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Discussion in 'General Investing Discussion' started by MaKeJJ, 21st Sep, 2008.

  1. MaKeJJ

    MaKeJJ New Member

    Joined:
    21st Sep, 2008
    Posts:
    2
    Location:
    Brisbane QLD
    Hi! i like this forum and looks like people get lots of good advice! I hope somebody can give me some insights...

    My husband and I have been planning for a while to buy a new house. Our first plan of action is to sell our current home and buy a new one- we have good enough equity so it was the best option for us at that time.

    One of our friends who have just started becoming a mortgage broker asked why we haven't thought about keeping our current property as investment and utilise the equity to use as a deposit to the new house. She gave us a negative gearing calculator and everything seemed good with cashflow etc.

    However, after doing a lot of research (and still researching) that not all loan amount will be tax deductible as some was used for personal useā€¦.and this was confirmed by an accountant. We will not have very good tax returns from the negative gearing every month which is vital to afford the costs of maintaining another property.

    Accountant advised that at this stage, it might be more reasonable to sell the property put as much deposit in the new house as interest is not tax deductible then in a year or two look at investing the equity made from the new house then buy an investment property.

    I guess our objective is if we are to do this, we want to make sure that our loan/finance structure is properly setup from the start (I think I like the RLOC structure) since we are now really serious in starting an investment portfolio. I am quite conservative and cautious so I want to start slowly but surely.

    Another financial adviser also recommended us to sell the property into a unit trust hence making all loans tax deductible and be able to negative gear. I know there will be stamp duty...i've done all my calculations and if all loan amount is higher then tax benefits will be maximised. My husband and I would want to buy more IP in the future...any thoughts?
     
  2. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    MakeJJ

    I'd go with your accountant's advise and sell it.

    Also trusts are not for everyone.
    It depends on your family situation, your type of employment, your financial situation and they do have annual management costs.

    Also, you'll have to guess where property prices would go from now on.
    Where is your property?

    cheers
     
  3. MaKeJJ

    MaKeJJ New Member

    Joined:
    21st Sep, 2008
    Posts:
    2
    Location:
    Brisbane QLD
    Thanks for the reply BV...

    My house is in the Southeast Brisbane- half an hour to the CBD which we are pretty sure the value will go up. I think our suburb is the last one close to the city where houses are a little bit affordable (rising very quickly though)

    It is also a high rental area...mostly young families (like us).

    The accountant we went to was our first time with him and didnt seem to be proactive in investing thus my having second thoughts in selling.

    5 yrs ago, one of my mum's friend told me i have to start investing while I'm young and I was very adamant not to as it is too hard...cant believe so much can change in 5 years!

    I've also bump into a website which encourage investing under trusts for investors info (it seems like a good website to me) InvestorOne :: Property Investment
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    MaKeJJ

    The tax deductibility of a loan is something I value greatly
    because its an ongoing benefit so don't dismiss this option straight away.
    My thinking is that you could sell and you can always buy another IP even straight away if you have to.

    But I wouldn't worry about buying another IP straight away.
    Unless interest rates come down considerably I believe property prices in many areas will either stagnate or even fall.

    The property markets as you know are now going through a difficult stage
    due to the higher cost of money.
    Lending has become harder to get and things from what I read will get worse so in the short to medium term don't expect massive capital gains from property.

    Concentrate on your PPOR.
    PPOR's are exempt from Capital Gains Tax and are often the best investment we ever make.

    IMHO