cashflow.

All very good points and i especially agree with the last one.
A while ago a friend of mine bought a busy Bakers Delight store and has absolutely cleaned up, on the income and the resale when he sold it, so franchises can be and are very profitable.

Theres nothing better than getting tons of cap growth (as you have) for free and then turning some of that into cashflow that your family can live on in a style they have become accustomed to Good luck with it and you might even be able to get in there and be a sandwich artist if you get bored .

 

[geoffw]

Good luck with it and you might even be able to get in there and be a sandwich artist if you get bored .

Griffith is out of my area too- a pity. I wouldn't have been putting so many details in public if I was interested in it myself

With their lo carb line, I'd be a wrap artist

 

[Glebe]

$56k revenue and $27.5k GP with lots of upside potential. Sale price $55k. I advised him to organise a LOC on his PPOR, he'll be paying 6.5% on $55K and receiving roughly 50%. Lovely!

Not bad for one day a week work.

If your mate doesn't like it, I'll take it!