Has anyone dealt with NuPath before?

Discussion in 'Investment Strategy' started by jstirl, 11th Apr, 2018.

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  1. Sackie

    Sackie Well-Known Member

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    Not everyone.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Avoid like the plague. It’s great for them but not for you - search one stop shop and you’ll see why.
     
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  3. jstirl

    jstirl Member

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    Thanks Jane, will ask about the AFS license
     
  4. jstirl

    jstirl Member

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    Thanks everyone for taking the time to reply and for some worthwhile advice.

    For those questioning the time frame on the debt clearance i'll provide some numbers below. The loan on our PPOR is quite small and I can clear it in around 5 years just with increased repayments, it just makes our household budget very tight. We are currently paying $30k a year in repayments comfortably.

    Remaining loan on PPOR is $298k, PPOR value is around $900k.

    Investment strategy being proposed is to use $160k equity from PPOR to purchase an investment property valued between $500-$600k (investment loan is interest only and with separate bank to our PPOR mortgage)

    Cycle all rent and Tax breaks (Tax breaks to be included in take home pay instead of claimed yearly to increase take home net pay) through the offset account of the PPOR mortgage to reduce interest on the PPOR loan and pay off sooner. Once PPOR debt is cleared use the $30k repayment to start reducing investment loan.

    Now the type of investment property they are recommending (which is what i'm questioning) is a brand new house as it provides greater tax benefits as you claim depreciation of fittings in a new property for the first 10 years. Obviously they get a kickback from a new property which is where the conflict of interest comes in.

    Now surely there are some investors on here who have purchased brand new properties and are aware of these tax breaks and if so has it been beneficial to them over saying buying an older property?

    Cheers
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    How much sooner is the question, and what is the primary driver of the redn

    ta
    rolf
     
  6. jstirl

    jstirl Member

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    Hi Rolf, So currently i'm paying $570 a week on a $298k loan at 4.5%. So on that trajectory I calculate clearing our PPOR loan in 13 years. Now if I increase repayments to $1153 a week it comes down to getting cleared in 5-6 years.

    With the strategy being proposed the clearance time is similar, 5-6 years but there are no extra repayments from our pocket as they are coming from the increase in funds cycling through the offset of our PPOR loan.

    The main aim of this is to clear our non-tax deductible debt and release cash to build investment portfolio towards retirement.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Based on these figures, you're going to pay off about $42k extra in the next 6 years. That's a long way short of $298k. In simple figures:
    ($1153 - $570) x 12 x 6 = $41,976

    What you're actually doing is changing the loan from non-deductible to tax-deductible. That's a good outcome, as is $42k in extra repayments especially as it hasn't taken a lot of effort on your part, but there is still a debt there.

    I should also point out that 4.5% is fairly expensive for an owner occupied loan. You could easily saving about $15k in 6 years just by having a cheaper loan.


    My biggest problem with off the plan property sales isn't really with the commission the seller receives (although they do tend to be obscenely large commissions). My problem is that they're usually selling a very average and low performing property at an inflated value. People get sold on the tax savings and they'll also have an investment property.

    Quite often the reality is that the investment property suffers a drop in value (similar to the way a car drops in value as soon as it's no longer a new car). Quite often these properties are in average locations and may not go anywhere for years.

    In investing, tax deductions are a bonus. The real reason to purchase a particular asset is because it's increasing in value. The reason you get tax deductions is because the investment is taking money out of your pocket.
     
    Last edited: 16th Apr, 2018
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  8. turk

    turk Well-Known Member

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    If NuPath had a real interest in your financial position the first thing they should have told you is that you are most likely over paying @ 4.5% PPOR interest.
     
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  9. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    In this scenario where is the money coming from to pay for the rental mortgage? Plus maintenance, property manager fees, council rates etc?

    Which area are they proposing for IP and how much is the rent?
     
  10. thatbum

    thatbum Well-Known Member

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    I don't know any experienced investors that use depreciation as their "strategy" like you describe. Most investors I know don't even factor depreciation into their calculations, because it should never be the primary reason to invest in property.

    100% agree with this. High depreciation numbers are probably a sign that you should be extra wary of overpaying for something - and in this case, you can add it to the list of other warning signs people here are telling you about...

    My previous opinion still applies - run. I can't believe you're still entertaining this.
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Are they suggesting you not pay the investment loan until you have paid off the main residence loan?

    Are they licenced to give tax advice?

    They don't appear to be licenced to give financial advice. You can check
    Financial advisers register | ASIC's MoneySmart
     
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  12. qak

    qak Well-Known Member

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    Just to confirm, they do not have an AFSL and are not an Authorised Representative according to ASIC, so I don't know how they can be making such recommendations to you?
     
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  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A hairdresser could make this recommendation legally. Property is not a financial product.
     
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  14. qak

    qak Well-Known Member

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    Isn't the OP saying they are also providing
    - tax advice
    - investment advice
    - credit advice?
     
  15. jstirl

    jstirl Member

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    I used this calculator for these numbers Extra Repayments Calculator - Reduce Home Loans

    Not sure why you took away the $570? Total repayments would be $1153 per week x 52 = $59,956 per year x 6 = $359,736 (that's if I just make extra repayments without an investment)
     
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  16. jstirl

    jstirl Member

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  17. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    He took away the $570 you are currently paying to reflect 'extra' payments.
     
  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A licence would be needed for tax advice and credit advice but not investment advice unless it involved a financial product
     
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  19. turk

    turk Well-Known Member

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    I think Peter T got his months and weeks mixed.
     
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  20. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Turk is correct, I tend to think in terms of monthly repayments rather than weekly. On that basis, given the interest savings you probably would pay off the loan within about 6 years. My apologies for the oversight.

    However, what you're saying is that owning the investment property and debt recycling will put about $583 per week in your pocket (over what you're currently paying), or about $30k per year, just because you're getting some extra tax deductions, mostly depreciation?

    I can't say I've ever seen a result that good, although I do have one client that gets about $50k in post tax add-backs a year - on a portfolio of 16 properties.

    I could be wrong (I'm not a tax advisor), but I think depreciation on the building allows you to claim 2.5% per year. If the building (doesn't include land value) is worth $300k, then that's $7,500 in depreciation related losses. Assuming you're on a higher than average income that earns in the 40% tax bracket, that's a $3,000 refund.

    You might argue that there's other deductions associated with the property, but these would apply to almost any property, not just new ones. In essence you're buying a brand new property for $3,000 more in your tax return each year.

    Debt recycling does work, but I'm really questioning the decision to buy a new property over an established one, and the decision to do it via a business that has a conflict of interest in the transaction.
     
    Last edited: 16th Apr, 2018
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