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Tax Man Hater | 27 Jun 2013, 09:34 AM Agree 0
I think the misses and myself might be getting ourselves into some financial strife if we continue down this path, need some advice on how to avoid paying extra tax on investment properties.
So basically our finances are:

1. I own a house was an investment property, $0 left to pay on loan, repayments of $600 P&I monthly - $100K I can redraw, no tenants at present vacant 2 months – rented for 5 years, owned for 7years, could sell for $600K
2. Partner owns a unit, $225K left on loan, $75K in redraw. Primary residence.
3. Both earn approx $90k a year each and both 30. All my extra cash gets put into the misses redraw account.

Have pre-approval for $1m 100% loan, but only want to spend around $800-850k, still want to be able to live life.

We were going to move out of the unit and rent it out for around $400pw, and move into the investment property, and then purchase a property. We might move into the new place straight away or rent it out for a 6-12months (areas we are looking at buying average rent is $650pw), but not much longer than that. After that period of time, move from the original investment property into the new property.

Which at that point in time will leave our finances all over the place.

I figure this will be our state of affairs:

1. House 1 - 100% paid off $100K in redraw rented out at $550pw, $600 monthly P&I repayments, $400 IO repayments
2. Unit - $225K in loan, $75+K in redraw, $400pw rent, $1200 monthly P&I repayments, $1000 IO repayments
3 House 2 - Living in it, huge loan to pay off, interest only repayments would be approximately $4,065 per month

Basically we need to pay back $5400 IO repayments a month, with approx $3800 each week coming in as rent.
I already get screwed over big time on house 1 with tax, basically I have to pay tax each year for the last 3 years. The unit will be positively geared.

Really need to get it all refinanced, and sorted before buying the next property. Anyone got any pointers/help.

Live in the southern suburbs of Sydney, so if you know any financial planners with property investment background, there contact details would be greatly appreciated.
thanks
  • Eos Property | 27 Jun 2013, 01:09 PM Agree 0
    Hi TMH,

    Love the tag by the way.

    Man, you guys love moving.

    Let's be quite clear here - you'll only be in financial strife if your continued focus is on saving tax and making, what appear to be convoluted moves, in order to save tax. Make sure you remember if you are paying tax then you are making money. Sure you give some of it up but you are still in front.

    Need some clarifying information.

    Why are you planning to move so often? Is this an attempt to minimise CGT exposures?

    Why are you paying P & I on the first property when it is paid off?

    Total monthly repays of $2200/month on second property. My calculation suggest I/On is around $1,100/month. Why the extra if you are moving out again?

    In my opinion you are better off converting to I/O and making no additional repayments. Need to separate the existing redraw into a separate facility to keep things clean for tax purposes. This property will be close to neutral after allowing for other costs.

    Above all - do nothing until your existing structure and strategy are sorted.

    Lots of unknowns - happy to chat if you think I can provide some general guidance. 0409 882 958 (WA Based)

    I do know someone who is a very ethical, straight shooter who runs a combined broker/accountant/financial planner service located in Central Park in Thornleigh. I know of people who travel from WA to use their services - so south of Sydney is only a relatively short drive.


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