Why I'm happy to pay tax

Discussion in 'Accounting & Tax' started by See Change, 13th May, 2016.

Join Australia's most dynamic and respected property investment community
Tags:
  1. See Change

    See Change Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,111
    Location:
    Sydney
    Amongst our early buys in early 2000' s we kept a block of units in New Town Hobart . Purchase 220 , rent at purchase 440 , now 800 . sold everything in Logan and Rocky . We did keep two in Logan but sold them four years ago to help pay for weekender .

    Cliff
     
    jins13 likes this.
  2. See Change

    See Change Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,111
    Location:
    Sydney
    Most definitely.

    Wasn't part of our initial plan , because we'd never reached a point where the banks said no . Now it is . When we sold our last ones in Sydney , we kept two loans and used those for a purchase in Goodna and Morphett Vale . If we'd done some more forward planning , we would have made more of that opportunity , but moving forwards post APRHA changes it certainly is .

    We have reached a level where the banks ( and us ) are wary of lending more , so we will re cycle that limit to make the most of opportunities .

    Cliff
     
    Sackie, MTR and bob shovel like this.
  3. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,935
    Location:
    Lower Blue Mountains
    That makes a lot of sense. You get in an extra boom then come back to goodna for around what you sold for but come back for 2 or 3 IP's!
     
  4. See Change

    See Change Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,111
    Location:
    Sydney
    An extra boom ? I'd be thinking 2-3 or maybe more .

    Sydney sold . Now Brisbane 1 , Regional 2 , then depending on circumstances maybe Perth / Darwin 3 .

    Cliff
     
    Sackie and bob shovel like this.
  5. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,935
    Location:
    Lower Blue Mountains
    Ok. I need to read some more. I've watched syd sit flat pre current boom and i haven't got around to understanding cgt and other taxes and what's involved.
    The main thing i would think is that once you sell you need to buy atleast 1 to replace the sold one
     
  6. See Change

    See Change Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,111
    Location:
    Sydney
    One thing to think about though , and this can be an issue , is whether the banks will still lend to you .
    It's possible , even after selling , you may not qualify for a new loan after the APRHA changes .
    One possible way around this is to exchange security , but that could be complicated .
    We had enough in our buffer to buy outright and then refinance via substitution , and then put funds back into buffer , but obviously not everyone has that capacity .

    Cliff
     
    bob shovel and MTR like this.
  7. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World

    cliff, you may want to contact RAMS they do Lo doc, worth considering as a short gap measure.

    My accountant signed off on this, accountant wears no liability, it's in the fine print
     
  8. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    BTW this is a very good thread, if I started it I would have been shot in flames...does that make me paranoid:p
     
  9. EN710

    EN710 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,218
    Location:
    Melburn
    Lol, does it matter who start?
     
    MTR likes this.
  10. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,934
    Location:
    Brisbane
    What rate is your Rams lo doc?
     
  11. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,483
    Location:
    Sydney
    I agree with you that I think increasing debt in retirement is a bad idea. However, I don't agree with all your other conclusions.

    Personally, I'm in the probably-never-sell group, but CGT isn't the reason for this at all.

    This is my reason:
    I foresee a future of continued low interest rates. My properties are also in (currently) high yielding areas. This means that my properties are cash flow positive at 85% LVR. Why 85% LVR? Because I've made allowances of at least 15% for CGT and selling costs. In practice, I think that the average would be a fair bit higher.
    But if my property is cash flow positive at 85% LVR, I'm definitely better off by never selling, hence my position.
     
    Observer and HUGH72 like this.
  12. Jjjjj

    Jjjjj Active Member

    Joined:
    19th Aug, 2015
    Posts:
    32
    Location:
    Melbourne
    Overall comment I think whether to sell or not depends on your age and financial situation. We are heavily geared but at this low interest rate environment it would be silly to sell considering I have another 20-30 years of working life ahead of myself. In 10 years time I'd regret selling even though we might get a good sell price now.
     
    Blueskies likes this.
  13. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    it was 5% until recent .25%, I assume it was reduced, but have not checked. This is an excellent rate as it was a construction loan for my 4 townhouse development. Fees comparable to 4 major banks

    RAMS owned by Wespac
     
    Sackie likes this.
  14. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,035
    Location:
    Vaucluse, Sydney.
    I think it depends on the individual's situation and goals. If they want more cash flow and reduce overall risk as they get older and their portfolio allows for it then selling some could make sense for them.
     
    Frazz likes this.
  15. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    not at all, happy that it highlights the importance of strategising and how volocity of money works. Who wants financial freedom in 20 years when you can achieve it in 10 years
     
  16. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,483
    Location:
    Sydney
    Reduced risk, yes, increased cash flow, ONLY if the property isn't positive at 85% or so.
     
    Observer likes this.
  17. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World

    Re read this thread and perhaps you will reconsider why it is worth considering as you may not need to work another 20-30 years
     
  18. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World

    it's very much dependent on what the cashflow is and whether there are other rising markets to jump into, whether your properties have already peaked and whether you have experience playing in other markets.

    No point me telling you this though because most people are stuck and fear selling, because they focus on the CG they have achieved and ignore that markets work in cycles and gains can and do fall back when markets peak.

    I have been at both ends of the equation that's why I know strategising and timing the market is far superior strategy, however you also need to use correct structures to reduce tax.
     
    Last edited: 13th May, 2016
    spludgey likes this.
  19. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,483
    Location:
    Sydney
    Definitely true @MTR and you're right that I didn't include this opportunity cost, but neither did the original post, so I thought I'm still comparing apples with apples.
     
    MTR likes this.
  20. See Change

    See Change Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,111
    Location:
    Sydney
    The thread is Why I'm happy to pay tax ...

    We're all different and have different approaches .

    I'm not out to prove what I do as better than what other people do and if other points are raised then happy to go that way .

    Cliff
     
    Last edited: 13th May, 2016