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Investment Properties

 



PURCHASING A NEW PROPERTY FOR THE DEPRECIATION BENEFITS?


Be aware of the gimmick, as the depreciation benefits are often offset by the increase in sales price of new properties. Depreciation is often available for older properties.



WHAT NAME DO I PUT ON THE CONTRACT OF SALE?


This is a little complicated and must be selected carefully. Please do not fall for the 99:1 as noted by many accountants (remember of land tax and CGT in your decision making). If it is a Super Fund purchase it will be in the name of the trustee of the Bare Trust (apparent owner).

 


MAKE SURE ALL INVESTMENTS OR SPENDING IS TAX DEDUCTIBLE (be very nice to your tenants)


There are often conflicting views on who pays for particular costs that are incidentally related to an investment property. My view on these costs is as follows:

 

Never let an expense get in the way of a good relationship with the person who is looking after your wealth (property). My tenants are, and always will have my attention and respect (directly, not through a third party). I always look at costs of my rental properties in the following way:

  • Investment Property value : $400,000, growth in 10 years, and new value will be: $800,000 (assumptions; past performance since 1926 is similar to future performances). The profit of an investment property is $40,000 p.a.
  • Assume you have the following costs: Pest inspection and Spray, light bulb replacement and tap washer (plumber) = $400 + $10 + $140 = $550. Do not pay this from your wallet -  borrow this and your cost is only 7% x $550 = 74c per week,  less a tax deduction at the Marginal tax rate of 31.5% (includes medicare levy). Total Cost = 51c per week.

 

I apppreciate there are other costs, but when you look at the numbers and you look at this property game as a business, I would say it is not a bad result! To outlay an extra 51c p.w. to provide a stable $40,000 p.a. income is really not too much to ask. 


When dealing with property investments the margins are not that fine. Yet, as most investors are Mums and Dads, they fail to see the real DOLLARS and SENSE. Think like a business. Look after your tenants!

 


FEES ARE EATING YOUR SUPER ( BY COMPARISON, LOOK AT AN INVESTMENT PROPERTY PURCHASE BY YOUR SUPERANNUATION FUND)


FEES are eating your Super (Front page article in the Australian Financial Review, Weekend Edition 29-30 August 09).


"No one cared in the boom times but now the superannuation industry is being asked to explain why it charges so much to manage your money".

Ask a Birchcorp representative how to reduce your fees. We have no ties to any super fund, or Financuial Institution unlike many other financial planners. This removes any conflict of interest. Ask your Financial Planner who they are linked with to ensure your best interest?


As a general rule of thumb, you will find all retail funds charge in excess of 2% of your investments. Read the PDS carefully, or have Birchcorp outline your real charges/ costs. You must look beyond the administration fee that your employer has generously waived. A typical family will have two superannuation funds with a total of $100,000. This represents over $2,000 in fees. By way of comparison you may purchase a $500,000 investment property with similar outgoings, but you now have an increased asset base and a rental return. Remember your 9.25% contributions will help with the repayments in the unlikely event of a shortfall.

 


PAY OFF YOUR HOME LOAN FASTER BY DEBT RECYCLING: FRIEND OR FOE?


An advanced strategy for astute investors. Debt recycling is the fastest way to pay off your own home but must be used or tackled with caution as this may be frowned upon by the ATO (Often a private ruling is required). Debt recycling involves converting all bad debt (non tax deductible) to tax deductible debt. Debt recycling may be conducted if you own or are thinking of owning shares, or investment properties. If done correctly, it will save tens of thousands of dollars and take years off your home loan.

 


ARE YOU A PROPERTY BUSINESS?


If you can reach the property business status or alternatively if you have Business Real Property - NSW has reduced the stamp duty to $50 to transfer the property into your SMSF (Or $500 if you have a loan in place). The tax savings on both Rental returns and Capital Gains Tax (CGT) are exciting!

 
 

BUYING IN THE USA?

 

Watch this space: This area is gathering speed and should be looked at for three good reasons:

 

  • Capital Growth: The potential upside due to the recent GFC and deflated property values.
  • Rental yields: They range from 8-20% and;
  • Currency: Favourable currency rates for Australians today. 

 

Birchcorp has seen growing support for Investment opportunities for wholesale investors (gross income > $250,000 or net worth >$2.5M) to purchase in New York and other USA states. This often sets a trend for other investors. As a side, it may be worth an investment with your SMSF. Remember Super Funds can borrow!


Purchase Property in your SMSF

SMSF and property investments: Although many property spruikers stand before you and sell the concept that everyone must buy a property in your SMSF. Birchcorp is here to say that there is much time and effort required for an investor to decide to embark on this complicated arrangement. Although Birchcorp is happy to say the process is as easy as 1,2,3... it is not a process that should be taken lightly. We are professionals and have processed these SMSF establishments and ongoing services many times. A complacent trustee can easily come into serious trouble with the govern... Read More

Insurance

Birchcorp can show you how you may purchase your Insurance with no out of pocket expense.

Unlike other Financial Planning firms, Birchcorp is happy to show you how and why you can decrease your Insurance coverage... Read More

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of Dover Financial Advisers Pty Ltd ABN 87 112 139321, which is the holder of an AFSL No. 307248. Birchcorp Pty Ltd is an Accredited Member of the FBAA with an ACL No. 376718.