What professionals are the most important early on?

I have just bought an old house in a good growth area which I'm renovating. It's my first investment property on a principal and interest mortgage, and I'd like to buy another newer property in the next year. To do this quickly (and then move on and get another property) I think I need some professional tax and finance advice.

What's the best way to go about getting this? Who should I listen to most?

Many thanks
Jen

Jen,

We always recommend you see a property investment savvy accountant and a proficient mortgage broker before you start investing. And sure we are biased, but we believe a property investment strategist is also an important part of your investment team.

Having a good team around you means you can leverage off their knowledge, contacts and experience. An accountant will help you buy your investments in the right structures to ensure your assets are protected and that you pay the minimal tax required.

When considering structures, begin with the end in mind – what will your property portfolio look like in 10 years time? If you will have multiple properties, set up your structure today for the way you want your portfolio to look like in the future. It's too expensive to change things later.

A good mortgage broker will help you through the maze of finance alternatives. If he knows your plans he will choose an appropriate lender for your needs and he will help you refinance into your next property.

Finally a property investment strategist, like the team at Metropole, can assist you in devising a plan to help you buy properties that outperform the market. With all the developers, property marketers and agents out there representing the seller, its nice having someone on your side levelling the playing field.

Regards
Michael Yardney
Director Metropole Property Investment Strategists

I have a question that I hope you can help me with. We have 2 properties in Caloundra West.  Both of our houses are on the side of hills with a nice view over the estate.

Can you see a boom happening in Caloundra in the near future? It is such a beautiful place and it never gets a mention in any real estate magazines. It is always Noosa and Maroochydore etc.

Do you think things will change and Caloundra will be the next Noosa? It has so many beautiful untouched beaches and is still a great holiday place for children. Please tell me if there is anything happening there in the near future.

Kind regards
Sonja  

Sonja,

I'm not going to speculate about the future of Caloundra West, but I would like to use your question to discuss a general point about property investment – how to choose in which location to buy your investment property.

When you look at where many investors buy their properties they buy near where they live, near where they holiday or near where they want to retire. These are all emotional reasons for buying property. They may be a great way to buy your home, but when you want to buy a top performing investment property you can't use these emotional criteria.

Sure Caloundra West may be a beautiful place, but there are lot's of beautiful parts of Australia that will never be areas in which to invest in – they will never show strong capital growth.

I know many investors who buy a property in an area they like or are emotionally attached to and then hope that it will increase in value. I call that "speculation." As opposed to investing which is buying in an area which has certain capital growth.  I choose these areas based on their past performance and the old issue of supply and demand – limited supply of property (scarcity) and strong demand form potential purchasers – this is what pushes up property values.

Regards
Michael Yardney
Director Metropole Property Investment Strategists

Hi,
I know that you can use flexible or hybrid trusts to retain the benefits of negative gearing by negatively gearing the units that you buy.
And I know you can gain the income distribution benefits of a discretionary trust by having different classes of units within the trust.
How though can these trusts be used for asset protection when a potential litigant may be able to sue the unit holder?
Pete

Pete,

If you borrow to buy the unit then you have no equity for which to be sued. For example - $100,000 is borrowed to buy $100,000 worth of units. The net value is zero. There is nothing left once the debt is paid out so why would anyone bother suing you?

Regards
Tony Melvin
Managing Director Chan & Naylor Australia Pty Ltd
Business & Tax Accountant

Hi

I am just wondering if you can give me advice pls. I have separated with my husband. We had a rental property which was rented out for 8 years. When I left him I moved out into our rental property as it was then vacant.

I sold the property after a year and a half…sold it for double what we had bought it for. Do I need to pay CGT?? Can u advise me?

Thank you
Gabby

Gabby,

Yes there will be some capital gains tax payable.

As a couple you are entitled to one principle place of residence that is exempt from capital gains tax, hence for the period that the rental property was leased out, it would have been considered an investment and subject to capital gains tax.

However once you left your husband and you were on your own, you are entitled to a separate PPR which is exempt. However because the first 8 years it was an investment property the capital gains tax will need to be proportioned between when the property was an investment property and for the year and a half that you lived in it. You would need to apportion the calculation of the CGT between these two periods. It would assist if you had a valuation of the property on the date you moved into it.

Regards
Ed Chan
Chairman Chan & Naylor Australia Pty Ltd
Business & Tax Accountant

Some of my friends who are concerned about our property investments are warning us that Australia will follow the current housing/bank crisis that has occurred in America and England. I'm trying to get information about this but am finding it difficult. Can you give me your opinion?


Thank you
Evelina

Evelina,

Thank you for your question. Actually it was very timely as we have an article by Michael Yardney in this issue of Property Update that provides the answers you are seeking and considers at length the US subprime market. Please read this 'Question of the month' article for more information.

Regards
Bronwyn Davis
Editor – Property Update


We are a family with very unusual circumstances and lots of talent as we are constantly reminded by people who see our home. I have a passion for decor and a hubby who is very handy and has a keen eye for detail. My hubby is on a pension and we have an income of around $25k, 2 daughters living with us on a combined income of $45k and one daughter and partner who earn say $100k.

Now the thing is we are going to sell our home we've been in and will have around $140k…what can we do as a family to make the most with the little we have? Need help please.

Regards
Chris

Thanks for the question. I can't give you advice about your own particular circumstances as it would be wrong to do so without knowing a lot more about you. And I'm not sure that selling your home to get into something more "exciting" is the right answer.

What I have seen many people who are in similar circumstances to you do is that they buy a home and use their talents and skills to improve it by doing renovations or improvements. This adds value to their home and allows them to borrow against the increasing value of their home to use as a deposit to purchase an investment property.

Regards
Michael Yardney
Director Metropole Property Investment Strategists

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