Sim
Administrator
From: Sim' Hampel
Congrats to Rolf Latham being the first person to post 100 messages in the new forum.
I think this shows his willingness to share his knowledge and experience regarding answers to the multitude of questions about finance and dealing with the institutions.
Well done Rolf and keep up the good work I think we all value your input.
Interestingly enough (but probably not surprising), I believe that this also shows the relevant importance of finance in investing in property.
Jan states in her books that she spends much more time sorting out how she is going to finance her next acquisition and convincing the institutions to let her do so, than searching for the "perfect" property.
Regardless of what strategy you take for choosing your IPs, you will always have to deal with finance of some description (unless you have bucketloads of cash).
My advice to the newbies is don't get so stressed over the "right" strategy. Sure, you need to have one, but it doesn't have to be a complicated one. For most people getting started, Jan's strategies are perfect. Just read her books and follow the instructions.
Once you have the experience of a couple of simple deals and can see how it all works, then you can start getting fancy with the more sophisticated deals. Don't make the mistake of getting into a state of analysis paralysis up front when you don't understand all the finer points of all the strategies people talk about here. There will be plenty of time for that later.
I think it is so very important for newbies to understand how the finance works for their deals, regardless of the strategy they use. In my opinion, everyone should have an understanding of the following things:
1. Lending. The information the banks will require and how they asses your ability to service a loan. You need to understand (among other things) what an LVR or a DSR is, the differences between P&I and IO, and what "too rent reliant" means.
If you don't know, I suggest you search through this forum and the old forum, where there are many definition and descriptions of how these things affect deals. Try searching for one of the acronyms mentioned above or search for threads where Rolf has posted ! If you need someone to explain it for you in person, I suggest you speak to an accountant or a mortgage broker.
2a. Taxation of rental income and expenses. How the ATO treats rental income and what are allowable expenses. How negative gearing really works and what effect that will have on your cashflow. What depreciation really means and how to work out what is allowable.
Again, there are many posts on this subject on the forum from people like Dunc (whom I believe has the ATO website as his browser homepage ;-)
I suggest that you look at the many plain english guides available on the ATO web site (www.ato.gov.au), call the ATO, or speak to an accountant or tax specialist for advice on these matters.
2b. Capital Gains Tax. How capital gains tax is calculated and how it is paid. What the effect of purchase costs are on calculating CGT. How CGT applies to owner occupied properties. What the definition of a principal place of residence is. The differences of holding assets in person as opposed to companies and trusts.
Once again, these topic have been discussed in detail in the forums. Do a search ! The ATO web site has yet more information, and an accountant or tax specialist is always a good place for information.
- - -
Anyway, I think that's enough ranting for a while. One day when I get some time, I'm going to write that elusive FAQ for the forum that has answers to all the easy questions. One day.
Ahh, that got my tally to 72 posts ;-)
Congrats to Rolf Latham being the first person to post 100 messages in the new forum.
I think this shows his willingness to share his knowledge and experience regarding answers to the multitude of questions about finance and dealing with the institutions.
Well done Rolf and keep up the good work I think we all value your input.
Interestingly enough (but probably not surprising), I believe that this also shows the relevant importance of finance in investing in property.
Jan states in her books that she spends much more time sorting out how she is going to finance her next acquisition and convincing the institutions to let her do so, than searching for the "perfect" property.
Regardless of what strategy you take for choosing your IPs, you will always have to deal with finance of some description (unless you have bucketloads of cash).
My advice to the newbies is don't get so stressed over the "right" strategy. Sure, you need to have one, but it doesn't have to be a complicated one. For most people getting started, Jan's strategies are perfect. Just read her books and follow the instructions.
Once you have the experience of a couple of simple deals and can see how it all works, then you can start getting fancy with the more sophisticated deals. Don't make the mistake of getting into a state of analysis paralysis up front when you don't understand all the finer points of all the strategies people talk about here. There will be plenty of time for that later.
I think it is so very important for newbies to understand how the finance works for their deals, regardless of the strategy they use. In my opinion, everyone should have an understanding of the following things:
1. Lending. The information the banks will require and how they asses your ability to service a loan. You need to understand (among other things) what an LVR or a DSR is, the differences between P&I and IO, and what "too rent reliant" means.
If you don't know, I suggest you search through this forum and the old forum, where there are many definition and descriptions of how these things affect deals. Try searching for one of the acronyms mentioned above or search for threads where Rolf has posted ! If you need someone to explain it for you in person, I suggest you speak to an accountant or a mortgage broker.
2a. Taxation of rental income and expenses. How the ATO treats rental income and what are allowable expenses. How negative gearing really works and what effect that will have on your cashflow. What depreciation really means and how to work out what is allowable.
Again, there are many posts on this subject on the forum from people like Dunc (whom I believe has the ATO website as his browser homepage ;-)
I suggest that you look at the many plain english guides available on the ATO web site (www.ato.gov.au), call the ATO, or speak to an accountant or tax specialist for advice on these matters.
2b. Capital Gains Tax. How capital gains tax is calculated and how it is paid. What the effect of purchase costs are on calculating CGT. How CGT applies to owner occupied properties. What the definition of a principal place of residence is. The differences of holding assets in person as opposed to companies and trusts.
Once again, these topic have been discussed in detail in the forums. Do a search ! The ATO web site has yet more information, and an accountant or tax specialist is always a good place for information.
- - -
Anyway, I think that's enough ranting for a while. One day when I get some time, I'm going to write that elusive FAQ for the forum that has answers to all the easy questions. One day.
Ahh, that got my tally to 72 posts ;-)
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