Housing crisis!

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#869678 1-Aug-2013 07:09

joker97:
sir1963:
Then there is the risk of interest rates going back up to 20%, to cover $500,000 rent would have to be $2000 a week + rates, insurance, maintenance

i presume if the interest rates go up to 20% these rich investors would a few years sell at a loss and move their money elsewhere ... i was just explaining who've been buying rentals in the past 15 years, and currently, and who knows perhaps the next 15 years but as you said it may not be so in the medium - long term future, but at the moment, this is what's happening

And there you again have it completely wrong with "rich investors". Most landlords aren't rich.

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#869682 1-Aug-2013 08:08

sir1963:
And there you again have it completely wrong with "rich investors". Most landlords aren't rich.

exactly! otherwise they'd be paying tax!

surfisup1000

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#869691 1-Aug-2013 08:25

There is no housing crisis. My parents bought an Auckland house in the early 90's.

It has gone up by 1000% in value since then.

That sounds quite good to me.

So, I guess it depends on which side of the fence you sit.

And, people don't need to live in Auckland, eg, prices have been falling in real terms for 5 years now in places like Tauranga.

alasta

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#869721 1-Aug-2013 09:10

kiwirock: The part that people who don't invest in property look right passed when
they see the "now" in terms of disposable income from rental revenue after expenses and mortgage, is that he's also getting a rather large priced investment paid off by his tenants in the long term that equates to a huge return on his original investment of the deposit.

What if the rental income is only sufficient to cover the interest on the mortgage and rates, maintenance, etc? Wouldn't the property owner be paying the principal out of their own pocket, hence the tenants are actually not paying off the asset?

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#869753 1-Aug-2013 10:13

kiwirock: It's also why I don't understand why people do capital gains investing along the lines of doing a house up then selling it again. It's a quick cash fix like selling state owned enterprises. It's not a real investment you build up for the long haul like the Warren Buffets of the world.

if you do enough of these during a short timeframe, you get classed as a trader and have to pay GST and other taxes.

There can also be a lot of money in doing it if you have the right contacts and can run a project well. Some 'quick do up' places i've seen on the market have been turned around in a couple of months and added $300-400k to the value of a property

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#869755 1-Aug-2013 10:16

alasta:
kiwirock: The part that people who don't invest in property look right passed when
they see the "now" in terms of disposable income from rental revenue after expenses and mortgage, is that he's also getting a rather large priced investment paid off by his tenants in the long term that equates to a huge return on his original investment of the deposit.

What if the rental income is only sufficient to cover the interest on the mortgage and rates, maintenance, etc? Wouldn't the property owner be paying the principal out of their own pocket, hence the tenants are actually not paying off the asset?

one option is interest only mortgage, hold on to the property long enough to make the capital gain... e.g. buy a $400K house in 2005, pay interest only, sell in 2015 for $800K (held for long enough to avoid trader taxes, depreciation clawbacks (*), etc), get $400k cash in hand when you sell.

(*) the law has changed a lot around depreciation on rentals, it may not be possible to avoid the depreciation clawbacks on disposal now.

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#869782 1-Aug-2013 11:05

Regs: (*) the law has changed a lot around depreciation on rentals, it may not be possible to avoid the depreciation clawbacks on disposal now.

My understanding is you can't claim deprecation on a house any more. My parents properties are cashflow postive (Ie, the rent covers more than all of the outgoings), but under their old LAQC they were able to claim deprecation as an expense, and on paper it all made a loss (Which was then offset against their tax). Now under their "look through" company, I think they get a tax bill.

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crackrdbycracku

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#869785 1-Aug-2013 11:12

Regs:

one option is interest only mortgage, hold on to the property long enough to make the capital gain... e.g. buy a $400K house in 2005, pay interest only, sell in 2015 for $800K (held for long enough to avoid trader taxes, depreciation clawbacks (*), etc), get $400k cash in hand when you sell.

(*) the law has changed a lot around depreciation on rentals, it may not be possible to avoid the depreciation clawbacks on disposal now.

I think this kind of thing is a major part of the problem. There are ways to avoid taxes around property trading and property investment. There are ways to avoid paying tax which are legal and easy enough to do. This means property investing can give a higher return than it 'should' if the capital were used other ways.

If you have a job, you pay PAYE. The more you work, the more you earn, the more you pay. Simple. There really isn't a way out.

In the above example it works out to $40,000 per year. This should be taxed at something close to the 33% you would be taxed if you were getting that as salary or wages.

I'm struggling to see a moral argument against paying tax on money you make, regardless of how you make it.

Maybe if we taxed sources of 'income' or whatever you want to call it then we could lower the overall tax rate.

Yeah, I know. There are winners under the current system and they are not going to vote to be losers.

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#869877 1-Aug-2013 12:30

ajobbins: My understanding is you can't claim deprecation on a house any more. My parents properties are cashflow postive (Ie, the rent covers more than all of the outgoings), but under their old LAQC they were able to claim deprecation as an expense, and on paper it all made a loss (Which was then offset against their tax). Now under their "look through" company, I think they get a tax bill.

not on the house
yes on chattels

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old3eyes

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#869888 1-Aug-2013 12:50

surfisup1000: There is no housing crisis. My parents bought an Auckland house in the early 90's.

It has gone up by 1000% in value since then.

That sounds quite good to me.

So, I guess it depends on which side of the fence you sit.

And, people don't need to live in Auckland, eg, prices have been falling in real terms for 5 years now in places like Tauranga.

Disagree with that. Our house in TG has gone up about $70grand in 3 years..

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surfisup1000

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#870162 1-Aug-2013 17:37

old3eyes:

Disagree with that. Our house in TG has gone up about $70grand in 3 years..

What do you base your figures on? Just your house?

The information I found shows the average house price in tauranga has falling from 470k in 2007 down to 428k today.

470k in 2007 dollars is worth 561k in todays money (adjusting for inflation) so this is a massive drop.

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#870202 1-Aug-2013 18:47

Regs:
one option is interest only mortgage, hold on to the property long enough to make the capital gain... e.g. buy a $400K house in 2005, pay interest only, sell in 2015 for $800K (held for long enough to avoid trader taxes, depreciation clawbacks (*), etc), get $400k cash in hand when you sell.

(*) the law has changed a lot around depreciation on rentals, it may not be possible to avoid the depreciation clawbacks on disposal now.

You'd need to sell for at least $320k more than what you paid for it. As that's how much interest you would have paid!

mattwnz

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#870368 1-Aug-2013 22:36

sir1963:
And there you again have it completely wrong with "rich investors". Most landlords aren't rich.

Whats your definition of rich?

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#870401 2-Aug-2013 00:49

mudguard:
Regs:
one option is interest only mortgage, hold on to the property long enough to make the capital gain... e.g. buy a $400K house in 2005, pay interest only, sell in 2015 for $800K (held for long enough to avoid trader taxes, depreciation clawbacks (*), etc), get $400k cash in hand when you sell.

(*) the law has changed a lot around depreciation on rentals, it may not be possible to avoid the depreciation clawbacks on disposal now.

You'd need to sell for at least $320k more than what you paid for it. As that's how much interest you would have paid!

well no, if the house is rented and the 'net' is zero then the tenants paid that interest for you....

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sir1963

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#870418 2-Aug-2013 07:16

mattwnz:
sir1963:
And there you again have it completely wrong with "rich investors". Most landlords aren't rich.

Whats your definition of rich?

Its all relative, I am sure that to someone from the slums in India you are considered rich.

But as a rough guide, in the top 10% of income.

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