Canterbury Property Services

Discussion in 'Property Experts' started by armorris007, 14th May, 2009.

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  1. Terry_w

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

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    Barnoid why are you capitalising interest?
     
  2. Barnoid

    Barnoid Member

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    Hi Terry, that is the system that CPS set up for me. It works, and will work better as I budget a bit more. I am always mindful that it's a marathon, not a sprint.
     
  3. Terry_w

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

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    Did they give you tax advice?

    It is likely the capitalised interest is not deductible.
     
  4. Barnoid

    Barnoid Member

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    As I said in the post I haven't engaged with CPS for a while, through no other reason than no necessity. My accountant (Bantacs) has provided me with advice as they do every year. I don't expect any issues.

    I am interested to hear more from Venom and PDG as their recent position and experiences. Venom in particular has been very successful over the same time period and perhaps I have been too conservative?
     
  5. Terry_w

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

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    I would suggest you get a second opinion on the deductibility of interest and Part IVA. If you have an appropriate private ruling, which considered Part IVA, then it would be fine, but most of the positive rulings out there are old and predate TD 2012/1 and those that don't didn't ask if Part IVA would apply
    Legal Database

    Good luck with it.
     
  6. Barnoid

    Barnoid Member

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    Thanks Terry, I have followed your posts and am aware of Part IVA. I do appreciate your vigilance and objectivity with all of these matters, it makes for good discussion and brings proportion to the thread.
     
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  7. pdg

    pdg Member

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    You have asked for comment, I too would like to hear from Venom. Personally I chose not to capitalise interest and only put my tax refund toward paying down my PPOR which we have paid off through hard saving only. I have also changed to principal and interest with a very good fixed interest rate and with all our savings the overall loan in no going down nicely. At the last re finance we had all our properties revalued and there was no significant gain. Tenants have been great so lucky in that respect.
     
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  8. venom

    venom Well-Known Member

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    Hi pdg, Barnoid and Terry, I have been waiting for some input from you all, and Terry, as I said, though we do capitalize the interest on the IP's, we don't claim on it.
    We have Three IP's now, and yes the two Duplex's are not increasing in value, actually gone down a bit since buying them, our House in Griffin has increased by around 60k.
    My Wife and I put around 6k a month into our buffer account, and in the 18 months since buying the third IP we have reduced that Acc from127k to 18k, and that Acc has all our expences from the IP's going into it along the way, once we pay that down, We will be putting every thing into paying down our IP's, we have two IP's that are P&I now and the Third, the interest from that gets taken out of our Buffer Acc, Even over the last 18 months our overall Debt has reduced by 55k so still on track, I know it seems daunting at the mo Barnoid but on the other side of the coin, what goes down must come up again lol, hang in there, you are younger than me so you have more years for the next boom, just be Positive, oh I forgot to Add, my Wife and I had a Great Holiday in the UK in August for 14 days as well, so really we could have been even better off, but once a Traveller always a Traveller lol, Japan in March.
    Please re visit this forum now and again to let me know how you are doing ok.
     
  9. pdg

    pdg Member

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    Thanks for the input venom. You and I are almost identical cases, age, savings, investment etc. How do you see yourself in say 7 years from now and wanting to retire? You see, I am in the mindset that I am bound to having to work as long as I owe money on this investment since we need the tax rebate to make the cash flow positive ( mine never has been tho, from day one it has cost me about $2000,00/annum per property to hold). Your future plan would be of great interest to me and others. I agree that in time these properties will increase in value, but right now I don't see that happening any time soon given the amount of development going on and the way they have structured the first home buyers grant. Your thoughts on this would be of great interest to me and others I'm sure
     
  10. Barnoid

    Barnoid Member

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    Hello Venom, PDG and others. Thanks for your replies - I appreciate your openness. Since I posted last I have been back to Canterbury and had our financials looked at. I have been re-assured that we are going well and the plan is working, but as I already knew myself our monthly living costs are holding us back. I also checked the capitalised interest claims and our accountant is only claiming the simple interest in compliance with the ATO ruling. Canterbury also approached Macquarie for us and secured a lower interest rate, which I greatly appreciated. I am not so concerned about capital growth I was more concerned with the ever increasing interest on the IP that we could not sell to get out of the hole if needed. I had it all checked by a friend who is a forensic accountant and he told me the system is working as best as it can, for our situation. Whilst I earn a decent wage, our expenses are high due to not only family size, but also due to old loyalties to big companies. I won't bore you with details, but after 26 years loyalty with a large insurance, telecommunications and credit card provider they all told me they would not reduce their fees to the same as other comparable companies I provided them. In fact each one told me I could move on. Needless to say that is my next step and will save me hundreds of dollars a month. I am re-assured and confident again, it seems that I lost sight of the long term benefits due to the short term struggles.
     
  11. Terry_w

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

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    What is the point in capitalising interest if you are not claiming it?
     
  12. Djd86

    Djd86 New Member

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    Hi Jamie,

    Do you have an update on how you have progressed with this company? I would appreciate any feedback you may have as I have a meeting booked with them.
     
  13. BB33

    BB33 New Member

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    DJd86,

    How did your meeting go? I stumbled upon Canterbury and have been trawling the forums for info. Like many others have said, I am yet to find any really bad press. What have your experiences been like so far?
     
  14. kprop

    kprop New Member

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    Hi All,
    Sorry i've not been back here in a long while. Back to post our experience since settling on our property and also to ask a couple of things from the more experienced Canterbury'ers.
    To be perfectly honest, it has been quite a learning curve and stressful experience for us. Since finding out about the buffer loan that Macquarie bank imposed on us we found it quite difficult to understand and even asked Canterbury about the way it worked. So at the start we opened 3 loan accounts as follows:
    1: PPOR Loan $306K (secured by PPOR)
    2: Buffer loan $99K (secured by PPOR)
    3: IP Loan $489K (Secured by IP)
    Let me take a step back. We purchased a 5 bedroom house in Springfield for $548K and our PPOR was valued at $450K. Both loans were at 90%LVR so 2 lots of LMI for us. It rented 4 days after PC and tenants were fine till they stopped paying rent for 6 weeks about 2 months into their term. Turned out they had gone overseas for family matters and were not contactable till they got back. After taking them to the magistrate they finally dribble fed us the arrears over the next 2 months. Missed bank payments a couple of times but Canterbury actually stepped in with part payments that we later payed back.
    After a year and a half of struggle to meet payments we decided to sell and cut our losses. We engaged Purple bricks (BIGGEST MISTAKE) and when the tenants were notified they left at their lease end. Hello untenanted property. It took 8 months to NOT sell our property. Now we have gone to another agent who found new tenants in a week and are now finally getting rent in again.

    So my concern is as follows:
    The Canterbury system as i understood it is that the rent money goes into loan 1, the interest on loan 3 just capitalises and we pay down our home in 7 years. Seems I understood completely wrong. Whats happening is the rent goes to loan 1 but the interest on loan 3 gets drawn from loan 2. Therefore i am effectively paying the IP loan interest. Its not capitalising. So the snapshot now looks like this:
    1: PPOR Loan $245K
    2: Buffer Loan $150K
    3: IP Loan $511K (Yes, we are in arrears $22K as we got permission not to pay the loan off whilst we were trying to sell the property on the proviso that it would be fully paid off once sold)

    The problem is not so much with Canterbury (other than them assuring me everything is going as planned when in my eyes it clearly is not), my problem is with this buffer loan. It is secured by my PPOR and to me its slowing down everything. Can anyone see where the system is cocking up? Or is it me thats cocking up? Any advice is appreciated.

    So in summation, our experience hasn't been the best but hoping the worst is behind us.
     
  15. Terry_w

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

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    You are capitalising the interest on the loan in 2 ways
    a) borrowing to pay the interest - borrow from loan 2 to pay loan 3, and
    b) letting the interest compound on loan 3.

    Have you sought tax advice?
     
  16. GThomo

    GThomo Member

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    Kprop,

    I am with Macquarie too but I did come on a few years back now and have the global line of credit so I don't have a buffer. One of the people I referred to Canterbury had to use the buffer too because the banks aren't really doing the GLOC product anymore. As he explained it to me, the buffer was used to pay the interest on the IP. So instead of the IP loan capitalising like all mine do, his draws from the buffer instead. I asked what happens when the buffer runs out and he said they just rebalance the loans and topup the buffer. The way he explained it, sounds like the same thing only using a separate account instead of the loans capitalising interest.

    Perhaps a forum site is not the place to get advice specific to your individual situation. I have lost my way slightly a few times but merely ask Canterbury to put me back on track. After all they understand what you went into, the figures and how it is structured in your case, which sounds more like my mates.

    Usually I get the same response - long term, pay everything off, don't worry too much about what the property might be worth day to day or year to year (and certainly don't sell). It is all about paying off the properties and keeping them long term, that's why they like new houses. So when I retire in another (hopefully) 15 years, I will own every - my place and all the investment properties. Whatever they are worth is a bonus but I want to live off the rent from them without a mortgage on my place.

    It took us about 4 and a bit years to pay off our place and now we are smashing our first investment property loan. While that is happening the other 2 are still growing of course but we are structured different to you.

    I wouldn't think anyone is cocking up anything, you might just need to sit down with them and get yourself clear on your structure as it is different to mine and maybe anyone else here.

    I have always found them pretty approachable.

    By the way, did you claim your rent back on landlord insurance? I am pretty sure it covers exactly that - a tenant walking out on the lease, doing damage etc.

    GT

     
  17. Terry_w

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

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    So instead of capitalising interest you are borrowing to pay interest. From a tax point of view this is virtually the same thing. High Court has said interest on this sort of thing is deductible if the underlying interest is deductible, but the Commission could apply Part IVA to deny the deduction if the dominant purpose is to increase tax deductions...

    So seek tax advice - and make sure the adviser is either a registered tax agent or a tax lawyer.
     
  18. GThomo

    GThomo Member

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    That is pretty much exactly what my accountant said (BANTACS who Canterbury hooked me up with). They said don't even bother trying to claim it for the reasons you said, just not worth it for maybe a few hundred bucks a year.
     
  19. Terry_w

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

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    In that case what is the idea behind doing it then?
     
  20. GThomo

    GThomo Member

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    To domino the debts. Pay off one property at a time. My place took about 4 years, now I am halfway through the first IP. Should have it done in 2 more years, then hit the next one. Their whole strategy is to own everything. Pretty easy retirement if I own my house and 3 IP's outright!

    GT
     
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