Investment Property - help out a young guy with some advice

Hi all,
Im new to this game and finding myself unsure of the best investment option giving the NSW govt recent tax changes.

I have never invested before, but have saved enough $ for a deposit on an investment property. I was convinced that property was a better option than other investment options but with the new changes its hard to know.

Seems logical that there may be bargains to be had as ppl rush to sell their investment properties before the 2.25% kicks in, but those that dont will hang on to theirs?

Im wondering how much of the theories discussed in Jan Somers investment properties book still hold true. If I buy a median priced appartment as an investment property in Sydney - am I making the right decision? Should I look interstate? Should I consider managed funds?

Appreciate any suggestions.
Thankyou
Chris
 
The decision is yours and yours alone...

I am however currently more interested in interstate properties due to their more favourable returns.

Good luck - G :D
 
Afternoon Christof,

If you do want to buy In NSW, I would suggest you purchase as your Place of Prime Residence (PPOR) and move out after 6 months and convert into an investment property - (while advising that the property is still your nominated PPOR).

This will give you free capital gains for 6 years.

No stamp duty payable on property under $500K - Saving you up to $18K (Based on the fact you qualify for the First Homer Policy).

This will also knock out the 2 1/4 % charge applied against all investment properties.

If you keep the property for over 6 years the cap gains tax will start to apply.

Check with ATO and your accountant before you go down this path as laws can change.

In relation to The Sydney Market, be very careful, we are seeing prices cooling and in some instances slighlty falling (Inner City Appartments are a much higher risk).

I would advise you may want to look at alternative states such as QLD & WA as part of your research process, work out what your true motivation is behind your purchase.

This will assist in guiding you to the right location.

Use this Web Site - It is a great resource to harness.

Don't rush do your research an opportunity will present itself and whats more you will recogonize a good deal from a moderate one.

Hope this helps,

Regards,

NAS
 
christof,

If you follow the Jan Somer's approach you won't be selling anyway...so who cares about exit costs - you don't pay tax (much) yet on refinancing.

And if you intend to buy a reasonable sized portfolio in NSW, you'll be paying less land tax than previously.

People in NSW still need to live in houses.

If the new rules make more people hesitate when buying then that reduces demand & increases your negotiating power as a buyer PLUS keeps a good pool of renters.

So it's not all bad ;)

Cheers,

Aceyducey
 
Hi "not a sheep" how is it possible to move out and turn into IP as well as nominating it as a PPOR. I am little confused, Pl advise.
 
karminar said:
Hi "not a sheep" how is it possible to move out and turn into IP as well as nominating it as a PPOR. I am little confused, Pl advise.

Karminar

What "not a sheep" means is dont be a sheep and live in your ppor when you can treat it like an IP. Tax laws allow you to move into ppor then move away and rent it out and treat as IP for up to 6 years.

Richard (trying not to be a sheep and buying in a market that eveyone says will not grow for 5 years)
 
rich ando said:
Karminar
Richard (trying not to be a sheep and buying in a market that eveyone says will not grow for 5 years)

Rich ando,
I don't know where you get these ideas from.

A city the size of Sydney consists of multiple markets and the predictions
even before the stamp duty changes were for increases up to 8% for this
year.

With the stamp duty disappearing for First Home Owners what do you think
its going to happen to properties below and around 500K?

Chris,
I personally don't like apartments, but its a good starting point for a lot of people.

Units normally have very little land component and as they are easy to
put up they are more price vulnerable than houses.
Why don't you consider a cheaper house or even a townhouse?

For someone who is buying his first investment property I would recommend
buying in an area where you could live in if you had to and the type of
property that would be suitable for your current or future needs.

That way you could use it as your PPOR if you wanted to.
 
BV, thank you for pointing out the last line you mentioned. At the risk of sounding to beginnerish (...well I am...) I believe it makes all of this seem less daunting if the PPOR that may become an IP is in an area where you could live, if you had to, so that if things didn't go to well and you needed to return to it to live.
Joe
 
Karminar,

As per above with cap gains tax.

There is a catch.

You must live in the property first to be entitled for the 6 years capital gains tax loophole.

I.E. If you rent the property out first and decide to live in it later, you will NOT qualify for the Free Cap Gains period for any time the property is deemed to be an investment property.

Do it the other way round, I.E. live in the property first then rent it out your are entitled to the 6 Year window which can be broken up -You move in, move out, move in etc - or taken in one long run.

The maximum entitlement in either scenario is a total of 6 Years of that your PPOR can be treated as a pure investment property.

EG over the ownership period
You live in it for 6 mths first
Move out for three years (Becomes Investment)
Move back in for 5 years (Returns to Owner Occupied)
move out for a further two years (Becomes Investment)

The ATO will still allow a futher year for the property to be treated as an investment without cap gains as the total rentable period is 6 Years.

You are only allowed to nominate one PPOR at any given time.

As I mentioned above speak to the ATO and your accountant to get further clarification.

Regards,

NAS

:)
 
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