Especially if they have been renting for more than 2 years, can someone explain this logic to me please.
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Why do high income earners rent?
- Thread starter quickerblade
- Start date
Because they can rent a million dollar property for $500/week while
getting a tax break for renting out their own million dollar property
to someone else.
If you can rent a similar property to your own for less than the
mortgage repayments and rent out your own property for the
same amount you will pay less tax.
andy
getting a tax break for renting out their own million dollar property
to someone else.
If you can rent a similar property to your own for less than the
mortgage repayments and rent out your own property for the
same amount you will pay less tax.
andy
Why own the property you live in?
Life isn't about OWNING assets - that's middle-class thinking.
It's about CONTROLLING assets so you have the use of them.
You tend to be able to controll a much better class of asset through renting it rather than buying it - and it leaves your cash free for better purposes.
Cheers,
Aceyducey
Life isn't about OWNING assets - that's middle-class thinking.
It's about CONTROLLING assets so you have the use of them.
You tend to be able to controll a much better class of asset through renting it rather than buying it - and it leaves your cash free for better purposes.
Cheers,
Aceyducey
CG break is a big incentive, but the ATO allows you to sell your property
up to six years after it is your PPOR and still not pay CGT.
You can only claim the CGT break for one property during any given
period but if you were renting this is not an issue.
So, you can get CGT free CG and negative gear your former PPOR.
andy
n.b. I am not an accountant, check with yours for the facts.
up to six years after it is your PPOR and still not pay CGT.
You can only claim the CGT break for one property during any given
period but if you were renting this is not an issue.
So, you can get CGT free CG and negative gear your former PPOR.
andy
n.b. I am not an accountant, check with yours for the facts.
Thank Andrew, I understand all you have said .
My current situation is I do not have any debt on my PPOR though.
So my question was should I :
1./sell my PPOR to get the 2 M cash (no CGT since my PPOR) to invest while renting.
or
2./ keeping it and invest using its EQUITY which is still 2M while the housecontinue to grow in CG ?
Ta
My current situation is I do not have any debt on my PPOR though.
So my question was should I :
1./sell my PPOR to get the 2 M cash (no CGT since my PPOR) to invest while renting.
or
2./ keeping it and invest using its EQUITY which is still 2M while the housecontinue to grow in CG ?
Ta
Hi Salsa
Nice Brissy House
ta
rolf
Nice Brissy House
ta
rolf
$2m
Salsa
If you're happy there, and who wouldn't be in a $2M BNE house - what would be the motivation to sell if you could hold the asset and use the equity, exactly as you say.
Some would argue the market is pretty soft (dunno about in the $2M+ bracket) so you could still use equity to buy some more property while the price is right ?
I dunno, but I haven't heard too many stories of anyone who sold a good property and looked back to say "that was a good idea"
Good luck
Salsa
If you're happy there, and who wouldn't be in a $2M BNE house
- what would be the motivation to sell if you could hold the asset and use the equity, exactly as you say. Some would argue the market is pretty soft (dunno about in the $2M+ bracket) so you could still use equity to buy some more property while the price is right ?
I dunno, but I haven't heard too many stories of anyone who sold a good property and looked back to say "that was a good idea"
Good luckYes I have always thought keeping it and using its equity to invest is the way to go until reading Acey words "Life isn't about OWNING assets ".....
Will continue my lifelong learning journey, but I guess no selling for the time being. Still dunno how best to use its equity to get me off me day job though. May be Living Off Equity with cash bond ????
And thanks Rolf & Tryhard, yes it is a nice house I am happy
Ta
Will continue my lifelong learning journey, but I guess no selling for the time being. Still dunno how best to use its equity to get me off me day job though. May be Living Off Equity with cash bond ????
And thanks Rolf & Tryhard, yes it is a nice house I am happy
Ta
Equity
Heh, I don't wanna mis-state Acey's intent, but I think he was explaining why some rich people rent prestigious residences when their real assets are elsewhere. But you could use your current OWNED asset to CONTROL plenty of NEW assets.
Don't worry about being middle class, if you're middle class living in a $2M house, I could handle THAT mediocrity ;-)
Plus its different strokes for different folks. Acey is totally correct, but I personally would not be happy renting the home I live in with my family. I want the freedom to renovate it the way I want, with no fear of eviction, add a pool 'cos the girls want one, have a yard for our boxer dogs, enjoy the CG. If I had to rent to free up money to invest, and pay dead money to help someone else pay off their property, I would see that as a step backward. But that's just me.
Presumably you can get a line of credit against your property, (Rolf can work out how much !) deploying it into income producing assets. If they're the right assets, surely you can only compound the growth you are going to currently enjoy ?
Actually you could probably retire now. See you at the Bowls Club ;-)
Heh, I don't wanna mis-state Acey's intent, but I think he was explaining why some rich people rent prestigious residences when their real assets are elsewhere. But you could use your current OWNED asset to CONTROL plenty of NEW assets.
Don't worry about being middle class, if you're middle class living in a $2M house, I could handle THAT mediocrity ;-)
Plus its different strokes for different folks. Acey is totally correct, but I personally would not be happy renting the home I live in with my family. I want the freedom to renovate it the way I want, with no fear of eviction, add a pool 'cos the girls want one, have a yard for our boxer dogs, enjoy the CG. If I had to rent to free up money to invest, and pay dead money to help someone else pay off their property, I would see that as a step backward. But that's just me.
Presumably you can get a line of credit against your property, (Rolf can work out how much !) deploying it into income producing assets. If they're the right assets, surely you can only compound the growth you are going to currently enjoy ?
Actually you could probably retire now. See you at the Bowls Club ;-)
I think there is a much simpler explanation... The bulk of the people who rent do so because they can afford to live where they want while renting, and can’t afford to buy or don’t want to commit. I observed this phenomenon many times. It was the same even 10 years ago.quickerblade said:
Hey, Salsa don’t stress out. Search this forum for renting from trusts. Life may be not about OWING the assets but surely it is not about selling it to somebody else and moving out to rent.salsa said:
This is true, however it isn’t so simple. There are conditions and if you just decided to move next street to rent and lease your PPOR it won’t be good enough for CGT exception.andrew said:
M.
more reading
Thanks Mik, just found this forum yesterday so will lurk around reading everything...
Tryhard, I am applying for a LOC at the moment. A few years back my banker said to me he would make me a LOC if i wanted to ,and I said "no I would not need it" . Hahaha he must have thought I was the dumpest person he ever dealt with, which was probably true too .......
I am sure had i found this forum a few years earlier I would not still be in me day job today. Hmmm...better late than never though.
Someone elses has also advised me to get myself a good broker and not to deal with bank directly......
Cheers
Thanks Mik, just found this forum yesterday so will lurk around reading everything...
Tryhard, I am applying for a LOC at the moment. A few years back my banker said to me he would make me a LOC if i wanted to ,and I said "no I would not need it" . Hahaha he must have thought I was the dumpest person he ever dealt with, which was probably true too .......
I am sure had i found this forum a few years earlier I would not still be in me day job today. Hmmm...better late than never though.
Someone elses has also advised me to get myself a good broker and not to deal with bank directly......
Cheers
Tryhard has it right. use the leverage. Remember that at an 80% lend you only own 20% of it, but you still control the other 80%....and can use that $1.6M to control other assets
Remember you can rent your own home AND have free rein to renovate/extent/treat it as you like (within reason - so long as it's value adds) if you structure correctly.
Look at some of the threads on renting from your trust.
Cheers,
Aceyducey
Remember you can rent your own home AND have free rein to renovate/extent/treat it as you like (within reason - so long as it's value adds) if you structure correctly.
Look at some of the threads on renting from your trust.
Cheers,
Aceyducey
quickerblade said:
Plenty of reasons... for me (a 27 y.o. high income earner):
1. I rent a $650,000 house in inner 'cafe' Melbourne for $345 per week. An I/O loan on this would be over $800 per week, plus I'd have to pay rates, maintenance, etc. This might be worth it if houses were crusing along at 7.5% growth but they're not. The purchase costs alone would be about a years worth of rent. For one reason or another I move around every 1-2 years or so and wouldn't want to hold onto this as an investment if I moved out of it given it's low yield.
2. I prefer to invest in 'average' suburban houses around $250-300k mark. I try to keep my portfolio close to neutral cashflow as possible (or at least in a position where I can service a negative CF with debt/increasing equity).
3. Flexibility, I spend about 1/3 of each year working overseas.
I hate you.domcc1 said:
salsa said:Yes I have always thought keeping it and using its equity to invest is the way to go until reading Acey words "Life isn't about OWNING assets ".....
Will continue my lifelong learning journey, but I guess no selling for the time being. Still dunno how best to use its equity to get me off me day job though. May be Living Off Equity with cash bond ????
And thanks Rolf & Tryhard, yes it is a nice house I am happy
Ta
Salsa
I'd keep it all in perspective before you go and change you plans on the basis of what someone says in an internet forum.
After all , you're the one with the 2 Million dollar house....
See Change
I can think of a much simpler reason as to why high income earners rent - they've never learned how to save.
For most people, before they can buy a PPOR they first need to save for a deposit.
Remember -
Disposable Income (gross income less tax) less expenditure equals savings.
Savings is a learned habit and not everyone has learned it - even among high earners.
In fact, what tends to happen is that as people earn more... (guess what?)
They spent it!
Simple, but true:
The skills required to earn a high income are different to the skills required to build wealth.
Mark
For most people, before they can buy a PPOR they first need to save for a deposit.
Remember -
Disposable Income (gross income less tax) less expenditure equals savings.
Savings is a learned habit and not everyone has learned it - even among high earners.
In fact, what tends to happen is that as people earn more... (guess what?)
They spent it!
Simple, but true:
The skills required to earn a high income are different to the skills required to build wealth.
Mark
SeeChange
Thanks - don't you worry, pleinty of research and education before I ll do anything.
Mark (Pitt ST), not sure what your points are in relation to the topic ?
TryHard et any Brisbany who have been with BIG, I have just learnt about BIG in the last few days via this forum so probably will turn up on 30 Aug. Pitty I have missed Steve 's talk last time...am always a tad late...the story of my life
Ta
Thanks - don't you worry, pleinty of research and education before I ll do anything.
Mark (Pitt ST), not sure what your points are in relation to the topic ?
TryHard et any Brisbany who have been with BIG, I have just learnt about BIG in the last few days via this forum so probably will turn up on 30 Aug. Pitty I have missed Steve 's talk last time...am always a tad late...the story of my life
Ta
We rented the 2 years we were in Sydney. Had necessary funds to buy a decent home without mortgage and that was our aim when we arrived.
At the end of the day I couldn't justify the prices for houses in Sydney so we decided to rent until the market readjusted or our expectations readjusted to match the market. We've now back overseas on another assignment.
Basically, it made more financial sense to rent as we got into a much higher quality residence then had we tried to buy. Also, in this market, our landlord was very keen to do some modifications to the place in return for a fixed 2 year lease. In a renters market, it makes sense to rent.
At the end of the day I couldn't justify the prices for houses in Sydney so we decided to rent until the market readjusted or our expectations readjusted to match the market. We've now back overseas on another assignment.
Basically, it made more financial sense to rent as we got into a much higher quality residence then had we tried to buy. Also, in this market, our landlord was very keen to do some modifications to the place in return for a fixed 2 year lease. In a renters market, it makes sense to rent.
