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Discussion in 'Introductions' started by Wade 75, 4th Aug, 2016.

  1. Wade 75

    Wade 75 Member

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    Hi All,
    I have had a couple of investment properties, have learned from some mistakes and am now ready to invest more actively and learn a heap more.

    I am looking to purchase cf+ property and hopefully a couple within the next 12 months. I have been reading up on NRAS property and think that could be the way for me but would like to know more about purchasing an existing NRAS property to protect myself. Maybe euro73 would be able to help more on this.

    I am currently selling the 1 investment property I own as it is draining my cashflow. I am 40 years old run my own business, have minimal super, low on paper income and am concerned about retirement. Interested to hear from anyone with advice or who thinks they can help.

    I would also like to know more about trusts. How many people purchase through a trust? Is this better? If so why?
     
  2. Xenia

    Xenia Adelaide Property Manager Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    About 10% of my clients have trusts set up for property acquisition.

    Whether it is better or not will depend on what you are comparing it to and what aspect you are considering.

    e.g. a properly set up discretionary trust with an open class of discretionary beneficiaries will provide excellent asset protection of the trust owned property if a beneficiary were to become bankrupt. The beneficiary owning property in their own name would lose that property to the trustee in bankruptcy if they were to go bankrupt.
     
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  4. andrew_t

    andrew_t Well-Known Member

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    @euro73 may be able to help you with wanting to know more about NRAS
     
  5. euro73

    euro73 Well-Known Member Business Member

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    Happy assist Andrew... but what specifically are you asking RE NRAS ?

    I would also point out that opportunities to purchase NRAS properties are few and far between now... there are still some good opportunities, but not very many left
     
  6. Wade 75

    Wade 75 Member

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    Assume it is the same as any other purchase as long as I have documentation to prove it is NRAS registered. Anything else I should be wary of besides overpricing?
    Euro73 What is the process to purchase from you? if you have any when I'm ready?
    Have seen quite a few for sale on real estate sites.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    You would need to let me know your budget first.
     
  8. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Increase your "paper income" as this will effect borrowing capacity. Get a broker to run the current borrowing capacity based on your present and future goals so they can advise accordingly.
     
  9. Wade 75

    Wade 75 Member

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    Have a loan for $430,000 for investment I am selling. Should be able to borrow this much. Have read it is better to buy cheaper nras to optimize return on investment?
     
  10. Brady

    Brady Well-Known Member

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    Have you spoke to anyone regarding this? Don't assume because you have loan now for $430,00 that the same bank will lend you $430,000 again when it's sold.
    It would be a new assessment, based on current assessment rates, policy, income.. etc. Even if you're and have been servicing for years without problems.

    NRAS has some great tax advantages, will this benefit you on a lower income. Will you be able to qualify for loan based on your current income.
     
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  11. euro73

    euro73 Well-Known Member Business Member

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    "should" is a really dangerous word, post APRA :) You should confirm your borrowing capacity before deciding on next steps.
     
  12. Wade 75

    Wade 75 Member

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    I will see a broker once property sold and latest tax return is done. Was just looking to find options for cashflow neutral/+ property so I have a better idea when in a position to buy.
     
  13. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Just wondering, wouldn't a security substitution work in this case?
     
  14. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I
    It can do, but in reality doing a security swap when purchasing requires both properties to settle on the same day which can be a bit of a headache. But yes, this is possible.
     
  15. Brady

    Brady Well-Known Member

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    Security subsitution does have to happen the same day, but doesn't have to be property for property. Could be property for cash then when property found the cash swapped for property.

    @Terry_w I believe I've mentioned it before but wasn't sure if it was clarrifed. If you're substituting a security of an investment property - my guess it all the deductability goes as it's the same loan but not the same assest. So unless you're able to get the bank to down the loan and redraw the repayment on the same day??? Don't see the bank doing this, so would there be a way for it to be possible? A way to security substitute and keep the facility.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    This is a good point - the original loan purpose was to buy an IP that is now sold - does this mean that the loan that remains open is no longer deductible? This has come up before but it was ages ago, on SS I think.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Interesting point Brady. I would say the interest would still be deductible because the loan relates to the acquisition of an income producing asset.
     
  18. Brady

    Brady Well-Known Member

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    Really? But it doesnt relate to that income producing assest as it's been sold. The new income producing asset was purchased using cash - from the sale of the old income producing asset.

    You would think common sense get's to apply and it would be tax deductable - but...
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  20. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    With the substitution of security how do the funds flow? Assume A is selling existing property to B and purchasing new property from C. Does B provide a cheque with the payee being C? A collects this cheque from B at settlement and then hands it straight over to C?

    As long as the sale proceeds from existing property can be traced to the purchase price for the new property then I think the interest should be deductible (assuming the new property is income producing).

    If the purchase price for the new property is less than the purchase price for the existing property and A ends up pocketing some of the sale proceeds then you might have a mixed purpose loan and some of the interest might not be deductible.
     
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