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AUSTRALIANS Love Property

Not only do we have one of the highest home ownership rates in the world but we also have one of the highest investment rates in the world.

Last year, more than 1.4 million people claimed rental deductions against their tax returns, and 200,000 firsttime property investors are expected to swell that number to 1.6 million this year.

While negative gearing, claiming your losses and cutting your costs are all allowed under our tax system, there are still a high number of mistakes made every year when it comes to property returns. The Australian Taxation Office says more than $25 billion was claimed in deductions on rental properties last year, making real estate one of the largest sources of claims.

Frank Brass, a director of tax company H&R Block, says one of the biggest expenses and often the area where the most mistakes are made is claiming interest paid on borrowings. “If you use some of the money for private expenses, then the interest amount has to be worked out pro-rata – a very expensive process to get your tax agent to do,” he says.

http://www.news.com.au/business/money/story/0,25197,25806877-14327,00.html

Martin comments – I have learnt over the past few years that having a great property is only part of a successful investment. We have seen many people with good properties “in trouble” because they did not set up their accounts and loans properly. Mixing private and investment expenses on the same account , as mentioned above, is one of the common mistakes made. As experienced investors we can show you how we manage those issues for ourselves.

Buy in the correct ownership split. Many married couples automatically buy in a 50/50 split. This is fine if your taxable incomes are similar but if they are not you could be losing a lot of money to the tax office.

Marion and I started buying in a 90/10 split because my income was $42k and hers was $18k. Later we ran our own business and income split so property purchases then were made at 50/50. It is important and can save you thousands of dollars a year.

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In this example we have used Endeavor Gardens at Deception Bay  showing how you can lower your holding costs, by capitalising your expenses.

Non Capitalised Example:

Weekly holding cost is $32.

Link to full non-capitalised report: Click Here PDF (24kb)

No weekly cost – positive cashflow, $75 per week.

Link to full capitalised report: Click Here PDF (24kb)

At the peak of the interest rate cycle the standard variable of the big 4 banks was 9.57%. Assuming you took up the offer of a professional package with the banks and qualified for the full 0.7% discount your interest rate would have been 8.87%. For a peak rate, that isn’t too bad considering long term history. I recall buying my first home in 1994 when the rates had come down to a low 10.5%. They then dropped to 9.5% and I was dancing with joy at how much money I was saving and how cheap interest rates were.

How times have changed.

To demonstrate how the changes in interest rates affect your holding costs I will use the properties at Endeavour Gardens as an example…

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The Reserve Bank of Australia (RBA) will meet for the first time this year, next Tuesday. While it’s difficult to know exactly what they will do with official interest rates, I expect another generous reduction to be handed out; probably 1%; but certainly at least 0.75%.

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VISITORS and overseas businesses will soon be able to buy residential property more easily in Australia thanks to a lifting of restrictions.

The Federal Government has relaxed rules over foreign investment and it should benefit more than 7500 overseas buyers.

Market flexibility will be enhanced, while compliance costs for temporary residents and the construction industry will be reduced, Assistant Treasurer Chris Bowen said.

The definition of temporary residents will also be aligned with contemporary visa categories.

Under the present structure, all temporary residents and non-residents, including foreign businesses, must notify the Federal Government if they wish to buy a property.

They must also comply with post-purchase conditions, including rules surrounding its use, development and resale.

Residential real estate makes up more than 92 per cent of applications received by the Foreign Investment Review Board.

The changes, to be implemented early 2009, will update regulations that are almost two decades old.

>>> Buying Australian property to be made easier for foreigners | The Courier-Mail.

THE cost of renting a home in Brisbane has soared by as much as 55 per cent in the past year, according to the latest residential tenancy figures.

Figures released by the Residential Tenancies Authority to mX today show it now costs an average $330 a week to rent a two-bedroom home in Brisbane after 10 per cent-plus increases almost across the board since this time last year.

The biggest proportionate price rises are in the outer southern and inner northwestern suburbs.

But the pain is widespread, with rents in only a few suburbs going backwards.

>>>>> Brisbane rents have risen by up to 55% in one year | The Courier-Mail.

To make sense of the property market we must separate opinion from fact. Opinions will always be heard… just in greater numbers now perhaps. If you are prepared to “drill deeper” and dissect the evidence available; the facts will speak for themselves. There’s no reason for allowing the conflicting voices of opinion to keep you confused!

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

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Last month I felt there was a very strong case for the Reserve Bank of Australia (RBA) to cut the official interest rates by a full 1%. I kept my considered views to myself but wished I hadn’t afterwards (as you do).

This month I considered the arguments and reasoning put forward by economists, journalists and commentators; who mostly said that rates were likely to drop by 0.5% (although some argued a case for just 0.24% and others no rate cut). I concluded that the likely rate cut would be 0.75% (or possibly more)…

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A well know finance industry figure recently launched a series of seminars. After reading the professionally crafted sales email, designed to invoke fear and panic and have me rushing to attend his paid event, I decided to address what appears to be a case of insincere opportunism.

Studying the world of global finance since last year is his authority for making such predictions. He proposed failure within our financial system is so systemic it is irreversible;  concluding our property market would soon crash.

A man (or a woman) with an experience is never at the mercy of a man with an opinion.

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