self managing an ip

[r3ckless]

OK,

So the property has been purchased!

have obtained a rental appraisal @ $420/week.

As mentioned it will be rented to a family member for over 30 years.

I will be getting them to sign a rental agreement (as you normally would) Two questions regarding the rental agreement, can you have the contract on that rental agreement be for 30 years (may be too long?) and also the rental apprisal shows $420. no issues with ATO if we do have on the rental agreement say $380 - $400/week at all?

 

[r3ckless]

OK,

So I have had a look at the Fair Trading website for NSW.

Looks like the only mandatory form I have to complete is the Tenancy Agreement form. Do I have to complete any other forms. For the sake of it, I will also complete a Condition form too.

Note:

THe agreement will be for 30 years if that has an impact on anything.

 

[alexlee]

What sort of rent increase are you writing into the agreement?

 

[r3ckless]

No rent increases... WIll this have any issue with the ATO?

 

[alexlee]

No rent increases... WIll this have any issue with the ATO?

Do you think $400 per week for the next 30 years is reasonable rent? You need to talk to an accountant.

 

[r3ckless]

The way I look at it is no, $400 is not reasdonable, but it is also guaranteed for the next 30 years..... thoughts ALex?

 

[thatbum]

The way I look at it is no, $400 is not reasdonable, but it is also guaranteed for the next 30 years..... thoughts ALex?

Are you serious?

 

[alexlee]

The way I look at it is no, $400 is not reasdonable, but it is also guaranteed for the next 30 years..... thoughts ALex?

My thought is that if the ato audits you, you're toast.

 

[r3ckless]

haha, I am actualyl deadset serious. So to keep everything above water....


$400/week with $20 increase every 2 years, or is that still not trendign with market rentet?

 

[alexlee]

The way I look at it is no, $400 is not reasdonable, but it is also guaranteed for the next 30 years..... thoughts ALex?

Would you rent it to someone you weren't related to on those terms?

 

[alexlee]

haha, I am actualyl deadset serious. So to keep everything above water....


$400/week with $20 increase every 2 years, or is that still not trendign with market rentet?

It's already sus because the tenant is family. A more legit way would be 12 month lease, and at every renewal the rent is supported by ads of comparable properties for rent.

 

[r3ckless]

It's already sus because the tenant is family. A more legit way would be 12 month lease, and at every renewal the rent is supported by ads of comparable properties for rent.

I see. To avoid more paperwork. I know the standard term is 6-24 months. is 5 year lease too much?

 

[Perp]

I see. To avoid more paperwork. I know the standard term is 6-24 months. is 5 year lease too much?

If the tenant stays the same, there's not really any more paperwork. You just let the first 12-month lease roll to a month-to-month lease, and notify the tenant every year or rental increases to keep it in line with market. The same lease can keep going for decades, really.

You are at risk if audited by the ATO at any time that you allow the rent to be significantly less than market. If market rent is $420 per week, you should be charging $420 per week. Throw your family member some cash if they're struggling, but don't risk compromising tax deductibility of the whole investment for the sake of $20-40 per week.

 

[r3ckless]

If the tenant stays the same, there's not really any more paperwork. You just let the first 12-month lease roll to a month-to-month lease, and notify the tenant every year or rental increases to keep it in line with market. The same lease can keep going for decades, really.

You are at risk if audited by the ATO at any time that you allow the rent to be significantly less than market. If market rent is $420 per week, you should be charging $420 per week. Throw your family member some cash if they're struggling, but don't risk compromising tax deductibility of the whole investment for the sake of $20-40 per week.

Thanks for the tip. Will change the term to just 12 months and keep it same as market rent.

Question: After 12 months has elasped, it will automatically roll to month-month, how do i officially increase the rent, via a new lease agreemeent?

 

[wylie]

Thanks for the tip. Will change the term to just 12 months and keep it same as market rent.

Question: After 12 months has elasped, it will automatically roll to month-month, how do i officially increase the rent, via a new lease agreemeent?

You service notice with the correct notice period for whatever state the property is in.

 

[Perp]

As wylie said, you just serve a notice under the existing lease agreement. There's no need for a new lease.

In NSW, you need to give 60 days' notice on a periodic tenancy.