New property is better
- Thread starter petho
- Start date
a recent purchase is an old character thing... cold as heck and no way i'd live in it. anyway it rents the same as a new build 4x2 we have that has all the fruit. the old thing sits on 2 green titles and can be divided into 4 units in future. i see it as a much better investment, however wont sell the new buiold as it has too much tax in built
As Rixter said, unless you already have enough assets to retire, when you sell a property, what are you going to do with the money? Most likely you need to invest it in something else, which may not even return as much as the property itself (especially after you pay CGT on it).
Capital gains (if the asset is held for more than 12 months and was purchased post 1985), is given a 50% discount and then added to your income for tax purposes. So if, after all the calcs are done (add stamp duty, etc and deduct depreciation already claimed, etc to your cost base) you have a CG of $20k, and you make $50k in salary. Your total taxable income is $70k. TAX on the CG component is 30% of $20k or $6,000.
I deliberately used the above wording because technically CGT doesn't exist. There is no separate rate on CG: it is added to your other taxable income and taxed together. This is an important thing to note when thinking about CG:the rate depends on what else you made during the year.
Alex
Hi Ausprop, I enjoy reading the comments you make on the forum this is also your 1000th post if you reply to me. I have heard of a title but what's "two green titles"?
I assume he means the house actually sits on two blocks of land with separate titles. i.e. it would be possible to sell the two blocks of land separately now, without any subdivision or legal work.
Alex
I'm still very new to all this so please forgive me for being a pest.
Let's say I need to contribute $150 per week out of my own pocket (negative gear) to meet the interest only payments for my first investment. Then the second IP I purchase requires $160 per week out of my own pocket. That then means I need to contribute $310 per week out of my own pocket. And so on for the rest of the IP's....
How would I fund these out of pocket expenses?
Thanks in advance...
No probs Simon. You can fund these from any other sources of income you have available and/or a LOC providing you have sufficient funds available.
Does this help you?
Yes it does Rick.
But if I keep eating away at the LOC, eventually there won't be enough.
So what your saying, is that I need to be able to fund the difference between the rent and the loan repayments for all 10 properties until such a time that the rent matches (or betters) the loan repayments.
But if I keep eating away at the LOC, eventually there won't be enough.
So what your saying, is that I need to be able to fund the difference between the rent and the loan repayments for all 10 properties until such a time that the rent matches (or betters) the loan repayments.
Simon, you need to be able to fund the difference if any between rent & your total property expenses not just Loan Interest portion.
If you are purchasing a property per annum providing you have bought well your rents will be increasing over the next 7-10 years. Some properties you bought first up will have become cash flow neutral to positive, as well as positive geared. The positive ones will offset some negative ones etc.
So you will not have to fund a great deal of shortfall over your total portfolio.
Does this make sense?
If you are purchasing a property per annum providing you have bought well your rents will be increasing over the next 7-10 years. Some properties you bought first up will have become cash flow neutral to positive, as well as positive geared. The positive ones will offset some negative ones etc.
So you will not have to fund a great deal of shortfall over your total portfolio.
Does this make sense?
