Fin Track

It is fair to say that the Australian economy is still struggling in its post-resources boom transition and that is underlined by the fact that the RBA is very likely to continue to cut interest rates.

While falling interest rates may give some relief to property investors, the outlook for the property market in many capital cities is becoming more challenging and as a result investors need to utilise every tax benefit they are entitled to so they are not put under any undue financial stress.

For example, it is still a fact that a large proportion of Australian property investors fail to claim their full tax depreciation benefits that can equate to 60 percent of the purchase price of a property. In dollar terms, if you bought a new apartment for investment purposes that cost $500,000, these total tax depreciation benefits could amount to a massive $300,000.

The typical cost of a tax depreciation report is around $600 which is also tax deductible making it a great investment for astute property investors.

Tax depreciation on a residential property is a deduction against assessable income allowing the owner to reduce the amount of taxation payable.

An investor is able to claim for two distinct types of depreciation on buildings. The first is capital allowance which is a deduction based on the historical construction costs of the property and may include surveying, engineering, architectural and building fees. The second is plant and equipment which includes items such as floor coverings, window treatments and fixed equipment i.e. cookers.

Most investors do not realise that tax benefits obtained through depreciation can be equivalent to 60 percent of the total purchase price of the property.

You should engage the services of a tax depreciation company who will undertake an inspection of your property and provide you with an ATO compliant tax depreciation report which you can provide to your accountant. This report is a ‘once off’ and will outline the amount of tax benefits you can claim on an annual basis. Anyone considering employing a tax depreciation company should ensure that they are a member of the Australian Institute of Quantity Surveyors (AIQS).

We estimate that only one in five residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties.

Many property investors who have owned their properties for several years and have not undertaken a tax depreciation schedule still have the potential to claim back thousands of dollars in tax depreciation benefits.

A depreciation schedule can be undertaken at any time by a property investor. If you own a property for a number of years, you can still undertake a depreciation schedule and put in an adjusted tax return to enable them to obtain unclaimed tax depreciation benefits.

Wealth Creation Australia

7 REASONS NOT TO “CROSS COLLATERISE"

Cross collateralisation is when two or more securities ( properties ) are used to secure the same mortgage. If you are unsure just look at the mortgage contracts and if any one contract mentions more than one property then it means all of the properties mentioned are being used as security ie: cross collateralised ( sometimes referred to as cross secured ). Here are the 7 reasons to avoid:

Reason 1: Unnecessary Paperwork and Legal Fees If you sell a property the bank has the right to reassess their exposure to you and therefore charge a fee to do this or even ask for brand new valuations on all your properties. Then if the values are less the lawyers get involved at your cost to draw up new legal paperwork known as “Variation of Security”. The bank may even ask you to sell a property.

Reason 2: You may not be able to access your funds when you sell a property If you sell a property the bank might say they need the sale proceeds to reduce your the banks expose. So instead of you getting that big cheque the bank keeps the money and pays down your debt.

Reason 3: Not the best loan deal Say you are with Bank ABC and you want to expand your property portfolio and buy another property. So you go off and buy this property and ask the bank for the money. They will no doubt give you the money but you are now restricted to that particular bank’s loan products and their loan pricing. This could cost you thousands over the years and make the investment a poorer one.

Reason 4: The bank holds too much security than they need Just because the bank wants more security for its loans does not mean you have to give them this security. As the example of your paid off home that you would die for why give this to the bank?

Reason 5: Hard to change banks Ok now you have your home and 3 investment properties with Bank ABC well good luck trying to change to another bank if they do not look after you. You will now have to discharge all the securities and pay out the loans then incur more costs to get into the next bank. Wow what a nightmare and all because the bank could not look after you and you were silly enough to give them all your security.

Reason 6: Hard to access equity Most investment property goes up and down and this will vary from location to location. So what if you wanted to get some money out of the equity you hold in these properties? Well in a cross collaterised security arrangement it is much harder as the bank will revalue all the properties and then tell you that the one in Location A went up but Location B went down so they cannot give you any more money. But under a stand-alone security program you would have just gone to then Bank that had the property in Location A and got the money.

you’ve been thinking about investing in property?

You’re not alone. In fact less than 6% of Australians, or roughly 1.3 million people, own an investment property, even though property is a national past-time.

It’s not stunning. lots of get overwhelmed by the method and quit before they even begin. however it doesn’t got to confound. Reality is, property investment is comparatively easy.

To help you start your journey,  here’s eight steps to beginning a property portfolio on a solid ground, while not losing your mind.

1. Check your finances

This can be as easy as listing all of your assets, as well as incomes and compute your expenses.

This will offer you a thought what proportion money you have got on the market to speculate. Don’t at once assume that you just can’t afford to speculate. As long as you have got a stable and fairly smart paying job with solid employment history, you shouldn’t have a tangle obtaining a loan.

2. Get a pre-approval

You can get pre-approval through your investor directly or through your trusty mortgage broker. researching a broker before applying for a pre-approval may be useful if you’re unsure you’re financially able to invest.

Applying for multiple pre-approvals isn't a decent plan. whenever you apply, the investor can check your credit record. If there square measure multiple inquiries, this sends a red flag to the investor and should refuse your application. Top tips

Find out if you qualify for a loan Check your credit rating Consider reducing your debt or mastercard limit

3. Set your goals

What square measure you wanting to achieve? What will success appear as if to you? Property investors usually invest in property to secure their money future or to be absolve to do what they require, after they need it.

In order for you to realize your goals, you need to 1st articulate what your goals square measure. additional significantly, you would like to line a point in time on once you need to realize these. Then you'll be able to work backwards.

For example, if you’re wanting to interchange your financial gain and retire on your investments inside ten years, you'll be able to begin by making a 10-year arrange, countermined additional to 5-yearly, yearly, bi-annual all the approach right down to weekly timeline. this manner you don’t get flooded by the enormity of the task.

4. Understand your attitude to risk

Your risk profile can dictate your strategy. What variety of risk are you able to tolerate?

Getting associate degree understanding of your own angle to risk can assist you produce a technique that reflects this.

5. Start budgeting

It’s not attractive. It’s not even remotely attention-grabbing. however budgeting is that the solely thanks to guarantee you’re ready to balance your financial gain and expenses. It permits you to check wherever you’ve been defrayal your cash and helps you to arrange for larger expenses down the road.

Make sure to line this up even before you begin yearning for a property.

6. Create a purchase plan

What will a perfect purchase arrange look like?

It ought to facilitate your goals of growing your portfolio to a degree wherever it’s manufacturing the expansion or financial gain you’re aiming for. It ought to function a structure for you to remain within the game.

Here’s associate degree example of an acquisition arrange you'll be able to follow:

Define your strategy Set up your criteria Do your analysis Cull your list Get appraisal Do your due diligence Make and supply and talk over

7. Be informed

Use the tools on the market to you to create associate degree knowledgeable call. Knowing the market may be key to creating the proper investment selection. Explore http://fintrack.com.au/ for a few valuable insights.

Being knowledgeable additionally means that being cautious of get rick fast schemes and property peddlers. If somebody is promising you secure returns and long material resource, walk away; the sole person obtaining made is them.

There’s no such factor as a property psychic and whereas there square measure tried and true ways to analysis, nobody will build guarantees. Understanding your tolerance for risk can assist you form what proportion you’re willing to require on over the shorter and long run.

8. Stay focused

Make sure you keep targeted. investment in property may be a business call, not associate degree emotional reaction.

Get clear regarding what you wish to realize Set a date on once you need to realize this goal Identify milestones you would like to try and do to induce to your goals It’s simple to induce flooded once you’re beginning one thing new and as large as property investment.