Investment properties

[panther]

Is there anyway of making money on buying a second house and renting ?
Can there be short term profits on 1-2 years and then selling ?
Stamp duty, Capital Gains Tax, Housing Loan, repairs etc seem substantial

Can a person lend the whole lot, rent and make money after expenses over 2 years ?

[mighty_tiger_79]

not sure you can make much cash in property over 2 years

[silicone skyline]

Agreed, unless you buy a steal and rent it out for more than the mortgage repayments.

Usually rent won't even cover your mortgage repayments, investing in real estate generally takes a good three years with capital gains taxes etc to be worthwhile.

Mind you, that entirely depends on where you buy.

I bought a house in Whyalla in 2007 for 130,000 and sold it 12 months later for 180,000.

I lived in it which cleared me of Capital Gains and has the first home buyers.

[mick]

not sure you can make much cash in property over 2 years

Correct, at least 5 years in the minimum, however I bought an investment property in 1990, I went 8-10 years without any capital gain, probably as a result of the poor SA economy as a result of the State Bank Fiasco. Since then the property has done very nicely.

[mighty_tiger_79]

there was property not long ago at Pt Augusta (i think) that was cheap and its value has dramatically risen and those that purchased some back then are absolutely laughing

[Booney]

I will keep you updated as I have just purchased a new property and have kept my previous house as a rental. My accountant is around in the next week or two to run through the finer points.

[A Mum]

there was property not long ago at Pt Augusta (i think) that was cheap and its value has dramatically risen and those that purchased some back then are absolutely laughing

About 7 years ago you could buy a house in Port Augusta between $25,000 and $40,000.
And yes, you're right, people who bought in Port Augusta back then are laughing now because they can add about $100,000 onto that now.

[asert]

Is there anyway of making money on buying a second house and renting ?
Can there be short term profits on 1-2 years and then selling ?
Stamp duty, Capital Gains Tax, Housing Loan, repairs etc seem substantial

Can a person lend the whole lot, rent and make money after expenses over 2 years ?

go to the library and rent jan somers building wealth thru investment property. hard times at the moment you will get a good buy but long term investment is the best way to make money. dont be fooled by making more capitol try and get something that will positively gear faster to create the affordability to buy the next

[gadj1976]

Is there anyway of making money on buying a second house and renting ?
Can there be short term profits on 1-2 years and then selling ?
Stamp duty, Capital Gains Tax, Housing Loan, repairs etc seem substantial

Can a person lend the whole lot, rent and make money after expenses over 2 years ?

Panther, in short, not really.

I've owned investment properties since 1991. My first one I lost money big time but the two I've had since 1999/2000 have done ok. I had to sell one recently to finance reno's on the house I'm in but I'm going to be hit with a 30k capital gains. When you add up all the expenses, vacancy time, renovation costs etc, etc, you really don't make that much money.

If you were to find a place for $50k and rent it out and then sell it within a year at a profit, you'd be hit with capital gains till your eyes bleed. I think (and I'd suggest getting a proper quote from a financier) you get hit with 100% of the profit being taxable at your nominal tax rate. If you sold it after 1 year, 50% is taxable at your nominal tax rate.

So if you sold the property for $100k in the first year, $50k of that is subject to tax at your nominal tax rate.
If you sold it after the first year, only 50% of the $50k ($25k) is subject to tax at your nominal tax rate.

If you are going to buy an investment property you'd be better keeping it for 5 or so years. Again a financial planner would be the best help.

Hope that helps.

Up until this time last year I was advising people not to get into property because the share market has less overheads. I went and saw a financial planner mid last year and he said "we're not going to see a property boom like we have just had for another 20 years, so get out and get into cash, cos the banks need it and are willing to pay heaps for it". With the crash, that's not as apparent as we thought it would be but I did get 8% at ING before the crash came through.

[Psyber]

I'd need to double check but I think a self-managed superannuation fund is exempt from CGT along with other taxes, and as they can now borrow to buy property this may be the best way to make property viable as an investment. Certainly rents, though claimed to be high by those renting, don't make for a good return on investment by themselves.

[Dutchy]

I'd need to double check but I think a self-managed superannuation fund is exempt from CGT along with other taxes, and as they can now borrow to buy property this may be the best way to make property viable as an investment. Certainly rents, though claimed to be high by those renting, don't make for a good return on investment by themselves.

Correct rules have recently changed, Super fund properties previously had to be freehold and couldnt have a mortgage over them, this has now changed

You wont get rich on Rentals, you get rich on Capital Gains, to try and get that gain over 2 years is very dangerous especially in this market

[whatcha got there?]

Agreed, unless you buy a steal and rent it out for more than the mortgage repayments.

Usually rent won't even cover your mortgage repayments, investing in real estate generally takes a good three years with capital gains taxes etc to be worthwhile.

rent generally doesnt cover your mortgage payments, however speak your accountant because they can advise you on what you can and cant claim on. pretty sure you can claim on majority of your fees for the mortgage, as well as the interest.

my suggestion is pump as much money as you can into your investment loan, then reduce the repayments and you may just find yourself making a few bucks.

[mypaddock]

Unless the market is in the middle of a boom (which it isnt atm) or you are a big player buying/selling $1million + properties you aren't going to see substantial profits being made within 2 years.

[FlyingHigh]

Buy Buy Buy. Our property market is so different to USA and England. Pity about New Zealand, Spain, South Africa, Ireland, etc etc http://www.irishtimes.com/newspaper/fin ... 20759.html

Shortage here? Same as they thought in England and parts of America. Why would the government increase FHOG for newly-built houses? Surely it wouldn't be because there is an oversupply and developers and banks need bailing out? Look at the steady trickle of property developers going bust in NSW and Qld.

[MagicKiwi]

I will keep you updated as I have just purchased a new property and have kept my previous house as a rental. My accountant is around in the next week or two to run through the finer points.

This is certainly the best way of gaining investment properties if you can do it. Mr MK and I did the same three years ago renting out a property I used to live in. Getting the mortgage down on that so much that it made money to help with our current mortgage. We're looking around for our last dwelling and will rent out our current house.

If the rent doesn't cover the mortgage payments, you can't afford the investment property. Take it from someone who's conservative.

[Dutchy]

If the rent doesn't cover the mortgage payments, you can't afford the investment property. Take it from someone who's conservative.

well thats take out 90% of people very simplistic view

so your saying that even if you have $2k spare cash each month after commitments you cant afford an extra $500- in repayments from your own resources to meet the shortfall from the rental?

Id love you to explain that to me please

[Booney]

I will keep you updated as I have just purchased a new property and have kept my previous house as a rental. My accountant is around in the next week or two to run through the finer points.

This is certainly the best way of gaining investment properties if you can do it. Mr MK and I did the same three years ago renting out a property I used to live in. Getting the mortgage down on that so much that it made money to help with our current mortgage. We're looking around for our last dwelling and will rent out our current house.

If the rent doesn't cover the mortgage payments, you can't afford the investment property. Take it from someone who's conservative.

With our investment property being in a very good state ( new bathroom,new kitchen, ducted air,lock up garage.....) and interest rates being down our rental income each week is above what our current repayments are. This gives us a small amount to pay over and above each month. The house we have moved into is covered comfortably by Mrs.Boon's and my wage, therefore we are paying an additional nominal fee off the investment property's motgage. Our aim is to have that loan end up with the rental income well above the repayment required. This will mean 'it is taking care of itself'. This we should be able to achieve by years end. The issue of rising interest rates in the years to come may impact on this, but most would agree the interest rate will stay down where it is for some time and we intend to make the most of it.

[Dutchy]

understand your strategy Boon and it is sound but reckon your Accountant might advise to pay any extra funds off your OO mortgage not the investment debt as its more tax effective

[Booney]

understand your strategy Boon and it is sound but reckon your Accountant might advise to pay any extra funds off your OO mortgage not the investment debt as its more tax effective

We are already doing that. We 'split' the loan so there is less on our investment and more on our OO to begin with.

[Amateur Footy]

Make sure your accountant is aware of the split loan facility. ATO doesn't like them if you are reducing payments on your Investment Property and paying more off you OO mortgage. Accountant should know the fine print.