Constructive Criticism

Hey there everyone,
It’s been a long time since I’ve posted anything here but today I decided to start writing up little ‘articles’ about the things that I’ve learnt, know and opinions I have in realestate.
Many of you will feel strongly about the suburbs I’ve written about in this one but please have a gander anyway.

Here goes nothing, Rob.

With the current economic climate, political throes and real-estate doomsayers anyone would be skeptical when it comes to bricks and mortar investing. If you really pay attention to the articles you’re reading though, you’ll see the only doom you’re reading about is in Sydney and Melbourne. If you know there’s more coffees than just lattes and cappuccinos you’d know that there’s more to Australia than just those two cities as well.

Capital gains are great, however if you can’t sustain your mortgage repayments then you’ll never see those capital gains anyway! Cash flow is what any first-time investor should be looking at in my opinion. It’ll alleviate the financial stress that you’ll feel in your first couple of years after buying your first house so you can keep your lifestyle and have an investment property at the same time. ‘Have your cake and eat it too’.

If you don’t have much of a deposit that’s fine. There are a surprising amount of good quality properties in the sub $200’s around the country and you could get them with a deposit as small as 20-40k and you don’t need to have a big salary either. Take Elisabeth in Adelaide for instance:high rental yields, large blocks of land, and a very active council rapidly gentrifying the area with financial support from private investors and even the federal government.

And if the stigma of Elizabeth is too much for you to stomach then how about looking in Townsville where the suburb of North Ward has an ample supply of 2 bedroom apartments under $200k in a city that offers a superb lifestyle just a couple of hundred meters from the beach. Since your mortgage will be almost nonexistent you’ll have more disposable income to enjoy all the culinary options along ‘The Strand’, catch the ferry to Magnetic island or even go scuba diving in the great barrier reef all while having that massive smart TV you couldn’t afford before.

Many professionals agree that Townsville has hit the bottom of its cycle, so you can feel confident putting your money there. Historically the town also has rapid capital gains during its up-swings.

Oh and did I mention they have more than 300 days of sunshine a year?

If your budget can stretch further though why not look in Brisbane. It’s a major city, with the most amazing CBD. They have public pools and a mini beach IN THE CBD!! And it’s just about an hour drive to the Gold Coast if you want to go and fight the tourists for a wave at Snapper Rocks.

In the suburb of Kelvin Grove, that is merely a 20 minute walk to the CBD, I recently went to a home open for a top floor apartment asking $440k; it was 2 bedroom with a pool in the complex and a body corporate with sinking fund healthier than your keto diet friend. The cherry on topwas being that the council has put a height-limit of three stories on all future developments in the area so you could have unobstructed city views for life.

If you plan to invest have a look around the place. Speak to professionals and if it’s an investment don’t buy from the heart, buy for the back pocket.

There’s a good chance that Labor will get in at the next election. They have plans to rid negative gearing on real-estate accept for new properties, but if you already have an older property that is negatively geared then it will remain that way.

Also don’t be afraid of distance. Contrary to popular belief you can still claim your travel expenses if they are ‘at a distance’ and you can claim your accommodation if ‘it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection’.

That information is readily available on the ATO web site.


Happy house hunting!

 

What if they have no debt, combined household income of 450k, 500k savings and wish to grow some wealth. Moderate risk profiles. Would you still advise them as first time investors to focus on cashflow?

 

This type up was targeted more towards the younger generation. Something they could achieve while still at uni for instance.
However to answer your question. If I was making 250k pa I’d be building a portfolio with a mix of both. Properties with high rental yields to support the holding costs that my properties bought for capital gains have.
That’s my 22yo opinion.

 

Also don’t be afraid of distance. Contrary to popular belief you can still claim your travel expenses if they are ‘at a distance’ and you can claim your accommodation if ‘it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection’.

That information is readily available on the ATO web site.


Happy house hunting![/QUOTE]

Hi nice post I’m sure it will generate some good discussion. In regards to the comment above are you referring to pre or post purchase inspections?

If it’s the latter I was under the impression this was no longer claimable as was my accountant?

 

At least one of the properties bought for CG would also be my PPOR as there’s no negative gearing incentive on that. And you pocket all the CG of course

 

Hi nice post I’m sure it will generate some good discussion. In regards to the comment above are you referring to pre or post purchase inspections?

If it’s the latter I was under the impression this was no longer claimable as was my accountant?[/QUOTE]

Post purchase. I will find the link and post it for you. As I would want to mis lead you. Give me a minute

 

All I'm saying is with income like that, do you really need to chase high yields? Often chasing high yields comes at the CG's expense... Not always, but quite often. And if there is no real need for it then you gotta think twice about it.

 

Hi nice post I’m sure it will generate some good discussion. In regards to the comment above are you referring to pre or post purchase inspections?

If it’s the latter I was under the impression this was no longer claimable as was my accountant?[/QUOTE]

Rental properties - claiming travel expenses deductions

See this page. Although is still confident I’m correct I will need to delve back into the topic as there are some things that could leave an impression both was after re reading that whole page.

 

I absolutely agree with you. However I still do believe that you need a well balanced portfolio. Doesn’t just have to be in property. Could be in other asset classes but anything could happen at work. Redundantcey etc.

 

Rental properties - claiming travel expenses deductions

See this page. Although is still confident I’m correct I will need to delve back into the topic as there are some things that could leave an impression both was after re reading that whole page.[/QUOTE]

Thanks. It’s really that first line the states in 16/17 or earlier that I think clarifies the changes made last year.

However if you can find anything else that indicates it can be claimed that would be great.

 

The travel restriction regarding residential investment properties contains no provisions for distance.

Are you referring to a business of residential property investment.

Send through the link to the ATO site you refer to.

The link the other poster referred to makes it clear that those type of expenses can only be claimed for 2017 year and prior, excluded entities or rental property business. For 2018 those rules dont apply and that link makes it clear.

 

I tend to agree. I started off buying CF+ properties in the early stages with the opportunity for CG in the medium term. In the last few purchases I have focussed more on properties with lower yields and more potential for CG. This has resulted in balanced / CF+ portfolio that still has some good growth properties.

 

I’m actually happier now that I posted this here. As it’s given me another round of motivation to confirm what I thought was correct. Even though I was certain that I was correct after reading over that page countless times I think it’s a case of hearing/reading what you want to hear and not actually what’s being said.
@Skinman @MikeLivingTheDream

 

I read the explanatory memorandum. Was also presented at our recent taxbanter in house training and the tax lawyer says the same.

 

Indeed it does. I’ve actually proven my self wrong with the same information I thought proved me right. I’m normally smarter than this I promise haha

 

All good thats why the forum is here. To learn from others who are specialists in their fields. Ask me how to build a 3 story apartment block and id have no idea.

 

You had me getting a little excited for a minute. I was thinking the interstate inspections may have been back on for 18/19!

 

@MikeLivingTheDream @Skinman

So after finding all the literature possible, and dissecting the 52 page ‘Guide for Rental Property Owners’ there is some literature in there that would still be open to interpretation. I then called the ATO and the lady was very helpful. She could also see how the text that I was pointing out to her while we both looked at the PDF on our screens was an interpretive mess. After a lengthy chat though we did come to the absolute conclusion that you can not claim travel expenses on a residential investment property.
However if you thought that your circumstances were different or you should be entitled to claim the travel for any reason then you can apply for a ‘private ruling’. I imagine you would have to have a sizeable number of properties at that point and really the ATO might just be able to consider your circumstances as operating as a business which I’m not sure you’d want.

Anyway guys thanks for all the chat. Hopefully I can have another scribble next week and we can all catch up again.

 

Hi There
You mentioned Elizabeth is gentrifying... interesting I know three investors who have recently sold out of this market. Purely because it has not performed, client base poor, cash flow poor.

What are the real numbers, in terms of cash flow? Its one thing buying cheap, but its another working out the true cash flow.

Also any market regardless of where, its important to look at the cycle in this market, where its at and the economy, no jobs, no growth. Cash flow is king/queen in this market, however true wealth is building capital, you need both. and here is the challenge in current climate.

Another option would be to perhaps add value, therefore not entirely dependent on market conditions.

 

I agree - if I want cash flow, I'm not buying property. It's good to have cash flow, but property doesn't yield as well as other vehicles like dividend paying shares, for eg, once all the costs are taken out.