Monthly Income

Discussion in 'Other Asset Classes' started by hillsguy, 29th Oct, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
Page 1 of 2
  1. hillsguy

    hillsguy Well-Known Member

    Joined:
    25th Aug, 2015
    Posts:
    502
    Location:
    Adelaide
    hillsguy, 29th Oct, 2019
    #1
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    Unless you cant budget, whats the issue with 6 monthly dividends?
     
    Trainee, 29th Oct, 2019
    #2
  3. hillsguy

    hillsguy Well-Known Member

    Joined:
    25th Aug, 2015
    Posts:
    502
    Location:
    Adelaide
    I prefer consistent monthly dividends ... :)
     
    hillsguy, 29th Oct, 2019
    #3
  4. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    Look at the shares theyre buying. That consistent monthly dividend is just them taking a 6 monthly dividend and dripping it back to you. It doesnt make it any safer. Also with that sort of daily volume liquidity risk is a real concern.
     
    Trainee, 29th Oct, 2019
    #4
    jprops likes this.
  5. Islay

    Islay Well-Known Member

    Joined:
    28th Jul, 2018
    Posts:
    845
    Location:
    somewhere
    @Trainee I think qualitas invests in debt ie 1st and 2nd mortgages rather than shares? A different investment entirely
     
    Islay, 29th Oct, 2019
    #5
  6. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    And eiga?
     
    Trainee, 29th Oct, 2019
    #6
  7. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,524
    Location:
    Melbourne
    Many unlisted REITs pay monthly.

    The Y-man
     
    The Y-man, 29th Oct, 2019
    #7
    Islay and Big A like this.
  8. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    Did I hear unlisted property?

    since I’m here I thought I would throw up an example that came across my table today.
    Centuria, a reputable player in the reit game is offering a starting yield of 6.25% going up to 6.50% next financial year. Asset is an A grade office building in the heart of Brisbane CBD. 5.1 year wale. Gearing is at 45%. And current and next financial year income is 100% tax deferred. Considering the current market I believe this is a reasonably attractive offering. Even though I’m overweighted property trusts I’m actually considering going in this one as there’s not much else in any asset class right now grabbing my attention.

    a reasonable monthly income with an asset that I believe has potential growth. The Brisbane office market has been getting plenty of attention of late as Syd and Melb has run strong for a few years now and Brisbane is seen as the next inline.
     
    Big A, 29th Oct, 2019
    #8
    Islay and The Y-man like this.
  9. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    Seen these sorts of unlisted reit prospectuses. Seem to achieve the tax deferred by borrowing, depreciation etc but there might be a cap gains sting in the end?
     
    Trainee, 29th Oct, 2019
    #9
  10. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    I believe the tax deferred is a result of depreciation. Yes you will have to pay it at the end when the asset is sold as capital gains. But as capital gains is discounted. So it’s still a better result then declaring it all as income.
     
    Big A, 29th Oct, 2019
    #10
    Islay likes this.
  11. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,524
    Location:
    Melbourne

    I'll potentially find out about the sting next year when one of my unlisted is due to close ~~ current NTA is 41% above the invested amount....

    The Y-man
     
    The Y-man, 29th Oct, 2019
    #11
    Islay and Big A like this.
  12. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    Nice. Let’s remember though a big sting come close time means you have done well and made plenty of money. Add in a 50% discount and it’s a good result.

    would anyone rather pay the tax as income when you first received it?
    I know I would rather pay the tax later and with a nice discount.
     
    Big A, 29th Oct, 2019
    #12
    Islay likes this.
  13. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    are the distributions in the form of capital returns? its like you put in $100, they buy $80 of property and pay you $5 a year as tax deferred capital return.

    of course you can still make money on appreciation. Absolutely think unlisted property is a valid investment class. The tax deferred distributions just seem misleading.
     
    Trainee, 29th Oct, 2019
    #13
  14. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    So the tax deferred has nothing to do with them paying you back from investment capital. All income comes from income produced from the asset. It’s just recorded as a return of capital for tax purposes. This results in a more desirable tax outcome.
     
    Big A, 29th Oct, 2019
    #14
  15. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,524
    Location:
    Melbourne
    I'll defer to a tax expert at this point... but just hauled out the old pds for one of my reits:

    The proportion of distributions that are tax deferred will depend upon a number of factors (for example timing of the issue of units, building amortisation and depreciation of plant and equipment) and may vary from year to year. Deferred tax may be payable, in whole or in part, on the sale, transfer or redemption of units in the Trust. The tax deferred component of the distribution will depend on the Trust satisfying various requirements including its ability to utilise tax losses incurred in the start up phase. If the Trust does not satisfy these requirements, the tax deferred component of the distribution could be materially less.

    Tax deferred income / return of capital Distributions from the Trust may include tax deferred income or a return of capital. Such amounts are not taxable as income to unitholders when distributed but rather will give rise to cost base adjustments to unitholders’ units for capital gains tax purposes. These adjustments could result in either an increased capital gain or a reduced capital loss when the units are subsequently disposed of (refer to the “Disposal of units” section below). A capital gains tax liability could arise prior to disposal where the sum of tax deferred distributions received exceeds an investor’s cost base in their units.

    The Y-man
     
    The Y-man, 29th Oct, 2019
    #15
  16. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    Yes good point. You should get advice relating to tax’s from a professional. But the explanation I gave is based on my understanding and experience with property trusts.
     
    Big A, 29th Oct, 2019
    #16
    The Y-man likes this.
  17. Islay

    Islay Well-Known Member

    Joined:
    28th Jul, 2018
    Posts:
    845
    Location:
    somewhere
    Thanks @Big A and @The Y-man I always enjoy and learn a bit more about unlisted property from your posts:)
     
    Islay, 29th Oct, 2019
    #17
    The Y-man likes this.
  18. Big A

    Big A Well-Known Member

    Joined:
    18th Nov, 2018
    Posts:
    2,421
    Location:
    ?
    A pleasure. :)
     
    Big A, 29th Oct, 2019
    #18
    Islay likes this.
  19. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,524
    Location:
    Melbourne
    Yep - I only ever had a cap return distributed for the aforementioned REIT when one of the 3 buildings in the trust was sold.

    The Y-man
     
    The Y-man, 29th Oct, 2019
    #19
  20. TAJ

    TAJ Well-Known Member

    Joined:
    10th Oct, 2017
    Posts:
    1,214
    Location:
    Northern NSW
    I have structured my income as : Super pension draw down (twice monthly)
    : Rental Income (monthly)
    : Dividend Income (twice annually, usually March & September)

    This provides for a consistent flow of monies and the welcomed SANF!
     
    TAJ, 30th Oct, 2019
    #20
Page 1 of 2